The Cayman Islands Monetary Authority ("CIMA") has issued the fourth edition of its Supervisory Issues and Information Circular (the "Circular"). The Circular is intended to raise awareness of common regulatory and thematic issues identified by CIMA and to highlight important regulatory developments for the financial sector. This briefing deals with the first issue discussed in the Circular, specifically the use of 'Requirements" stemming from the findings of on-site inspections.

Prior to 2016, CIMA segregated the corrective actions to address material deficiencies noted at onsite inspections into the distinct classifications of 'Suggestions", "Requirements" and 'Recommendations'. The findings by CIMA from onsite inspections was that many licensees deemed an observation which was classified as a 'Recommendation' to be optional and therefore the licensee did not take any corrective action to implement it. In June 2016, CIMA made the decision that all corrective actions to address material deficiencies would henceforth simply be classified as 'Requirements", prioritised in order of severity. In July, 2017, a further step was taken and CIMA's Regulatory Handbook was amended to prioritise inspection findings and to remove the use of "suggestions" entirely. Prior to that change CIMA had used the term "suggestions" in onsite inspection reports to indicate corrective actions that were optional.

The Circular goes on to clarify the applicability of Statements of Guidance ("SoGs") and it is noted that SoGs represent CIMA's minimum expectations of licensees which are in place to support and underpin the rules, laws and legislation. It is confirmed in the Circular that SoGs do have a binding affect and must be adhered to.

The finding by CIMA that licensees had not complied with the corrective action recommended has resulted in a change in approach so that all corrective actions emanating from onsite inspections are now classified as "Requirements". Each Requirement is given a corresponding priority level where there is a breach of a law, regulatory rule and regulatory policy or where there are found to be deficiencies as per the relevant SoG and good governance. The Requirements must be adopted by the licensee within the time frames specified in the report and further the licensee must provide monthly updates to CIMA outlining the status of the Requirements, the remedial action being taken and the likely completion date until all of the Requirements have been fully implemented.

CIMA - Supervisory Information Circular (September 2017)

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