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AIFMD – Cayman Islands legislation change to prepare for passporting to Europe

The Cayman Islands Government has recently taken steps to facilitate extension of the European Union’s Alternative Investment Fund Managers Directive (AIFMD) passport regime to the Cayman Islands.

On 10 July 2015, the Cayman Islands Legislative Assembly published proposed amendments to two key pieces of legislation, the Mutual Funds Law (Revised) and the Securities Investment Business Law (Revised). The proposed amendments establish an opt-in regulatory regime for Cayman-domiciled investment funds that are managed within, or marketed into, the EU, to be known as “regulated EU connected funds”; and for Cayman-domiciled fund managers managing or marketing such regulated EU connected funds. The election to be treated as a “regulated EU connected fund” would be available to both open-ended funds and closed-ended funds, which are currently outside the scope of the Mutual Funds Law.

The European Securities and Markets Authority’s (ESMA) initial advice as to which non-EU countries will be extended the benefit of the passporting regime is due on 22 July 2015. Further updates to this initial advice are expected as ESMA assesses the technical preparedness of each relevant non-EU jurisdiction. It is expected that Cayman’s proactive approach in developing these new opt-in regulatory standards, consistent with AIFMD, will position Cayman favorably when it comes to ESMA’s advice.