Weavering - Cayman Islands Clawbacks And Investor Certainty

The Privy Council upheld the decisions of the lower courts that redemption payments to a Swedish bank made shortly prior to the collapse of the Weavering fund were voidable preferences that must be repaid. In doing so, the Privy Council has revisited the question of whether a fund's net asset value ("NAV") calculated in accordance with the fund's constitutional documents can be revised – holding that, in certain limited circumstances, it can. On the whole, though, any erosion to investor certainty will likely be around the margins. This is because it will only be possible to challenge NAV in circumstances where the fund itself has perpetrated a fraud (internal fraud), as opposed to having had a fraud perpetrated on it (external fraud, for example, in the case of the various Madoff feeder funds). Further, there is no automatic adjustment; legal proceedings must be brought to rectify the NAV.