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CIMA Seeks To Quell Fears Over New Reporting For Cayman Hedge Funds

by Amanda Banks, for, London

28 August 2006

The Cayman Islands financial regulator has stressed that a new electronic data reporting requirement for the 8,000 or so Cayman-domiciled hedge funds is not an attempt to tighten regulatory oversight of the sector in the jurisdiction, where the vast majority of the world's hedge funds are registered.

The Cayman Islands Monetary Authority (CIMA), announced last week that in early 2007, fund managers with a year-end of December 2006 will submit "in a prescribed manner" their annual reporting requirements using a secure, streamlined and paperless system.

According to CIMA, the new system will allow it to have access to more accurate data extracted from audited accounts, which will be used in reporting statistical data on the Cayman fund industry.

Responding to fears that the new reporting system would require hedge funds to report confidential information, CIMA said that the new system only represents a change in the way that information is reported, not in the type of data that is reported.

"The system we are seeking to develop will eliminate redundant data requirements, align reporting to make use of more of the data that regulated entities use for their own purposes, and minimise ad hoc requests from us to those entities, thereby making CIMA more effective in its regulatory oversight," commented Gary Linford, Head of Investment and Securities for the Authority.

He added: "CIMA-regulated funds will not need to file 'information on transactions' as recently reported in an online media (report), nor is CIMA seeking to increase its prudential regulation of hedge funds beyond the existing regulatory framework. The initiative will allow us to significantly improve our compilation of aggregate statistics on the 8,000 funds regulated in our jurisdiction. This will better enable CIMA to meet the needs of our stakeholders for reliable, representative industry statistics, such as size, growth, change, market share, and investments by and in funds."

Linford stressed that the information submitted will continue to be managed in an "extremely confidential" manner.

"In no way will fund- or manager-specific information be made available to the public, only aggregate industry statistics," he stated.

CIMA says that demand for such statistical information is high, but currently the regulator does not have the wherewithal to collect this information manually.

Linford said that the industry has been supportive of the electronic supporting system.

"Many of the investment managers and service providers with whom we have had dialogue are relieved to hear that meaningful statistics on the industry will soon be available from a credible source," he explained.

CIMA also argues that electronic reporting will enable the Authority to maintain the appropriate supervisory capacity without a proportionate increase in staff.

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