What CIMA's Corporate Governance Thematic Review Found — and What Boards Should Do About It

The Cayman Islands has long been the jurisdiction of choice for investment fund domiciliation, and the numbers continue to reflect that status.

By the end of December 2024, the total number of regulated funds in the Cayman Islands was over 30,000, with private funds growing by 4.5% during the course of 2024 alone. Mutual funds reported a total asset value of US$10.6 trillion, reflecting a 15.2% increase from the previous year.

Such numbers are a measure of the responsibility that comes with operating in one of the world's most significant financial centers. With that scale comes regulatory scrutiny.

In 2024, the Cayman Islands Monetary Authority (CIMA) conducted its first Corporate Governance Thematic Review under the new enforceable Rule on Corporate Governance, which became effective in October 2023.

The review evaluated 19 selected licensees across several sectors, including Banking, Fiduciary, Insurance, Investments, and Securities. The goal of the review was to examine compliance across 14 governance categories, including the corporate governance framework, oversight responsibilities, independence, risk management, financial reporting, and transparency.

For fund managers and investment firms operating in the Cayman Islands, this review remains as relevant today as when it was published. The governance weaknesses it identified have not disappeared, and with CIMA's supervisory scrutiny continuing to intensify in 2026, the pressure on boards to act has only grown. 

Boards that have yet to address these findings are running out of time to do so on their own terms. This review is best treated as a practical roadmap — one that tells you exactly where the regulator is looking and what it expects to find. 

To fully appreciate what the review found and why it matters, it is worth taking a step back to understand the regulatory shift that made it possible in the first place.

Background: What Changed in 2023

To understand the significance of the thematic review, it helps to first understand what changed in 2023. 

On 14 April 2023, CIMA issued the Statement of Guidance on Corporate Governance for Mutual Funds and Private Funds, the Rule on Corporate Governance for Regulated Entities, and the Rule and Statement of Guidance on Internal Controls for Regulated Entities. All of these became effective from October 2023.

Unlike the Corporate Governance Statement of Guidance, which provided guidance on CIMA's minimum expectations for sound and prudent fund governance, the new Corporate Governance Rule creates binding obligations. Breaching these obligations could lead to the imposition of fines or other regulatory action.

The 2023 update introduced distinct guidelines for mutual funds and private funds. The guidelines mainly emphasized the importance of governance structures tailored to the size, complexity, and risk profile of each entity. 

The guidelines also provided clearer definitions, enhanced oversight functions, and more detailed requirements for managing conflicts of interest and risk management. Most importantly, private funds are now in scope of the Statement of Guidance, whereas previously only mutual funds were covered under this framework.

What CIMA Found: The Positives

Let's start with the positive side of things. The thematic review did identify areas of genuine good practice across the entities reviewed. Some boards demonstrated the kind of governance discipline that CIMA expects to see as standard. 

Specifically, the review found commendable examples of:

• Defined Board Mandates and Roles: Some entities had clearly documented board mandates with well-articulated responsibilities for each director, which provides a solid foundation for effective governance oversight.

• Active Risk and Compliance Oversight: Certain boards demonstrated consistent, hands-on oversight of risk management, compliance functions, and internal controls.

• Annual Policy Reviews: A number of entities were conducting structured annual reviews of their governance frameworks and internal policies.

• Timely Conflicts of Interest Declarations: Some boards had established reliable processes for collecting and recording conflicts of interest declarations from directors on a regular basis. 

These findings matter because they demonstrate that sound governance at this level is achievable. The challenge, as the review made clear, is that these practices are not yet consistent or widespread enough across the industry.

What CIMA Found: The Areas of Concern

The more significant findings from the review were the weaknesses identified. Fund managers and boards should treat each of these as a direct prompt to examine their own practices:

• Policy Oversight Lapses: Few boards were conducting annual reviews of their governance frameworks or internal policies. This finding suggests that many are treating governance documentation as a one-time exercise rather than an ongoing obligation.

• Weak Conflicts of Interest Protocols: There was insufficient clarity around conflict of interest disclosures, abstentions from board decisions, and the handling of related-party transactions. CIMA's updated framework addresses this area explicitly.

• Absent or Poorly Documented Succession Planning: Succession planning for board members, particularly independent directors, was largely missing or inadequately documented. This leaves many boards exposed to both governance and operational risk.

• Inadequate Board Minutes: Minutes frequently lacked sign-offs, failed to clearly capture decisions taken, and did not record how conflicts of interest were managed.

