The entity is required to submit the new application (APP-101-75) to the Authority within the timeframe outlined in the refusal notice in order for the Authority to assess whether all of the requirements of the law have now been met.  Failure to submit the application within the timeframe outlined will result in the Authority taking further action, up to and including a recommendation being made to the DPP for criminal prosecution, where the Authority suspects that the entity continues to conduct securities investment business.

A currently registered Excluded Person cannot continue to carry on securities investment business after 15 January 2020 unless by that date it has been re-registered or registered by the Authority as a Registered Person or has been granted a license under section 6 of the Securities Investment Business Law (2019 Revision) (the ”SIBL”).

All currently registered Excluded Persons are required to file the following two forms, whether or not they wish to be considered for re-registration as a Registered Person:

• AIR-157-75 - AML/CFT Inherent Risk - Securities
• ARC-158-75 - AML/CFT Risk Controls - Securities

In addition, a currently registered Excluded Person must file the following form in order to be considered for re-registration as a Registered Person:

• RRP-160-75 - Application to Re-register to its assessment of the information provided in the forms.

An Excluded Person who fails to file the AML/CFT reporting forms AIR-157-75 and ARC-158-75 by 15 August 2019 will be unable to benefit from the re-registration process under the transitional provisions of the SIB Amendment Law.

Should that Excluded Person wish to continue to carry on securities investment business in or from within the Cayman Islands following the end of the transition period, being 15 January 2020, the Excluded Person will be required to comply with all of the application requirements applicable to a new applicant under either of section 5 or section 6 of SIBL for registration as a Registered Person or a licence under the SIBL. These requirements include submission of a new application form and fee as well as being in good standing with its filing requirements, including the AML/CFT reporting forms AIR-157-75 and ARC-158-75. An Excluded Person that by 15 January 2020 has not been registered as a Registered Person or granted a licence by the Authority will not be permitted to carry on securities investment business in or from within the Cayman Islands unless and until it has been registered as a Registered Person or licensed under the SIBL. Please note that a previous failure to comply with filing requirements under the SIBL or the AML/CFT Regulations can be grounds for the Authority to refuse to register an applicant.

Any change in the information required to be provided for purposes of an application for registration and any change in the information required to be provided in an annual declaration form is considered material for purposes of the notification requirements under the SIB Amendment Law. Written notification of each such change, including a detailed explanation of the nature of and reasons for the change along with supporting documentation relevant to the change, are to be sent to contactsecurities@cima.ky.

The applicant, in order to be considered for registration by the Authority as a Registered Person, must file Form APP-101-75 “Application for SIBL Registered Person”, which is accessible by the applicant’s registered office via the Regulatory Enhanced Electronic Forms Submission portal, along with all of the required supporting information that is to be attached to the Form and the required application fee.

If the Registered Person is a company incorporated under the Companies Law (2018 Revision), it is required to have a minimum of (a) two directors who are individuals; or (b) one corporate director, each of whom is complying with the Directors Registration and Licensing Law, 2014. If the Registered Person is a foreign company registered under Part IX of the Companies Law (2018 Revision), it is required to have a minimum of two directors or equivalent officers. If the Registered Person is formed, established or registered under another Cayman Islands law, please refer to section 15(4) of the SIBL as revised under the SIB Amendment Law. 

Section 2 of the Securities Investment Business Law (SIBL) defines "high net worth person" as an individual whose net worth is at least $800,000 or any person that has total assets of not less than $4,000,000.

Schedule 1 of the Securities Investment Business Law (SIBL) defines "securities" as:

1.Shares or stock of any kind of the share capital of a company (end note)
2.Debentures, loan stock, bonds, certificates of deposit and any other instrument that creates or acknowledges debt (excluding various banking and monetary instruments e.g. cheques, mortgage instruments and land charges).
3.Warrants and other instruments that allow the holder to subscribe for certain securities
4.Certificates or other instruments which confer contractual or proprietary rights
5.Options on any security and on any currency, precious metal or an option on an option
6.Futures
7.Rights under contracts for differences (e.g. cash-settled derivatives such as interest rate and stock index futures, forward rate agreements and swaps)

Schedule 2 of the Securities Investment Business Law (SIBL) defines the regulated activities as:

1. Dealing in securities: Buying, selling, subscribing for or underwriting securities as agent or principal, including market maker activity.

This definition inherently excludes own-account dealing as dealing as a principal is only captured where there is ‘holding out’ and ‘solicitation’ under 1(b)(i) to (iii).

2. Arranging deals in securities:

Making arrangements with a view to another person (whether as principal or agent) buying, selling, subscribing for or underwriting securities.

3. Managing securities:

Managing securities belonging to another person in circumstances involving the exercise of discretion.

4. Advising on securities:

Advise an investor or potential investor (including acting as an agent on behalf of an investor) on buying, selling, underwriting, subscribing for or exercising any right conferred by a security.

