Articles & Alerts
Breaking Down the Fund Annual Return (FAR): Guidance for Managers of Cayman Islands Private Funds
An item that private fund managers often overlook when planning for audit season is the Fund Annual Return (FAR), a form that is required of Cayman Islands Private Funds registered with Cayman Islands Monetary Authority (CIMA). Given recent regulatory developments, managers of Cayman funds must not only fill out the form properly, but also ensure that they have access to audit services provided by a Cayman certified office.
On February 7, 2020, the Private Funds Act required certain Cayman Islands-domiciled and closed-ended investment funds to be regulated by CIMA. As part of this Act, private funds that are registered with CIMA must have their accounts audited annually by a CIMA-approved audit firm. This February 2022, CIMA released an updated version of the FAR form. This new edition combines the existing form with the Related Fund Entity form and should be utilized for all private funds with a financial year-end of December 31, 2021 and beyond.
Our affiliate, Anchin, Block & Anchin (Cayman) Ltd. is an excellent resource and point of reference when planning, preparing, and filing the FAR. The group discusses the logistics and considerations of filing the form in the following paragraphs
The FAR asks fund managers to provide information about a fund’s legal structure, investment advisory team, fund service providers, investors (type and jurisdiction), financial statement information, and co-investment or parallel funds, both of which are examples of Related Fund Entities. The fund must also provide financial statements audited by a CIMA-approved audit firm. Finally, the fund operator must sign a declaration that the submitted fund is compliant with sections 16 (valuation), 17 (safekeeping of assets) and 18 (cash monitoring) of the Cayman Islands Private Funds Act.
Upon filing the FAR and Declaration, the fund pays a filing fee of CI$300 (US$366). A fund may be granted up to three filing extensions, each one month in duration, if it is unable to meet the June 30th deadline. It is best to file before or as close to the deadline as possible, as there is an extension fee of CI$500 (US$609.75) for each extension request. Funds that do not file the FAR face a penalty that starts at CI$5,000 (US$6,100) for each instance of not filing and may not be considered in good standing until all fees are paid. If a fine is not paid within six months, CIMA considers the fund to have committed a “minor” breach and will consider the fund to have committed a “serious” or “very serious” breach if the fine is not paid within two years. It is essential that fund managers are aware of these potential repercussions and plan their filing accordingly.
While the filing deadline for the FAR may seem distant, advance preparation is important to ensure that the FAR is filed correctly and in a timely matter. If you manage an offshore fund registered in the Cayman Islands, Anchin’s Cayman office can review the FAR, execute the form’s filing and validation, and provide additional guidance and resources. For more information, please contact your Anchin Relationship Partner.