Don Seymour President of dms Management	Yolanda McCoy CIMA head of Investments and Securities	Anthony Travers CIFSA Chairman

By Tad Stoner
tad@caymannetnews.com

The Cayman Islands Financial Services Association (CIFSA) has addressed efforts to boost disclosure of information about hedge funds, and has cautioned that the move must be widely agreed and equally applied.

Meanwhile, regulators at the Cayman Islands Monetary Authority (CIMA) said it hoped the changes, contemplated for later this year, if approved, would aid industry transparency, improving global views of Cayman’s financial services industry as it struggles for approval from the Organisation for Economic Cooperation and Development (OECD).

“The most crucial aspect of this is to ensure that there is a comprehensive approach so that every regulated hedge fund is covered,” said CIFSA chairman Anthony Travers. “This should be achieved first. There is a real risk that disclosing partial information may colour the debate going forward and may not present Cayman in its best light.

“However, it is also important that the proposals proceed through a proper consultative process so that all members of CIFSA are given the opportunity to comment before a consensus position is presented to Government. That is an important feature of the new relationship between CIFSA and the Cayman Islands Government,” he said.

CIMA head of Investments and Securities Yolanda McCoy said she would consult with the industry before implementing new disclosure rules.

“CIMA has received some positive feedback from local and international players, including investment managers, on this proposal. Any concerns by industry practitioners will be considered during the consultation process and will provide CIMA with useful information for its cost-benefits analysis,” she said.

“We see this as enhancing the local hedge funds industry. The growth of our industry and the increasing volume of business we have received over the years, as regulation has been enhanced, shows that people like to do business in a well-regulated environment.”

The proposed changes, in discussion since last summer, would create a publicly available database naming directors, lawyers, advisers, managers, auditors and others who administer the 9,700 funds registered in the Cayman Islands, the world’s top jurisdiction.

Such information is already available to investors through a fund’s initial “offering documents” and to CIMA regulators, but this would mark the first time for general access.

Some managers have cautioned, however, that the change might alienate new investors and new businesses, attracted to lighter-regulated jurisdictions such as the British Virgin Islands or the Channel islands of Jersey and Guernsey.

They also worry that the attempt to regulate “secrecy” might overspill into legitimate concerns for privacy in an industry, they say, aimed at private investors making personal decisions about placing their own funds.

“We support disclosure of ‘systemically relevant’ information,” DMS Management’s President Don Seymour told Cayman Net News last week, but he listed “a number of concerns” about the database proposal, including the right of private individuals to retain their contractual right to confidentiality.

“Any change should be carefully considered. There is no public interest here. The public at large cannot invest in these funds,” he said, pointing out that ownership of shares in a fund was a matter of private assets.

In mid-June, Cayman was admitted to the 109-member, Madrid-based International Organisation of Securities Commissions, which has called for compulsory registration of fund managers, echoing a similar call by the Group of 20 industrialised nations.

Both Washington and the European Union have also moved to tighten fund legislation, while the OECD has sought transparency improvements among financial services providers worldwide as economies have slowed globally and authorities have tried to staunch capital outflows.

The organisation has placed Cayman on a “grey list” of insufficiently tax-compliant jurisdictions, triggering a local scramble to gain “white list” status to preserve Cayman’s financial industry.

“Evidently enough important issues, such as trading strategy, will remain confidential so no material change will result to the operating practice of any regulated fund,” Mr Travers said.

“The move comes at a time when the confidentiality provisions of Cayman law are under review in any event, and we can anticipate more relevant changes that are consistent with -- and complementary to -- the financial operations that are conducted in the Cayman Islands currently.”

Ms McCoy said CIMA had not referred to the OECD when launching the initiative, but said it dovetailed with the Paris-based group’s demands.

“The initiative is in line with CIMA’s responsibility to keep the regulatory framework under constant review and make recommendations for adjustments we judge necessary to enhance market confidence, consumer protection, the jurisdiction’s reputation, and to maintain our competitiveness while meeting relevant, appropriate international standards,” she said.

“CIMA started discussions on expanding hedge-fund information last year, before the OECD initiative was announced. It must be clear that the initiative of becoming OECD-compliant and gaining recognition on the white list is lead by the Cayman Islands government, not CIMA.

“However, this is an initiative that further demonstrates Cayman’s ongoing commitment to transparency and mutual cooperation.”