• Remuneration Blind Spots: Many boards lacked formal, board-approved policies linking executive remuneration to long-term risk management and strategic objectives. CIMA expects these to be in place as a standard governance practice.

• Strategy and Internal Audit Disconnect: Strategic objectives and internal audit plans were often undocumented or poorly communicated across control functions, undermining the board's ability to oversee risk effectively.

Where the Industry Stands in 2026

Since CIMA's 2024 thematic review, the governance conversation in the Cayman Islands has moved from awareness to action — at least among the more proactive firms. 

CIMA is expected to intensify scrutiny and inspections in 2026 as part of its risk-based supervisory programme and in preparation for the 2027 FATF mutual evaluation. On that note, regulated entities are advised to anticipate increased on-site inspections and off-site monitoring, as well as greater emphasis on documented governance frameworks and internal control registers.

Leading firms are responding by treating governance as an operational discipline rather than a compliance checkbox. The practices now becoming standard among well-governed funds include:

• Appointing dedicated governance officers or engaging specialist third-party providers to maintain and oversee governance frameworks.

• Moving board documentation onto structured digital platforms that create automatic audit trails

• Commissioning annual governance health checks against CIMA's Rule

• Ensuring that conflicts registers, succession plans, and policy review cycles are formally built into the board calendar rather than addressed reactively.

CIMA's communication style is increasingly directive, reflecting a shift from education toward accountability. This approach is made clear in its recent enforcement circulars and public statements, with institutions now expected to demonstrate that compliance frameworks are both operational and periodically tested. 

This trend is promoting the adoption of best practices in fund governance, including the appointment of independent directors and the implementation of robust risk management frameworks, which in turn enhances investor confidence and market stability. 

What Boards Should Do About It

The findings from this review translate into a clear set of actions for fund managers and their boards. The following steps should be treated as priorities to avoid unnecessary penalties:

• Formalize Annual Governance Reviews: Schedule and document an annual review of the corporate governance framework and all associated policies. There should be formal documentation of what was assessed, updated, and approved.

• Strengthen Conflicts of Interest Procedures: Review and update the conflicts of interest policy to clearly address how conflicts are disclosed, managed, and recorded, including abstentions and related-party transactions. Annual declarations from all board members should also be collected and reviewed at a formal board meeting.

• Develop a Succession Plan: Put in place a documented succession plan for all directors, including independent directors, that identifies potential gaps and sets out a clear process for replacing departing members. This should be a living document and must be updated regularly to reflect any changes.

• Upgrade the Quality of Board Minutes: Ensure minutes are comprehensive, signed off, and capture the substance of decisions made and not just the fact that a meeting occurred. Conflicts of interest raised, how they were managed, and any abstentions must all be recorded. Remember, board minutes are among the first documents CIMA will request in an inspection.

• Establish a Remuneration Policy: Put in place a formally approved, documented policy that links executive compensation to long-term risk management and strategic performance. This policy document should also be reviewed periodically.

• Align Strategy with Internal Audit and Risk Oversight: Clearly document strategic objectives and communicate them across all control functions, including internal audit, with defined lines of accountability and regular reporting to the board.

Looking Ahead

CIMA's 2024 Corporate Governance Thematic Review marked a significant moment for the Cayman Islands fund industry. But as 2026 gets underway, the question fund managers must answer is whether their governance frameworks are keeping pace with a regulatory environment that continues to raise the bar.

The shift from guidance to enforceable rules means that good intentions are no longer sufficient. Fund boards must be able to demonstrate that their governance frameworks are properly designed, consistently applied, thoroughly documented, and periodically reviewed. 

For many firms, this will require not just policy updates but a fundamental change in how governance is resourced, structured, and prioritised at board level.

The right mindset is to treat the thematic review not as a historical document but as a live benchmarking tool. This review should help your fund identify where it may be exposed and what it needs to do to meet the standards that CIMA, and increasingly investors, now expect.

At Daymer, we have been helping funds and boards in the Cayman Islands navigate exactly these challenges — building governance frameworks that are not only compliant on paper but genuinely fit for purpose in practice. 

As a DFSA-regulated firm operating out of the DIFC in Dubai, we are bringing the same governance standards and hands-on expertise we have built in the Cayman Islands to one of the world's most dynamic and fast-growing financial centres. 

If you would like to discuss how Daymer can support your governance framework, get in touch with our team today via our Email: info@daymer.group.