Cayman Islands: Transparency And Directors Registration In The Cayman Islands

Last Updated: 19 January 2015
Article by Matt Mulry

THE CAYMAN ISLANDS MONETARY AUTHORITY (CIMA) undertook a public consultation during the course of 2012 on certain corporate governance proposals that were intended to enhance and clarify corporate governance standards and provide greater transparency in the financial services markets.

The proposals included a statement of guidance for operators of mutual funds, a public searchable database disclosing the names of the directors and the registered office address of all registered and licensed mutual funds and the registration and licensing of all directors of such funds. Some two years on this article takes a look at the developments which have been implemented in the Cayman Islands and what developments are expected to be implemented in order to enhance transparency regarding the directors of Cayman funds.

The statement of guidance for operators of mutual funds was issued in December 2013 and sets out useful and clear guidance for directors or Cayman registered and licensed mutual funds and for prospective and existing investors in those funds. The statement of guidance did affect or seek to change existing Cayman law and it largely mirrors the judgment of Justice Jones delivered in the high profile Cayman Grand Court case of Weavering Macro Fixed Income Fund Limited (in liquidation) v Stefan Peterson and Hans Ekstrom.

The Directors Registration and Licensing Law, 2014 (the Law) which provides for the regulation of directors of certain entities in the Cayman Islands was published on 21 May 2014 and the majority of its provisions came into force on 4 June 2014. Under the Law all directors of regulated mutual funds and of entities which are registered as excluded persons pursuant to paragraphs 1 and 4 of schedule 4 of the Securities Business Law (Revised) (each referred to as "covered entities") are required to apply to CIMA to be registered or licensed.

Regulated mutual funds are those registered with CIMA under s4(3), or licensed by CIMA under s4(1) of the Mutual Funds Law (Revised) and include registered master funds. Excluded persons under paragraphs 1 and 4 of schedule 4 of the Securities Business Law (Revised) (SIBL) are Cayman domiciled companies or partnerships or Cayman registered foreign companies (or entities which have established a place of business in Cayman) which provide securities investment business services (i) exclusively to sophisticated persons or high net worth persons or vehicles in which such persons invest or (ii) only on an intra-group basis. The Law does not apply to trustees regulated under the Banks and Trust Companies Law (Revised) or partners of partnerships.

The Law regulates three categories of directors: (i) registered directors, (ii) professional directors and (iii) corporate directors. Registered directors are persons who hold the position of director on less than 20 covered entities. Professional directors are persons who hold 20 or more directorships on covered entities. Corporate Directors are any body corporate (wherever it is incorporated) which is appointed to act as a director of a covered entity.

The requirement to register as a director or be licensed as a professional or corporate director of a covered entity applies to both executive and non-executive directors, regardless of whether or not they reside in the Cayman Islands. Only relevant Cayman funds and relevant excluded persons will count toward the threshold number of Covered Entities to bring a director within the Professional Director definition. The Law is applicable to covered entities in "Licence Under Termination" status, where the directors are still appointed to the board, however, it is not applicable to covered entities which have appointed liquidators.

Individuals who act as directors of covered entities should already be registered or licensed. Corporate directors of covered entities who have acted in that capacity prior to the coming into effect of the Law will have until 4 December 2014 to obtain their license. Persons who have not previously acted as a director to a covered entity and who would like to be appointed as such will need to be registered or licensed, as applicable, prior to their appointment.

Individual directors will not be registered or licensed automatically following application. CIMA may refuse to register an applicant if they have information that the applicant has been convicted of a criminal offence involving fraud or dishonesty or is the subject of an adverse finding, financial penalty, sanction or disciplinary action by a regulator, self-regulatory organisation or a professional disciplinary body. CIMA will not grant a license to a director unless it is satisfied that the applicant is a fit and proper person for such licensing.

