Legal experts explained that the changes were deemed necessary, as although the Japan Securities Dealer's Association had not objected to the distribution of Cayman-registered funds, the guidelines for the selection of foreign unit trusts were vague with regard to the required standards for foreign regulatory regimes, meaning that some Japanese fund distributors had opted not to take the risk.

Although this was by no means a universal position, demonstrated by the fact that currently around 20 funds domiciled in the Cayman Islands are sold to the Japanese public, CIMA decided to introduce new regulations to soothe the fears of more wary distributors.

From November 19, fund prospectuses for Japanese markets must reveal the rights and restrictions attached to securities, such as the terms of their issue and redemption, and the method of calculating redemption prices. Funds domiciled in the Cayman Islands and selling to the Japanese public must also be audited in accordance with the standards set out in the new rules.

However, according to reports, the Monetary Authority also included a clause in the new regulations exempting existing Cayman funds registered in Japan from the obligation to adopt the more stringent rules if the fund manager does not see the need.