09/02/2011 Author: Tony Griffiths

Cayman and Ireland to review corporate governance policy

Groundbreaking changes in corporate governance policy are underway throughout the hedge fund industry, with new initiatives in both Cayman and Ireland due to be unveiled in the next few months, sources in the two jurisdictions have told HFMWeek.  

In Ireland, a review of the jurisdiction’s corporate governance structures – sparked by the country’s banking crisis – was extended to funds in the middle of last year.

A working group consisting of members of the Irish Funds Industry Association (IFIA) and the Central Bank, recently handed responsibility for fund regulation, is working on a white paper, believed to be ready for release in a few weeks’ time. The code itself – the first of its kind in Ireland – is due in the months following.

The Cayman Islands Monetary Authority (Cima) is also working on a policy review, prompted by a letter-writing campaign from large fiduciary investors, begun last June by Chicago-based fund of hedge funds (FoHF) Mesirow Advanced Strategies.

One source with knowledge of developments in Cayman, who declined to be named, said Cima had “recognised that there is an issue, that they can’t sit on their hands and that they have to give a definitive answer to the market. There is an inclination at board level at Cima to do this by the end of the year – whether it is within a month or six months is another matter.”

According to the source, Cima is in the information gathering stage, gauging support for possible solutions. Previous calls for information on Cayman-based directors to be made public via an internet database were met with a mixed response, the source added, but it now appears to be the solution behind which most transparency campaigners have gathered.

Gary Palmer, CEO of the IFIA, told HFMWeek that the Irish working group was, “very confident that a code for corporate governance would be completed in the next few months.”

While refusing to be drawn on speculation that the new code could include a cap on the number of directorships an individual could hold, Palmer revealed the group was working on a time-metric approach. “Time required would be applied to the time-metric to ensure the duties and responsibilities can be suitably delivered,” he said.   

Commenting on the atmosphere in Cayman regarding corporate governance, Gary Linford, a professional independent director and board member at one Mesirow product, said: “There is definitely a more activist approach taking hold and I would suggest this will continue and will be significantly aided if Cima proceeds with the transparency initiative.”   

Corporate governance found itself under increased scrutiny following the 2008 financial crisis, and is considered a potential weakness for a range of financial entities, particularly in the banking sector, but also in regards to funds.