Regulation of Corporate Services

The Companies Management Act gives the Cayman Islands Monetary Authority the responsibility of regulating company management / corporate services business in the Cayman Islands. This includes licensing, ongoing supervision, and enforcement.

Definition of Company Management & Corporate Services

Section 3(1) of the Companies Management Act defines the "business of company management" as the provision of the corporate services specified in 3(1)(a) through (l) for profit or reward in or from within the Cayman Islands.

Licence Categories

In accordance with the Companies Management Act, CIMA may issue the following categories of licences:

• Company Manager Licence - This authorises the holder to provide corporate services as listed in Section 3(1) or any other corporate services as may be prescribed under that section.

• Corporate Service Provider Licence - This authorises the holder to provide only the corporate services specified in Section 3(1)(a) through (e).

Standards of Regulation

CIMA regulates company management business in accordance with:

• The Companies Management Act, The Monetary Authority Act, as well as an array of other local acts, including The Proceeds of Crime Act; and Companies Act;
• the relevant rules, guidance, policies and procedures issued by The Cayman Islands Monetary Authority (See Corporate Services Regulatory Measures):
• the Offshore Group of Banking Supervisors issued Statement of Best Practice for Trust and Company Service Providers.

Supervision

The day-to-day regulatory oversight of the sector falls to CIMA's Fiduciary Services Division, which is responsible for:

• processing applications for all Company Managers and making recommendations to the Management Committee on the issue (or non-issue) of a licence.
• ongoing supervision and regulation of the activities of the licensed Company Managers through, for example, receipt and analysis of regular audited financial statements, meetings with the licensees' management, and periodic detailed reports or examinations by auditors on specific areas of internal controls and systems.  Capital adequacy, asset quality, management capability and expertise, earnings and liquidity are all assessed on an ongoing basis.

On-site/Off-site Supervision

A primary objective of the Authority is to maintain a first class financial system and a supervisory system that reflects international supervisory standards.  It does so through integrated off-site and on-site functions, the actual processes of which are reviewed continuously in light of experience and changes in the global financial industry.

On-site work includes a review of the licensees' control environment, and compliance with acts, regulations and supervisory directives.  The inspection tests transactions to evaluate the effectiveness of the control environment and whether fiduciary duty is being upheld.  As part of the inspection, discussions are held with the external auditors to review the licensees' strength of internal controls, compliance with legislation and prudential standards, and adequacy of provisions.

The objective of the supervisory system is to foster prudent fiduciary practices that will enhance the financial sector.  In those instances where a licensee engages in conduct detrimental to the public interest or threatens the safety of clients' assets, the legislation provides remedial powers.  These can include revoking or imposing conditions on the licence, and changing management and directors.