The Private Funds Act (2021 Revision) and Private Funds (Annual Returns) Regulations 2021 introduced new filing requirements for Private Funds. In order to assist entities with this process, CIIPA has collated frequently asked questions and responses from CIMA.
2.3.7 The FAR only allows one investment sub-advisor to be entered. What criteria should be used where there is more than one?
If the sub-advisors are advising on separate investments of the private fund, then select the sub-advisor who provides advice regarding the most substantial part of the overall portfolio. In the event all advisors provide advice regarding the overall portfolio, then select the most long-standing relationship.
3.1 Where the investor is an international entity and therefore does not have a jurisdiction (e.g. World Bank or United Nations), how does one disclose them in Section 3.1 on the FAR? The only approach is not to disclose as there is no drop down that fits these investors.
We have no objection to this approach.
3.2 In the case of Cayman Domiciled Investors where there is no capital commitment amount, 0% produces a validation error and therefore,
clients have been entering 100% (as no further capital commitment is outstanding). Is this reasonable?
In scenarios where there is no capital commitment , enter the same percentage in both 3.2(b) and 3.2(c).
3.3 (a) Is this section meant to be:
i) the total number of Related Fund Entities or
ii) just the total number of Related Fund Entities invested into the Fund?
REEFs portal seems to indicate (i) but the Completion Guide indicates (ii)
Section 3 of the FAR is in relation to “Investor Details”, so the section should identify the number of related fund entities that are investors in the private fund, but exclude those that are already separately regulated under the Private Funds Act. Therefore, per the above options, ii) is the most appropriate.
3.4 - 3.1 There is no option for Banks as types of investors. A note within the completion guide states "Note: See list of definitions for various
sections of 3.1 - 3.10 in the Appendix to the Completion Guide." The Appendix does not include Banks as an option to be reported as an
Investor or Nominee Investor for purposes of section 3. Can you please clarify that if an investor is a bank it is excluded in the table?
Confirmed, if an investor is a bank it is excluded in the table.
3.4-3.10 For the classification with respect to nominee investors is this the classification of the ultimate investor through the
nominee or is this the classification of the nominee?
Classification of the nominee.
3 & 9 Per completion guide, "non-bank financial institutions" is defined as follow:
"Private or public financial institutions other than banks, engaged primarily in the provision of financial services and activities auxiliary to financial intermediation such as fund management. Includes special purpose vehicles, hedge funds, securities brokers, money market funds, investment funds, pension funds, insurance companies, financial leasing corporations, central clearing counterparties, unit trusts, other financial auxiliaries, and other captive financial institutions. It also includes any public financial institutions such as development banks and export credit agencies."
Should the second sentence be interpreted as (1) or (2) below.
(1) Private or public financial institutions other than banks, engaged primarily in the provision of financial services and activities auxiliary to financial intermediation such as fund management. Financial intermediation includes special purpose vehicles, hedge funds, securities brokers, money market funds, investment funds, pension funds, insurance companies, financial leasing corporations, central clearing counterparties, unit trusts, other financial auxiliaries, and other captive financial institutions.
(2) Private or public financial institutions other than banks, engaged primarily in the provision of financial services and activities auxiliary to financial intermediation such as fund management. Non-bank financial institution includes special purpose vehicles, hedge funds, securities brokers, money market funds, investment funds, pension funds, insurance companies, financial leasing corporations, central clearing counterparties, unit trusts, other financial auxiliaries, and other captive financial institutions.
The guidance provides certain examples of what would be considered “non-bank financial institutions”, and through which
financial services are provided. Financial intermediation is a type of financial service. The examples provided in the guidance
are in relation to the first sentence as a whole and therefore not mutually exclusive as options (a) and (b) appear to categorize it.
3.8 & 3.10 1) Would charitable institutions and foundations be classified as financial institutions? There is a separate category for these in
section 9 so because of that would they be excluded as you consider them to be a separate category (similar to banks)?
The Authority confirms that Section 3 of the FAR (i.e. 3.2 – 3.10) does not currently make provision for recording charitable
institutions/foundations (therefore similar to Banks as noted).
2) Large clients are concerned that they do not actually maintain these classifications for their investors, especially for older
investors. Do you have any guidance where the type of corporation is not known for investors?
No formal guidance is available regarding the last comment. Funds however should use the completion guidance together
with any internal/external available information to make a most informed assessment.
5.8 Regarding the question, “Has the private fund issued a digital representation of its investment interest within the reporting period?”
a. Is this asking whether the Private Fund has issued crypto-currency (or some other digital asset) that can be traded on an exchange? Or;
b. is it asking whether the Private Fund has issued shares/portions of it’s equity in the form of digital representation? Or;
c. is the question asking something else?
Digital representation refers to the issuance of digital tokens in relation to the fund’s investment interests. Therefore b.
5.10 Where a fund has the minimum commitment stated in the PPM of 1.0mm USD but the GP has the right to accept any amount in its sole
discretion. Subsequently, we have a few investors whose commitment is well below the 1.0mm USD threshold. For the purposes of the
FAR form, should we report the minimum commitment stated in the PPM or the smallest commitment that was accepted into the fund?
Minimum amount per PPM.
5.13 Do board resolutions also count or only count those face-to-face meeting/tele-conference meetings?
Board resolutions may be drafted for various reasons and do not necessarily represent a formal board meeting. It is rather
represented by face-to-face/teleconference meetings, inclusive of formal meeting minutes.
