The Mutual Funds Act (MFA) is the cornerstone of Cayman's open-ended funds industry. Understanding the threshold for registration is critical for any emerging manager.
Section 4(3) Registration
The vast majority of Cayman hedge funds register under Section 4(3) of the MFA. To qualify, the minimum initial investment per investor must be at least US$100,000 (or equivalent), and its equity interests must be listed on a recognized stock exchange.
Funds registered under 4(3) are exempt from full licensing but remain subject to CIMA supervision, requiring them to file audited accounts annually and maintain appropriate AML procedures.
Section 4(4) Master Funds
Master funds incorporated in Cayman that issue equity interests to one or more regulated feeder funds must also register under Section 4(4). This ensures the underlying asset pool remains under CIMA's regulatory umbrella.
| Fund Type | Min. Investment | Audit Requirement | CIMA Registration |
|---|---|---|---|
| Section 4(3) Registered | US$100,000 | Yes, Cayman Auditor | Required |
| Section 4(4) Master | None (Feeder driven) | Yes, Cayman Auditor | Required |
| Exempted (<15 investors) | None | No statutory mandate | Exempt (Not regulated) |
Common Pitfalls
A frequent mistake is failing to engage a CIMA-approved local auditor before launch. Even if the fund's primary audit team is based in New York or London, a Cayman-resident auditor must sign off on the local statutory filings.
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