AIFMD Passport Regime Update

The Cayman Islands is confident it will be granted the EU’s Alternative Investment Fund Managers Directive passport, according to the Alternative Investment Management Association, the global hedge fund industry association. Cayman is awaiting assessment by the European Securities and Markets Authority, which it hopes will lead to its approval for the pan-European marketing passport.

The Mutual Funds Act, and the Securities Investment Business Act have been amended to establish an opt-in regime for regulating Cayman Islands-domiciled investment funds and managers with connections to the European Union (EU), in order to facilitate extending the EU’s Alternative Investment Fund Managers Directive (AIFMD) passport to the Cayman Islands.

The Mutual Funds Act (2015 Revision) now provides for regulating Cayman investment funds that opt to be regulated by the Cayman Islands Monetary Authority (“CIMA") for AIFMD passport purposes. A Cayman investment fund that chooses this option is referred to as a “regulated EU connected fund”. This is a category available to both open-ended funds and closed-ended funds.

The Securities Investment Business Act (2015 Revision) (“SIBA”) now provides for regulating Cayman fund management entities that engage in certain EU connected activities specified in the SIBA; and which elect to be regulated by CIMA for AIFMD passport purposes. A Cayman fund management entity that makes such an election is referred to as an “EU Connected Manager” in the SIBA. This category is available to both current licensees under the Securities Investment Business Act and entities that are currently not required to be licensed under the SIBA.

Until such time that decisions are made regarding extending the AIFMD passport to the Cayman Islands, Cayman investment funds may continue to be marketed in the EU under national private placement regimes that require, among other things, that Cayman’s regulator, CIMA, has signed memoranda of understanding (MOUs) with individual EU member states. These arrangements can continue until at least 2018. CIMA has signed MOUs with 27 EU member states.