A New Regimen…

Originally pubished in Legal Week, March 2006.

February 1, 2006 was the deadline date for hedge funds to register with the U.S. Securities and Exchange Commission (SEC) in compliance with SEC Rule 203 (b)(3)-2 ("New Rule 203"). With 80% of the world’s more than 8,000 hedge funds domiciled in the Cayman Islands, the impact of the new regulations has certainly been felt in this jurisdiction, primarily in the areas of structuring lock-ups for new funds clients and creating independent boards of directors for hedge funds.

The volume of hedge funds in Cayman likewise makes the jurisdiction a global bellwether for how the new rules will play out on a global basis.

One of the key criteria under New Rule 203 is that any fund with 14 or more U.S. investors is required to register with the SEC, even if the fund is not domiciled in the U.S. Unlike the rules that apply to U.S. managers, there is no minimum amount of assets under management that an offshore fund manager needs to have before