Segregation of Assets – Registered Private Funds_____________________________________________________________________________

Rule
Segregation of Assets –Registered Private Funds
1.

2.

Statutory Authority
1.1.

These Rules are issued pursuant to section 34 of the Monetary Authority Law(2020 Revision) (“MAL”), which provides that the Cayman Islands Monetary
Authority (the “Authority”) may, after private sector consultation, issue oramend rules or statements of principle or guidance concerning the conduct oflicensees and their officers and employees, and any other persons to whom andto the extent that the regulatory laws may apply.

1.2.

These Rules should be read in conjunction with the Authority’s Rule on Contentsof Marketing Materials of Registered Private Funds.

Objective
2.1.

3.

Scope
3.1.

4.

To set out the Authority’s rules on the Segregation of Assets – Registered
Private Funds pursuant (each subparagraph of paragraph 5 below referred toas a “Rule,” and collectively, the “Rules”), to the MAL.

These Rules apply to all Private Funds registered under section 7 of the Private
Funds Law, 2020 (“PFL”) other than Alternative Investment Vehicles.

Definitions
4.1.

Fund means any Private Fund registered under section 7 of the PFL that is not
an Alternative Investment Vehicle.

4.2.

Portfolio means all financial assets and liabilities of a Fund and any part
thereof, including “investor funds” and “investments” as those terms are usedin the definition of Private Fund in section 2 of the PFL.

4.3.

Section 17 Person means a person appointed by a Fund under section 17 ofthe PFL to hold the Custodial Fund Assets of the Fund in custody.

4.4.

All other capitalised terms used in the Rules shall have the meanings ascribedto them in the PFL.

Segregation of Assets – Registered Private Funds_____________________________________________________________________________
5.
Segregation of Assets
5.1.

The Portfolio must be segregated and accounted for separately from any
assets of the Manager or Operator(s) or any Section 17 Person.

5.2.

A Fund must ensure that any Manager, Operator or Section 17 Person thatholds or manages the Portfolio complies with Rule 5.1.

5.3.

The overriding requirement of Rule 5.1 is that a Fund must ensure that noManager, Operator or Section 17 Person uses the Portfolio to finance its own
or any other operations.

5.4.

For the purposes of Rule 5.3 the following shall not in itself, constitute thefinancing of the operations of a Manager, Operator or Section 17 Person:
5.4.1 remitting to the relevant Investors, redemption, withdrawal ordistribution proceeds being paid on behalf of the Fund;5.4.2 paying fees, charges and expenses that are payable by an Investor inconnection with the purchase, conversion, holding, transfer,withdrawal or redemption of Investment Interests of the Fund;5.4.3 acquiring or disposing of assets for investment purposes in accordancewith the Fund’s constitutive documents and Marketing Materials;
5.4.4 paying fees, charges, expenses and taxes that are properly payable by
the Fund and as disclosed in and in accordance with the Fund’s
constitutive documents or Marketing Materials or as otherwise
disclosed to Investors; or
5.4.5 transfer and reuse of assets as consented to by or on behalf of theFund, provided that a description of the arrangements entered intowith any Section 17 Person allowing for the possibility of transfer andreuse (and the maximum permitted level of transfer and reuse) isdisclosed in the offering documents or otherwise disclosed to investors
before they invest, and that any material changes thereto are also
disclosed to investors.

5.5.

The Operator(s) of a Fund must establish, implement, and maintain, (oroversee the establishment, implementation, and maintenance of) strategies,
policies, controls, and procedures to ensure compliance with these Rules,consistent with the Fund’s Marketing Materials and appropriate for the size,
complexity, and nature of the Fund’s activities and Investors.

Segregation of Assets – Registered Private Funds_____________________________________________________________________________
6.
Enforcement
6.1.

Whenever there has been a breach of the Rules, the Authority’s regulatory
policies and procedures as contained in its Enforcement Manual will apply, inaddition to any other powers provided in the PFL and the MAL.