Changes To Regulatory Requirements For “Section 4(4)” Investment Funds

Janet FrancisPartner, FrancisGrey

The Mutual Funds (Amendment) Law, 2020 of the Cayman Islands (the “Amendment Law“)  was brought into law on 7 February 2020.

The Amendment Law has removed the exemption from regulation for Section 4(4) investment funds  i.e. investment funds which have its equity interests held by fifteen (15) or fewer investors, a majority of which have the ability to appoint or remove the fund’s operator, i.e. its director, general partner or trustee.

Following the passing of the Amendment Law, Section 4(4) funds will be required to :

  • register with the Cayman Islands Monetary Authority (CIMA) and be subject to regulation[1]
  • pay an annual registration fee; 
  • file copies of the fund’s constitutional documents with CIMA which show that a majority of the holders of equity interests have  the ability to appoint or remove the fund’s operator; 
  • have a minimum of two (2) individual directors so as to comply with CIMA’s “four eyes policy“; 
  • have each of its directors register with CIMA under the Directors Registration and Licensing Law, 2014 of the Cayman Islands[2]
  • have the fund’s accounts audited annually by a CIMA approved auditor and file audited financial statements with CIMA within six (6) months of the fund’s financial year end. The Amendment Law provides that accounts should be prepared in accordance with International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP) of US, Japanese, Swiss or any other non-high risk jurisdiction; 
  • file a fund annual return (FAR) with CIMA; and 
  • inform CIMA of any material changes to the information submitted in the registration application within twenty-one (21) days of making any such change. 

It is to be noted that there still is no minimum initial investment amount for Section 4(4) funds.

Existing Section 4(4) funds will have until 7 August 2020 within which to comply with the Amendment Law.  This transitional period will not apply to Section 4(4) funds which commence carrying on business after 7 February 2020 and these funds will be required to comply with the new requirements immediately.

Section 4(4) funds which were in existence prior to the commencement of the Amendment Law should  review their governance structure, director registration status and constitutional documents in preparation for meeting the registration deadline.

If you require additional information and or assistance with the registration process FrancisGrey is able to assist, please contact:

Janet Francis

Corporate & Commercial Practice Group


  1. +1 345 815 2807 


© FrancisGrey 2020

[1] Once registered Section 4(4) funds will receive a certificate of registration. 

[2] This registration is an online filing process which is done on the  director portal of CIMA’s website.