Why choose dms Management Ltd.(DMS)?
DMS is the largest management firm in the Cayman Islands focused on serving the hedge fund industry and attracts and serves some of the most notable names in the industry. We offer a full comprehensive service of corporate governance to the funds that we serve, and our outstanding reputation and experience are second to none.
What sets DMS' directors apart?
DMS' directors are wholly independent and serve in their own personal capacity, exercising their judgment independently of DMS and at their own risk. This is starkly different from the directors provided by law firms and fund administrators, where decisions are made via chain of command and ultimately controlled by the management hierarchy of the company; not the actual person appointed. Decisions are made according to firm policy rather than the knowledge and discretion of the individual appointed. Our principals are not employees of, or affiliated with, any administrator, law firm or other service provider. Our independent directors have received international recognition for their work protecting and maximizing investors’ interests in renowned publications like the Wall Street Journal and Institutional Investor.
What does it mean for a director to be independent?
An independent director means that a board member is free of conflicting loyalties that would adversely affect his professional judgment and ability to discharge his fiduciary duties in an impartial, objective and unbiased manner.
The best guidance on the issue is promulgated by The United States Securities and Exchange Commission (“SEC”) fund governance rules that address the independence of fund directors. “Role of Independent Directors of Investment Companies” (Release Nos. 33-7932; 34-43786; IC-24816).
The focus on independent directors is increasing because traditionally, offshore hedge fund directors have been employees of the administrator and, most recently, employees of companies owned by offshore law firms. However, serious questions remain about the efficacy and suitability of these practices to offshore hedge funds managed within a SEC regulated hedge fund complex – such as the SEC staff continuing to emphasize that directors have access to legal counsel that is “free from conflicting loyalties”.
Independence is fundamentally important and necessary because independent directors play a vital role in resolving conflicts of interest between a fund and its service providers; and also in approving special transactions such as deferred fee arrangements and principal and agency cross trades. These special transactions attract a high degree of scrutiny from regulators like the IRS and the SEC and it is vital that true independence be evident and demonstrated.
Accordingly, DMS continues to recommend that, for the avoidance of doubt, SEC registered investment managers adopt the SEC fund governance rules, as applicable, for their offshore hedge funds as best practice.
What do directors do?
The directors' duties and responsibilities are typically outlined in the fund documents. Click here for more information on what independent directors do.
How many boards can a director serve on?
DMS believes that service on multiple boards broadens and deepens the experience and effectiveness of its directors. Consequently, DMS' directors serve on a substantial number of boards. Since the duties and responsibilities of each board can vary significantly, DMS like any other professional services firm, is focused on ensuring that each director has sufficient time and other resources to meet the expectations of each fund and to discharge their professional obligations. A fit and proper director should either refuse appointment, or resign, if he cannot effectively discharge his obligations to the fund. Ultimately, each board is responsible for considering and assessing the commitments, available resources and performance of each director.
How often does the board meet?
The objectives of each fund can vary significantly so boards should meet as often as required, in their professional judgment, to discharge the various duties and responsibilities in the fund documents. Under Cayman Islands law, there is no legal requirement for a meeting; however most corporate actions are effected by written resolutions that require the written approval of all directors. These resolutions evidence oversight by the board in the same manner as a formal meeting.
What is the appropriate board size?
DMS recommends the majority of the board should be independent. Ultimately, the board should determine the appropriate size for itself, but in our experience, smaller boards (two to three members) are more cohesive and function more effectively.
What are the keys to an effective board composition?
For effective board composition, DMS recommends that directors should be independent, possess hedge fund literacy and have diverse talents and backgrounds. They should also posses the highest standards of probity, diligence and sound judgment, in addition to the willingness and resources available to attend meetings, participate in consultation and follow-up discussions between meetings and review materials prior to meetings.
Are there term limits for board service?
No, the cumulative value of the director’s history with the fund’s affairs is of great benefit to the fund.
Are directors required to invest in the funds for which they serve?
The SEC endorses this concept, but we have always believed that it compromises the director’s independence. Directors are often faced with investors with differing needs that have to be balanced and the ability for the director to make a profit may fetter his discretion to a group aligned with his interest over another.
What fees do you charge?
Our fees vary based on the jurisdiction and the nature and extent of the duties and responsibilities in the fund documents. Typical fees are reasonable and consistent with average professional services fees in established financial services jurisdictions. In any event, a good director will add value in excess of the fees. Directors serve at will and can be terminated or resign at any time. For a fee schedule or to request a service proposal, please email us.