5.14 For side letters, when filling out the form for a blocker/AIV entity there would not be any side letters specific to the blocker/AIV
but there would be relating to the main fund (in this case a Delaware entity). Do you disclose those of the main fund or simply
If no side letters pertain to the AIV, then zero should be entered for the specific AIV on the Sub-Fund/AIV tab.
7.5 Should all Fund of Fund Investments (regardless of legal structure) be included in this category rather than 7.13?
Based on the information provided, it appears the investment is in another fund (Fund of Fund) and therefore not in an
investment company, and 7.13 may therefore be more appropriate.
10 Performance fee or carried interest - For a Private Equity Fund where carried interest is reversed in the current year and is a
positive value, should the performance fee or carried interest fee in 10.2 be reported as a zero even though it is a positive value?
The specific field only accepts zero or negative numbers, so the only option will be to report as zero.
11 & 12 1) What should the clients be inputting on the FARs if each of the SPs of the registered SPC has different Administrators,
Custodians, Investment Managers, Investment Advisors?
The legal entity is the SPC, and service provider contracts can only be made with the SPC, and not a SP. Where a service
provider contract pertains to only specific SP’s, the contract (with the SPC) will indicate so by reference to the specific SP
name(s). In cases where more than one service provider is appointed in the above noted service provider categories, insert
the name of the service provider appointed in relation to most of the SP’s.
2) What should be entered for Investment advisor/manager if the SPC itself doesn't have one because they are at the SP level?
The relationship type questions are only asked in the Private Fund tab, so if the Private Fund is a multi-fund, then the
relationships to the underlying sub-fund(s) should effectively be reflected in the Private Fund tab. Also see the comments at
point 1 above with regard to multiple relationships of the same type, and that contracts are made with the SPC, and are
therefore not at the “SP level”. The contract in such cases merely specify to which SP(s) it applies.
3) Regarding a registered Private Fund where all assets & liabilities are attributed to the sub-funds, what does the client report on the
Per the guidance notes, each sub-fund must report its financial position within the requisite sections of the FAR - Sections 11 & 12, as such there would be no FS information at the registered entity level.
Does the client input all zeros in the FD tab and report the financial position of each of the sub-funds in Section 11 & 12, or do they put the aggregate information in the FD tab and then break down per sub-fund in 11 & 12?
If all financial activity is at the sub-fund levels, then adding zeros in the FD Private Fund tab would accurately reflect the
circumstances. Aggregation in the FD Private Fund tab is not required – doing so will result in double-counting, and the FD Private
Fund tab also does not actually make provision for it considering that sub-funds may have different base currencies.
Can we get clarification on the intent for PF FAR data entry in relation to investor details of segregated portfolios? Based on the response to the above questions which is to submit a single FAR and utilize the AIV/Sub-Fund tabs, there would be no data input for investor details in section 3 (only zeros). The investor level detail is also not included in the AIV/Sub-Fund tabs.
Note the number of investors (within section 3 of the FAR) should be calculated by totaling the number of investors in the private
fund and/or sub-funds, if applicable. As rightly mentioned, the investor information is not captured within the “SD (AIV + Sub Fund)”
and “FD (AIV + Sub Fund) Allocation” tabs and as such should be included in section 3 of the “SD (Private Fund)” tab.
4) Can you please confirm that AIVs to be included here are AIVs that would otherwise meet the definition of a private fund but have
been registered as AIVs under the Private Funds Act? The definition of an AIV does not specifically state this but it is our
understanding that this is the intent, and that there is no obligation to provide detailed information on AIVs that would not
otherwise be required to be registered (i.e. a Delaware domiciled AIV).
Part B of the Schedule to the Private Funds (Annual Returns) Regulations, 2021 requires the information in respect of each of the private fund’s alternative investment vehicles and sub-funds (therefore not only Cayman AIV’s/Sub-funds). However, please refer to the definition of “alternative investment vehicle” (“AIV”) in the Private Funds Regulations, 2020 (“regulations”) which outlines that an AIV is a vehicle/entity formed in accordance with the constitutional documents of a private fund (as defined in the Private Funds Act). Accordingly, the definition does not include other entities/vehicles considered to be AIVs within the entire structure but not directly associated with the regulated private fund.
Additionally, any AIVs (as defined in the regulations) that are also registered as private funds are excluded from providing the operating and financial information per section 3(2)(a) of the Private Funds (Annual Returns) Regulations, 2021, in the submission of the Fund Annual Return (“FAR”) for the private fund (as these AIVs will have to separately file their FARs).
Operators If an Operator is the operator of multiple funds, are they able to fill out one Operator Declaration Form and use an appendix to list
Declaration out all of the private funds that they are signing on behalf of?
This is fine, the operator would just have to ensure all of the relevant funds are listed.
Exemption Per the Exemption from Audit Requirement for a Private Fund
From Audit https://www.cima.ky/upimages/regulatorymeasures/1595434336RPy
Requirement ExemptionfromAuditRequirementPrivateFund_1595434336_1599582125.pdf), on page 5 the footnote 1 for launched, “Launched” means where a fund has accepted capital commitments from investors for the purpose of investments.”
1) Does this mean received capital contributions - meaning capital was called and received by the fund?
3) If there are no capital contributions received by the fund, then would the fund be eligible for a waiver under the exemptions?
That section is in reference to any capital contributions that have been received from investors, it should be noted however that private funds which have not received capital from investors are actually not required to submit an audit waiver request.
Within the Private Funds (Amendment) Regulations, 2021 it outlines that private funds in such a situation are exempted from the requirement to submit an audit. The regulations then go on to outline the relevant wording that should be submitted to the Authority in this regard.