The Cayman Islands is becoming an increasingly regulated jurisdiction. New rules require additional responsibilities to be undertaken. Some of these functions can be costly to Cayman funds. Where the rules have a wide interpretation as to who can fulfil these functions, some clients endeavour to reduce costs by appointing a friend or colleague who agrees to act gratuitously. This approach has some pros and cons.

Pros

**Friend’s track record is known and can be verified

**Appointee may be reliable and will execute instructions when required

**Friend is a trusted party

**Friend’s appointment can be quickly executed

**Little or zero upfront costs as role is completed for “free”

Cons

**Friend may be unfamiliar with industry sector

**Legal or regulatory violations may occur and fund remains unknowingly non-compliant

**Friend’s available time may be limited to execute functions

**Important fiduciary concerns may not be addressed

**Long-run cost implications may be high due to breach of duties resulting in losses or fines

Overall

Even when appointing a friend (as a director, principal point of contact, anti-money laundering compliance officer, money laundering reporting officer or money laundering reporting officer), we may need to consider whether there are any statutory duties or other obligations for appointees and how execution or non-execution of the role may impact the reputation or profits of the entity. The effects could be positive or negative, however, if you are doing any appointment, you should evaluate both while assessing the risks and rewards.

About the author

Alric Lindsay is a Cayman Islands corporate/funds lawyer and an independent fund director approved by the Cayman Islands Monetary Authority and licensed under The Directors’ Registration and Licensing Law. Alric also acts as voluntary liquidator to Cayman Islands entities. Alric can be contacted at alric@caymanfs.com.