Update for all Registered Private Funds - Segregation of Assets

Funds registered under the Private Funds Law (as amended) (the “Private Funds Law”) are obliged to discharge certain custodial obligations related to the safekeeping of the fund’s assets. In exercise of its authority under the Monetary Authority Law (as amended) (the “Monetary Authority Law”), the Cayman Islands Monetary Authority (“CIMA”) has published a rule for the segregation of assets (the “Rule”). The primary intention of the Rule reinforces standard industry practice by reiterating that no manager, operator or, if appointed, custodian to a private fund is able to utilise the portfolio investments or investor capital of such private fund to finance its own or any other non-fund operations in any way. In most cases, we do not expect that funds will need to make significant changes to their existing arrangements.

In order to comply with the Rule, a private fund’s investment portfolio must be segregated and accounted for separately from any assets of the manager, operator or, if appointed, custodian. The operator of the fund is required to establish, implement and maintain strategies, policies, controls and procedures to ensure compliance with the Rule, consistent with the fund’s marketing materials and as determined by reference to the size, complexity and nature of the private fund, its portfolio assets and its investor base. 

The Rule sets out certain activities that will not be deemed to constitute the financing of the operations of the manager, operator or, if appointed, custodian. In particular, the Rule specifies that the transfer and reuse, or rehypothecation of assets by the manager, operator or, if appointed, custodian is not in contravention of the Rule, provided that:

  • such transfer and reuse is consented to by or on behalf of a fund; 
  • a description of the arrangements entered into with any manager, operator or, if appointed, custodian allowing for the possibility of transfer and reuse (and the maximum permitted level of transfer and reuse) is disclosed in the offering documents or otherwise disclosed to investors before they invest; and
  • any material changes thereto are also disclosed to investors.

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Nicholas QuinManaging DirectorT +1 345 914 4295nicholas.quin@walkersglobal.com

Ingrid Pierce Global Managing PartnerT +1 345 814 4667ingrid.pierce@walkersglobal.com
Tim BuckleyManaging PartnerT +1 345 814 4646 tim.buckley@walkersglobal.com
Bicrom DasPartnerT +1 345 814 4606bicrom.das@walkersglobal.com
Caroline WilliamsPartnerT +1 345 914 6342caroline.williams@walkersglobal.com
Steven ManningChief Executive Officer – WPST +1 345 814 7612steven.manning@walkersglobal.com
Nicholas QuinManaging DirectorT +1 345 914 4295nicholas.quin@walkersglobal.com

Daniel WoodManaging PartnerT +971 4 363 7912daniel.wood@walkersglobal.com

Thomas GrangerPartnerT +852 2596 3348thomas.granger@walkersglobal.com
Denise WongPartnerT +852 2596 3303denise.wong@walkersglobal.com

Tatziana Paraguacuto-MaheoPartnerT +44 (0)20 7220 4991Tatziana.Paraguacuto@walkersglobal.com
Ed PearsonPartnerT +44 (0)20 7220 4999ed.pearson@walkersglobal.com

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