Securities investment business in or from the Cayman Islands is
regulated by the Securities Investment Business Law (Revised)
(SIBL). SIBL sets out which securities
investment business activities are regulated, and so need a license
to do them, and also various exemptions from the licensing
So how does SIBL work?
SIBL applies to Cayman Islands incorporated or registered
entities carrying on securities investment business anywhere in the
world as well as entities with an established place of business in
the Cayman Islands carrying on securities investment business
there. "Securities" is widely defined and includes
shares, partnership interests, trust units, debt instruments,
warrants, options, futures and contracts for differences.
Securities investment business includes dealing in securities as an
agent, dealing in securities as principal in certain circumstances,
making arrangements with a view to dealing in securities,
discretionary management of securities of another person and
advising investors or their agent on securities and the merits of
dealing in the security.
Various exemptions from licensing are available under SIBL, the
most commonly used ones being for:
a person who is regulated for securities investment business by
a recognised overseas regulated body;
a company in a group of companies which is carrying on
securities investment business solely for one or more companies
within the group;
a person carrying on securities investment business exclusively
for one or more sophisticated person, high net worth person or a
company / partnership / unit trust of which the investors are
sophisticated persons or high net worth persons (as defined in
The last of these exemptions is particularly useful for an
investment manager / adviser of an open-ended fund which is
registered with the Cayman Islands Monetary Authority
(CIMA) under the Mutual Funds Law (Revised), as a
sophisticated person under SIBL includes a person regulated by
CIMA, ie the fund itself. Sophisticated person also includes
persons who are knowledgeable and experienced in financial and
business matters and who participate in a transaction with a value
of at least US$100,000 per transaction. High net worth persons are
individuals whose net worth is at least US$1 million or any person
who has total assets of not less than US$5 million. As the
exemption includes entities whose investors are sophisticated
persons or high net worth persons, it is also available to managers
and advisors of funds which are not regulated by CIMA (including
non-Cayman funds) but whose eligible investors fit within the
sophisticated person / high net worth definitions.
Setting up a manager / adviser in the Cayman Islands using one
of the exemptions above under SIBL typically involves incorporating
a Cayman Islands exempted company, completing a declaration and
filing it with CIMA to confirm which exemption applies and paying
the annual fee to CIMA, currently US$6,097. The manager / adviser
must also have anti-money laundering policies or procedures in
place or have delegated that function to a suitably qualified third
party. Directors of an exempted manager under SIBL must also be
registered or licensed with CIMA under the Directors Registration
and Licensing Law 2014,
see our earlier post for more details. The exemption has to be renewed
annually by 31 January each year by completing the declaration
again and paying the fee to CIMA.
Although my BVI colleagues are quick to point to
the BVI's recently introduced approved manager mechanism as an
alternative, the Cayman Islands exempted manager regime remains
a popular and well established way for Cayman investment managers
and advisers to provide their services to funds and sophisticated
or high net worth investors without going through a full licensing
application. I suspect we're going to have to agree to differ
with the BVI on this one.
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.
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Investment funds with high net worth individuals as investors will need to have a client agreement with their high net worth investors.
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