Changes to the Securities Investment Business Law (SIBL)

On 19 June 2019 the Cayman Islands Government brought into force changes to the Securities Investment Business Law (SIBL). The said changes affect investment managers and advisors registered as excluded persons under SIBL as follows:

1. 1. New anti-money laundering and countering financing (AML/CFT) filings to be made by 15 August 2019

   All existing excluded persons must complete two detailed anti-money laundering and countering financing of terrorism (AML/CFT) reporting forms and file them (via their registered office provider in the Cayman Islands) on the Cayman Islands Monetary Authority’s (CIMA) online REEFS system by 15 August 2019.

2. 2. New registered person regime

   The new regime replaces the excluded person regime with a new regulated category of registered person.

3. 3. Re-registration by 15 January 2020

   Existing excluded persons must re-register as a registered person by 15 January 2020 if they wish to continue carrying on securities investment business.

4. 4. Minimum of two individual directors or one corporate director

   Each registered person structured as a company must have at least two individuals as directors or one corporate director and there are equivalent requirements for registered persons that are not companies.

5. 5. Fit and Proper Tests

   An applicant for registration must satisfy CIMA that the applicant’s shareholders, directors and senior officers are fit and proper persons.

6. 6. Implementing economic substance in the Cayman Islands

   Cayman Islands investment managers and advisors carrying on fund management business will likely be required to implement economic substance in the Cayman Islands upon re-registration.

Under the new registered person regime further ongoing compliance obligations apply to registered persons and CIMA has a number of supervisory and enforcement powers over registered persons. There are significant penalties for failure to comply with any direction from CIMA.

An excluded person should review the SIBL re-registration and ongoing requirements and its ability to meet them, including any possible economic substance requirements set out below. Once the re-registration forms are released the excluded person should then prepare to re-register by the deadline of 15 January 2020.

Economic substance and Cayman Islands investment managers and advisors

When a Cayman Islands investment manager or advisor re-registers with CIMA as a registered person under SIBL they may come within the scope of the Cayman Islands economic substance law if they are conducting ‘fund management business’. A registered person conducts fund management business if it has discretionary investment powers for an investment fund.

Investment managers and advisors should firstly consider whether they are a relevant entity and whether they are conducting fund management business for the purpose of the economic substance law.

Investment managers and advisors who are relevant entities conducting fund management business and who wish to continue their current business will therefore need to review their timing of re-registration and their ability to comply with the economic substance law as part of the re-registration process.