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Letter: European Union Alternative Investment Fund Directive: The Cayman Islands

Published on Friday, May 14, 2010 Email To Friend    Print Version

Dear Sir:

The following letter was sent by Cayman Finance to Mr Jean-Paul Gauzes (the rapporteur for the EU on the AIFM Directive).

Dear Monsieur Gauzes,

Cayman Finance represents the financial service industry in the Cayman Islands. I appreciate that you are no doubt currently engaged in what is a very complex reconciliation process. Nevertheless, I felt it appropriate to write because I have the impression from your recent comments that there may exist a misunderstanding about the nature of the transparency which exists in relation to the Cayman Islands hedge funds industry and the manner in which Cayman Islands hedge funds operate.

Specifically:

1. The Cayman Islands has full IOSCO membership and therefore full regulator to regulator disclosure with regard to regulated funds with all IOSCO jurisdiction based regulators. There are in addition numerous regulator to regulator MOU’s most of which preceded the IOSCO arrangements but in principal, we expect all Cayman Islands regulated funds to operate on the basis of full transparency.

2. Under the European Union Saving Directive which Cayman signed in 2003, and unlike a number of European Union based jurisdictions, the Cayman Islands opted for full pro-active tax reporting for all European Union residents with the relevant Treasury department of each of the 27 European Union members. It is therefore unnecessary to go further but in fact the Cayman Islands has gone further and has also entered into the OECD form TIEA’s with a number of European Union jurisdictions and further such agreements are in negotiation.

3. A Cayman Islands hedge fund may have fund managers investing its assets in a number of onshore jurisdictions but no Cayman Islands hedge fund can therefore invest otherwise in accordance with the laws and regulations that are of application to each such fund manager in its jurisdiction of residence and operation.

4. Subject to the Cayman Islands’ licensing process, no objection exists to the European Union based financial institution establishing operations and undertaking trading activity from within the Cayman Islands;

5. The anti money laundering legislation of the Cayman Islands is evaluated by the International Monetary Fund and by the Financial Action Task Force and is found to be superior to that of most EU jurisdictions when evaluated in relation to the Vienna principles.

The Cayman Islands financial services industry operates to access and pool funds from the international capital markets and directs those funds into investment opportunities in G20 jurisdictions. Whilst in terms of AUM the favoured locations for investment managers of Cayman funds are the United States and Asia, the Cayman Islands industry would welcome any opportunity to establish with you a regime that would enable European Union based fund managers to continue to benefit from investment by Cayman Islands investment vehicles.

If it would be helpful to you to provide further information based on the technical reviews of the International Monetary Fund or the Financial Action Task Force, or indeed the United States General Accountability Office which verify the foregoing statements, I would be happy to do so.

Yours sincerely,
Anthony Travers OBE
Chairman
Cayman Finance
 
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