On March 23, 2012, the U.S. Securities and Exchange Commission (SEC) announced that it had entered into a supervisory cooperation arrangement with the Cayman Islands Monetary Authority (CIMA). In its press release announcing the memorandum of understanding (MOU) embodying the supervisory cooperation arrangement, the SEC identified five categories of information that may be shared pursuant to the arrangement. Those five categories include information required to: (1) conduct routine supervision; (2) monitor risk concentrations; (3) identify emerging systemic risks; (4) better understand a globally active regulated entity’s compliance culture; and (5) conduct on-site examinations of registered entities located abroad. See “Is This an Inspection or an Investigation? The Blurring Line Between Examinations of and Enforcement Actions Against Private Fund Managers
,” Hedge Fund Law Report, Vol. 5, No. 13 (Mar. 29, 2012). Hedge fund managers, lawyers, compliance professionals and others have asked the Hedge Fund Law Report what this MOU means for their businesses. To help answer that question, we recently interviewed Don Seymour. Seymour is the founder and Managing Director of dms Management Ltd. (dms Management) and the former head of the Investment Services Division of the CIMA. At the CIMA, Seymour directed the authorization, supervision and enforcement of regulated mutual funds, including hedge funds, under the Mutual Funds Law of the Cayman Islands, and the supervision of company managers under the Cayman Companies Management Law. Seymour brought his CIMA experience to bear in explaining how the MOU will impact Cayman-domiciled hedge funds and their managers with respect to data collection and sharing, supervision, monitoring, examinations and regulatory coordination. Moreover, based on his service on the boards of several notable investment companies, Seymour offered insight on hedge fund governance issues, including: director independence; evolution in best corporate governance practices following the decision in Weavering Macro Fixed Income Fund Limited v. Stefan Peterson and Hans Ekstrom
; valuation expertise
required of fund directors; specific steps that directors can take to manage fund conflicts of interest
; maximum number of directorships
; and whether investors should have rights to appoint fund directors. This article includes the full transcript of our interview with Seymour.