To determine whether or not a person is fit and proper, regard shall be had to all the circumstances including that person's (a) honesty, integrity and reputation; (b) competence and capability, and (c) financial soundness. CIMA may grant a license to a professional director or a corporate director with or without conditions attached. Any terms or conditions attached to the license must be adhered to in order to maintain it. The fitness and probity requirements apply not only to corporate directors but also to the members of their board.

Whilst not currently in force, the Law also contains provision that CIMA may not grant a license to a director unless it is satisfied that the applicant has sufficient capacity to carry out the duties of a professional or corporate director, as the case may be. Once these provisions are brought into force CIMA is also expected to examine the capacity of registered, professional and corporate directors to carry out their duties and to give directions where necessary.

For professional directors, there are limited circumstances where registration only is required under the Law as follows: (i) an individual director who is a director, employee, member, officer, partner or shareholder of an investment manager or adviser of a licensed or registered fund where that investment manager or adviser is registered or licensed by an approved regulatory authority1 and that person acts as a director of a covered entity by virtue of their relationship to that fund manager or adviser; and (ii) an individual director of a covered entity who is a director, an employee, a member, an officer, a partner or a shareholder of a holder of a companies management license or a mutual fund administrator license issued pursuant to the Companies Management Law (Revised) or the Mutual Funds Law (Revised).

One significant difference between registered directors and professional or corporate directors is the fact that registered directors are not required to take out a policy of insurance under the Law. Both professional and corporate directors must maintain a policy of insurance with an insurer which is licensed under Cayman's Insurance Law (Revised) or any other insurer acceptable to CIMA to cover loss potentially arising from claims in respect of civil liability incurred in connection with the business of that director. The insurance policy must have minimum aggregate cover of US$1.22m for each and every claim.

If CIMA cancels or suspends registration, or revokes or suspends the license of a director of a covered entity details of that suspension or revocation will be made public through publication in the Cayman Islands Gazette.

CIMA will maintain a database of Registered, Professional and Corporate Directors (the Database), however, this database will not initially be a publically available document and will be protected from freedom of information requests. It is proposed that CIMA will provide a facility for the public to search the Database to determine whether a director is registered or licenced in accordance with the Law. It is expected that the results of any search for a director's licence or registration status will only show the director's name, the type of registration or licence held, the registration/licence number and the date on which licence or registration was issued.

The Law therefore serves to provide CIMA with additional teeth for the proper regulation of directors of covered entities and provides investors in those entities with reassurance that their directors are subject to the oversight of the Cayman regulator. Investors can also take comfort that where professional director or corporate directors have been appointed to their funds, the necessary insurance required under the Law will be in place.

Investors can add to their preinvestment due diligence a review of the Cayman Islands Gazette for details of any directors who have had their registration suspended or their license suspended or revoked. In time it is expected that CIMA will undertake a review of the capacity of each director of a covered entity to ensure that they have sufficient time to discharge their duties appropriately for each of the funds in respect of which they have been appointed. It is also expected that CIMA will produce a publicly searchable database giving access to information on all directors who are subject to registration and licensing under the Law.

Whilst the Cayman Islands are still in the process of enhancing transparency of information relating to the directors of covered entities significant steps have been taken to increase transparency and investor protection for Cayman funds.

Footnote

1 US Securities and Exchange Commission (SEC); US Commodity Futures Trading Commission (CFTC); US Financial Industry Regulatory Authority (FINRA); Hong Kong Securities and Futures Commission (SFC); Japan Financial Services Agency (FSA); Monetary Authority of Singapore (MAS); UK Financial Conduct Authority (FCA); German Federal Financial Supervisory Authority (BaFin); French Authorité des Marchés Financiers (France) (AMF); Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, AFM); _ e Central Bank of Ireland (CBI); Luxembourg Commission de Surveillance du Secteur Financier (CSSF); Dubai Financial Services Authority (DFSA); Brazilian Comissão de Valores Mobilários (CVM)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions