In recent years, the Cayman Islands continues to evolve as a premier global jurisdiction for investment funds. One of the most important, yet sometimes underappreciated, developments in this landscape is the modernised framework for investment managers under the Securities Investment Business Act (as Revised) (the "SIBA").
For investment managers considering their operational base, the Cayman Islands offers a compelling combination of regulatory certainty, efficiency and cost effectiveness. Below, we explore how the SIBA enhances that offering and why more managers are making the Cayman Islands their jurisdiction of choice.
What is SIBA?
The SIBA is the principal piece of legislation regulating securities investment business in the Cayman Islands. It covers a broad range of activities, including managing securities, advising on securities, arranging deals in securities, and acting as a market maker.
Crucially, the SIBA sets out who must be licensed or registered with the Cayman Islands Monetary Authority ("CIMA") and provides a robust but proportionate framework for compliance.
Any person, company, limited liability company, or partnership which is incorporated or registered in the Cayman Islands, or which is incorporated or registered outside the Cayman Islands but has an established place of business in the Cayman Islands, and is carrying on securities investment business (as detailed below) must be registered or hold a licence issued by CIMA.
The Two-Tier Regime: Registered vs Licensed Persons
The SIBA establishes two categories of regulated entities that conduct securities investment business activities:
- Registered Persons: This is a streamlined category for certain types of managers and advisors, especially those serving sophisticated clients such as regulated funds or high net worth individuals or those serving one or more companies within the same corporate group. Registration is quicker, less expensive, and subject to fewer ongoing compliance burdens than full licensing.
- Licensed Persons: These are entities that conduct securities investment business with the broader public or fall outside the scope of the registered person exemptions. They are subject to a full licensing process and a more comprehensive regulatory regime.
For many fund managers operating in or through Cayman Islands entities serving professional investors, the registered person regime offers an efficient and practical compliance pathway.
Securities Investment Business
The SIBA defines undertaking "securities investment business" as dealing in securities, arranging deals in securities, managing securities, providing investment advice, managing, marketing, or acting as a depository for EU-connected funds and encompasses certain virtual asset service providers. "Securities" broadly includes shares, debt instruments, government securities, derivatives, collective investment scheme interests and related financial instruments used in investment activities and can also include digital assets.
Establishing if an entity undertakes "securities investment business" activities is important and needs to be considered on a case-by-case basis to conclude whether the SIBA applies to an entity and whether it is required to be registered or licensed.
Why Choose the Cayman Islands for Your Investment Management Entity?
- Efficiency and Speed: The Cayman Islands offers a swift registration process for eligible managers. With proper legal guidance, registration under the SIBA can often be completed in a matter of weeks, a key consideration for time-sensitive launches.
- Regulatory Stability: The Cayman Islands has maintained a strong and cooperative relationship with global regulatory bodies. The SIBA regime reflects international best practices while avoiding the bureaucratic overload seen in some onshore jurisdictions.
- Reputation and Substance: The Cayman Islands continues to meet international standards on transparency and economic substance. Setting up a Cayman Islands based investment management company signals a commitment to quality governance and regulatory compliance, without the overreach.
- Access to Global Markets: Managers based in the Cayman Islands enjoy legal certainty and tax neutrality, enabling them to operate globally while offering flexibility in structuring their products and services.
SIBA and Economic Substance
Entities registered or licensed under the SIBA may be subject to the International Tax Co-Operation (Economic Substance Act) (as Revised), which encourages a local presence and alignment with core business activities. These requirements can be leveraged to enhance operational efficiency and deepen ties within the jurisdiction.
Our firm assists managers in developing substance-aligned operating models that are practical, cost-effective, and designed to support long term global business goals.
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.
