All Cayman regulated mutual and private funds are required to have their financial accounts audited on an annual basis by an auditor approved by the Cayman Islands Monetary Authority (“CIMA”). The regulated mutual and private fund is also required to submit its audited accounts, along with the Fund Annual Return (“FAR”) within 6 months after the financial year end with CIMA. CIMA very recently updated its existing Regulatory Policy for Exemption from Audit Requirements for a Regulated Mutual Fund as well as issued the new Regulatory Policy for Exemption from Audit Requirements for a Private Fund (collectively the “Audit Waiver Policies”). According to these Audit Waiver Policies some relief may be available to both regulated mutual and private funds in certain circumstances. Here we cover more specifically newly launched mutual and private funds. Extending a mutual and private fund’s first audit period
The Audit Waiver Policies outline that CIMA may consider extending the mutual and private fund’s first audit period for a maximum of 18 months from the date of registration or licensing. For example, a newly launched mutual/private fund with a typical December year-end and registration date within the second half of the calendar year, may request for an extended first audit period ending December in the year following the launch. This relief may be very helpful for newly launched mutual and private funds by performing a single audit for the extended first audit period.
To obtain approval for an extended first audit period, a written request must be submitted to CIMA. The request may be submitted by the operators (i.e. directors) or authorised service providers (e.g. Auditor, Registered Office, Legal Counsel, etc.) of the mutual and private fund. This may be done either at the time of registration/licensing of the mutual/private fund with CIMA, or at a later stage but typically before the audited financial statements are due. CIMA will use its supervisory discretion and may request additional information to support the request such as a confirmation from the fund administrator to confirm when subscriptions/capital commitments were received from investors and trading commenced if the request is done typically after registration/licensing with CIMA. A mutual and private fund has not launched as expected
In more extreme cases where a mutual or private fund has not properly launched and does not wish to be de-registered, a written request may be submitted to CIMA to request an exemption from the annual audit requirement. Pursuant to the Audit Waiver Policies, “launched” for a mutual fund means where a mutual fund has accepted subscriptions from investors, admitted the investors and commenced trading with subscription monies. Additionally, “launched” for a private fund means where a fund has accepted capital commitments from investors for the purpose of investments.
Similarly, the request may be submitted by the operators or authorised service providers (e.g. Auditor, Registered Office, Legal Counsel, etc.). The requester is required to submit an affidavit from an operator of the mutual or private fund:
a) Explaining the reason for the fund not being launched;
b) Explaining the reason for the fund not wishing to be de-registered; and
c) Confirming that the fund has not received subscriptions from investors. Further the payment of the required application fee of CI$500 (US$609.76) must accompany the request. CIMA will assess each mutual/private fund’s request on a case by case basis and use its supervisory discretion to request additional information as necessary to support the request. If approved by CIMA, then no audit will be required for the requested financial period but the audits for the subsequent financial periods will be required until the mutual or private fund cancels its registration/licensing with CIMA.