Cayman Islands Updates
Securities Investment Business Law

Cayman Islands Monetary Authority (CIMA) issues new rules for Excluded Persons - Securities Investment Businesses (i.e. broker-dealers/investment managers).


For many years investment professionals set-up Cayman investment management firms/broker-dealers (Excluded Persons) with limited documentation and oversight by the local regulators. Those laws had allowed a firm to rely on exemptions provided by the Cayman Islands Monetary (CIMA).

However, the Cayman Islands Government has recently passed the Securities Investment Business (Amendment) Law, 2019 (the "Amendment Law"), that would provide important changes to the regulatory and supervisory framework applicable to those persons currently registered as 'excluded persons' under the Securities Investment Business Law (2019 Revision) ("SIBL") including Cayman Islands fund managers, investment advisers and broker dealers ("Excluded Persons").

Excluded Persons will now be identified as Registered Persons and will be subject to a number of CIMA supervisory, inspection and enforcement powers which were previously restricted to those entities holding a full license ("Licensees"). CIMA now has the ability to refuse or deny an application or impose conditions upon a Registered Person. The Registered Person must also wait for formal approval from CIMA before operating as a securities investment business (typically around six weeks). This approval process will include CIMA assessing whether the applicant's shareholders, directors and senior officers are fit and proper persons. A fit and proper person is defined as a person that demonstrated honesty, reputation and integrity; competence and capability; and financial soundness.

Registered Persons will not be required to submit annual audited financial statements or business plans, will not be subject to certain regulations made under SIBL (in relation to Conduct of Business and Financial Requirements), and will not be subject to pre-approval of any change of directors, shareholders or beneficial owners.

WHAT IS AN EXCLUDED REGISTERED PERSON?

An entity which conducts securities investment business, as defined by Section 4(1) of the Securities Investment Business Law ("SIBL") may be required to be licensed pursuant to the SIBL, unless otherwise exempted under Schedule 3 or is excluded from licensing pursuant to Section 5(2) and Schedule 4 of the SIBL.

Entities registered as excluded persons (i.e. broker-dealer) are exempted from the requirement to obtain a license to conduct securities investment business as they conduct business exclusively with persons or institutions as set out in Schedule 4 of the SIBL and are therefore not regulated by the Authority.

Contact us to receive a free summary outlining the costs to set up a turn-key Cayman broker-dealer (Excluded Registered Person) that is fully compliant with the current legislation.

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