Aug 10, 2020
In July 2020, CIMA introduced regulations to standardize valuation practices for Cayman private equity (equity) funds registered with CIMA. Here's a breakdown in plaintext of the key points:
1.Fund valuation must occur annually, at a minimum.
2.Funds are required to have a "Net Asset Value Calculation Policy" (NAV Calculation Policy).
3.The NAV Calculation Policy must encompass the following:
Disclosure in fund documents, marketing materials, or other investor reports.
A thorough description of valuation policies.
Adherence to accounting standards.
Defined roles and responsibilities of "specified persons."
Indication of the "pricing source" for underlying assets.
Protocols for reporting in unique circumstances to management.
Internal control procedures for fund valuation.
4.The NAV Calculation Policy must be executed by a "specified person."
5.Reports on fund net asset value should be directly distributed to investors by a "specified person."
6."Specified person" may be:
Independent third parties (e.g., fund administrators).
Internal independent valuation teams (Note: If valuations are prepared by internal staff, CIMA may require validation by independent auditors or third-party entities, like fund administrators).
7.Valuation of underlying assets must use "fair value."
8.Alternatively, a "pricing model" may be utilized for "hard-to-value assets" (e.g., company equity).
9.Funds are obligated to validate and test the "pricing model."
10.The "fund operators" of the fund must, at a minimum, annually review and ultimately take responsibility for the following:
Fund valuation processes.
The NAV Calculation Policy.
The pricing model.
11.The " fund operators " includes:
General Partners (GPs).
Fund Directors (for corporate funds).
Managers/Administrators (for LLCs).
Our team specializes in providing comprehensive back-office services for various funds, encompassing fund document review, fund accounting, and valuation services. Don't hesitate to get in touch with us for further details.
onboarding@precisionfundservices.com
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