DMS' Annual Fund Governance Review

 
FREE EXCERPT

Annual Compliance Review

Investment managers registered under the Investment Advisers Act of 1940 (the "Act") are required to conduct an annual compliance review pursuant to Rule 206(4)-7 of the Act. This review includes evaluating the capacity of service providers to serve investment funds that are managed by Registered Investment Advisers. It's imperative to recognize that the service providers of a fund include its directors and they should not be omitted from this annual review. Annual compliance reviews should ensure that the fund's directors have adopted internal controls and procedures that are consistent with applicable rules and regulations, including risk management, independence, data security (particularly MNPI), business continuity, recordkeeping and other key business controls, that relate to the ability of the Adviser to meet its obligations under SEC rules and regulations. It is important for an Adviser to maintain proper documentation of this review as it is a focal area of the SEC National Exam Program.

Under this Rule, service providers (including fund directors) to investment funds managed by registered investment advisers are required to have "implemented effective compliance policies and procedures administered by competent personnel and should provide the compliance officer with periodic reports". To evidence compliance with this Rule, DMS delivers to each fund we serve, a fund-specific DMS Fund Governance Transparency Report, DMS Independent Director Report and DMS Due Diligence Report. Additional copies of these reports are readily available on request for distribution to other stakeholders as required.

Footnote: Commodity pool operations must conduct a compliance review similar to the requirement of investment managers under the Act.

Board Review

DMS recommends that board performance, including any committees, be assessed at least annually. Consider whether the composition of the board, the capacity of its members, plus the frequency (and location) of its meetings, transparency reporting and other governance output, meet stakeholders' expectations. Be aware that the Cayman Islands Monetary Authority ("CIMA") has recently issued a new Statement of Guidance ("SOG") that requires, among other standards, all CIMA regulated funds to hold board meetings at least twice per year. Compliance with the new SOG need not be onerous or expensive with proper planning. If the fund is already a registered user of DMS Board Support Services, compliance with the new SOG will be seamless.

Review the tax status of the board members annually. Ensure that any directors or officers of the fund...

To continue reading

FREE SIGN UP