Bermuda Funds vs. Cayman Islands Section 4(3) Funds

Bermuda Funds Cayman Islands Funds

Investment Funds Act 2006, as amended in Mutual Funds Law (2013 Revision) October 2013 i. Licensed Funds (retail) i. Standard Funds (retail) ii. Administered Funds ii. Administered Funds iii. Registered Funds (S4(3) funds) iii. Institutional Funds iv. Exempted Funds (private offer to less than 15 iv. Class A Exempt Fund investors. Investors must have right to remove and Funds Legislation v. Class B Exempt Fund appoint the fund’s operator) and Classification vi. Excluded Funds (private offer to less Registered Funds (S4(3) funds) most widely used. They than 20 investors) account for about 90% of the registered funds in the Institutional and Class A/B Exempt Funds Cayman Islands. most widely used. Private Equity Funds fall outside the scope of the Investment Funds Act 2006.

Cayman Islands Monetary Authority (“CIMA”) Bermuda Monetary Authority (“BMA”) Regulatory Registrar of Companies Registrar of Companies (single registrar Authorities Registrar of Exempted Partnerships for companies and partnership structures). Registrar of Trusts

Unregulated A Section 4(3) must have either: A Bermuda Exempt A Fund must have: i. The initial minimum investment must be $100,000 i. An investor base that meets the purchasable by a prospective investor; or ‘qualified participant test’ (includes ii. The equity interests must be listed on a stock ‘accredited’ investors); and exchange approved by CIMA. ii. A registered investment adviser as If a minimum investment below $100,000 is required, the investment manager of the fund; the Cayman Licensed and Administered Funds (Retail) or are the available options. iii. An investment adviser with consolidated gross assets under management of an amount not less Requirements than $100 million. Class B exempt fund available where manager does not meet (ii) or (iii) above, but subject to BMA approval. Regulated A Bermuda Institutional Fund must have either: i. An investor base that meets the ‘qualified participant test’; or ii. The minimum investment must be $100,000 per investor.

Class A Exempt Fund - same day filing Registered (S4(3) Fund). Filing of prescribed form MF1 of prescribed form. No approval from and offering documents. Registration with CIMA, . BMA. Immediately following filing, offering Acknowledgement of Registration from CIMA issued in can commence and investors admitted to approximately 5 business days. the fund. No delay to launch. Licensed and Administered Funds. Subject to licensing Class B Exempt Fund - typically within application. Speed to market 2 to 3 business days with a 10 day approval deadline. Institutional Fund - the authorization procedure is handled online. In practice it can take between 3 to 4 business days. BMA is subject to a 6 day maximum turnaround policy.

The Directors Registration and Licensing Bill 2014 will No Director registration or licensing require directors of certain regulated entities (including Directors required most registered funds) to register with or obtain a licence from CIMA under this new regime. Bermuda Funds vs. Cayman Islands Section 4(3) Funds

Bermuda Funds Cayman Islands Funds

Class A Exempt Fund. Exemption Registered (S4(3) Fund). Submit with CIMA only - Notification under IFA made to BMA- i. File Form MF1 with CIMA; i. Submit Exemption notification using Filings ii. File Offering Document with CIMA; prescribed form; iii. Launch ii. File Offering Document with BMA; iv. Acknowledgement of registration issued by CIMA. iii. Launch.

Annual reporting to BMA in the form of a Annual reporting to CIMA in the form of a Fund Annual Reporting Statement of Compliance together with Return (FAR) together with annual return. audited financials.

No prior approval requirement for changes Section 4(3) Funds are subject to the supervision of Ongoing regulatory to the service providers of the Exempt A CIMA. CIMA may at any time instruct a Section 4(3) Fund. Fund to have its accounts audited and to submit them to aspects Full enforcement/investigatory powers set CIMA within such time as CIMA specifies. out in IFA. Section 4(3) Funds must appoint local Cayman Islands auditors to “sign-off” on audited financial statements Audit requirements No local auditor sign-off requirement. prepared elsewhere or prepare the audited financial statements on island. Bermuda Master Funds are not required to Cayman master funds are required to register as such Master Fund filing register with the BMA. with CIMA. They do, however, have to notify the BMA requirements that they qualify to be treated as excluded funds. Generally, there is no Bermuda tax Generally, there is no Cayman tax applicable to the applicable to the establishment and establishment and operation of funds. Taxation operation of investment funds which are exempted undertakings. Separate accounts required to be maintained Required to have “SPC” or Segregated Portfolio in respect of each segregated account. Company in name. Cayman SPCs v Not required to have “SAC” in name. Each segregated portfolio must be identified or Bermuda Bermuda Act expressly permits Segregated designated with “Segregated Portfolio”, “SP” or “S.P.” Segregated account to invest into another segregated Contracts to be executed on behalf of the relevant Accounts account. segregated portfolio. Companies Court tested - Bermuda Court has expressly upheld the notion of statutory insulation between the accounts. Annual/ $731 $1,995 Incorporation fee If registered express, add $488 Tax exemption $179 $1,830 certificate Certificate of $277 $244 Incorporation Filing fee (ROC $86 $63 Companies Act)

Government Fees* Certificate of Good Standing (if $82 $122 required) Application fee under IFA 2006 Class A; or $1,500 Registration fee under MFL $4,268 Class B; or $1,000 Institutional $830 Total Class A: $4,119 Total: $7,258 Total Class B: $3,619 Total if registered express: $7,746 Total Institutional: $3,449 *All fees are listed in USD