The SIBL applies only to persons that engage in the above activities in the course of business i.e. persons who provide services for profit or reward.

Disclaimer: 

Please note that entities registered as Excluded Persons are exempted from the requirement to obtain a licence to conduct securities investment business as they conduct business exclusively with persons or institutions as set out in Schedule 4 of the SIBL and are therefore not regulated by the Authority. 

1. Section 4(1) of the Securities Investment Business Law (SIBL) identifies two classes of person as having sufficient nexus with the Cayman Islands to bring them within the geographical scope of the SIBL (subject to the Schedule 4 exclusions):

     1. any Cayman Islands company or partnership, wherever it may be conducting securities investment business as defined by the Law; or
     2. any person who has an established place of business in the Cayman Islands through which he conducts securities investment business as defined by the SIBL.

 
2. There is also the issue of persons who are not Cayman Islands entities of either class above but who might seek to conduct securities investment business in the Cayman Islands from an established place of business outside of the Islands. An example of this might be foreign persons soliciting business from persons in the Cayman Islands via email or the internet in a deliberately targeted manner. Another example would be intermittent ‘investment seminars’ mounted in the Cayman Islands by foreign persons, for the purpose of selling securities products or services. It is common for securities regulatory regimes to prohibit such activity on the grounds of domestic investor protection and it may well be necessary to introduce a provision to prohibit foreign persons with no place of business in the Cayman Islands from conducting securities investment business in the Islands unless:

     1. they are doing so in conjunction with a person licensed or registered under the SIBL; or
     2. the business approach came from the Cayman Islands person and was not in any way solicited by the foreign person.

1. Schedule 3 of the Securities Investment Business Law (SIBL) specifies the activities considered to be outside the scope of the SIBL, even though they would nominally constitute activities captured by schedule 2. Generally speaking, the excluded activities cover:

       1. activities internal to a company, trust or partnership (e.g. risk management activity; certain dealing in its own securities; treasury functions);
       2. incidental activities (i.e. activity that is a ‘by-product’ of other core activity that is not securities investment business and for which the remuneration is not severable from that the core activity, e.g. legal or accounting advice); and
      3. activities that are not intended to induce the general public into conducting securities investment business (e.g. general advice on investment matters published in any communications media).

 
2. The excluded activity related to the disposal of goods or supply of services covers situations where a supplier undertakes some form of securities investment business activity for the purpose of facilitating the disposal or supply or hedging exposure to, e.g., the price of the raw materials that will be used in the manufacture of capital goods for a customer.
3. There is also an exclusion for the making of arrangements for the sole purpose of providing financing for another person’s dealing in securities.
4. Schedule 4 of the SIBL specifies persons who may conduct securities investment business without a licence. There are six categories of such person:

          1. A company that is part of a group and that conducts securities investment business exclusively for one or more companies within the same group;
          2. Persons participating with each other in a joint enterprise (e.g. a merger or buy-out or joint venture);
          3. Various government entities;
          4. A person carrying on securities investment business exclusively for sophisticated persons or high net worth persons, provided that the person carrying on the business has a registered office in the Islands that is provided by an entity that is licensed to provide such service by the Authority;
          5. A person to whom s.4(1) of the SIBL applies but who is regulated in respect of securities investment business by a recognized Overseas Regulatory Authority (ORA) in the jurisdiction (other than the Islands) in which such business is being conducted; and
          6. A person carrying on securities investment business only in the course of acting in any of the following capacities: a) director, b) partner, c) liquidator, d) trustee in bankruptcy, e) receiver, f) executor or administrator of an estate, and g) a trustee who is not required to be licensed under the Banks and Trust Companies Law, provided that certain statutory conditions are met with regard to remuneration and holding out.

 
5. Section 5(4) of the SIBL requires persons to whom paragraphs 1, 4 and 5 of Schedule 4 apply, to register with the Authority and file an Annual Declaration Form approved by the Authority and pay an annual fee. (Please see our Fee Schedule). This is for basic identification purposes and for the purposes of s.5(5).

Disclaimer: 

Please note that entities registered as Excluded Persons are exempted from the requirement to obtain a licence to conduct securities investment business as they conduct business exclusively with persons or institutions as set out in Schedule 4 of the SIBL and are therefore not regulated by the Authority.  

1. The Authority must be satisfied that an applicant meets high standard in all material aspects, is financially sound and is competent as well as capable of undertaking the activities that are being licensed.
2. When considering fitness and propriety, the Authority will consider all factors that appear to be relevant for the application in question. These include, but are not limited to, those set out below:

   1. Honesty, reputation and integrity
   2. Competence and capability
   3. Financial soundness

 
3. Before reaching a final decision, the Authority will also consider if there are any reputational risks to Cayman in granting the licence

Section 2 of the Securities Investment Business Law (SIBL) defines "sophisticated person" as a person

   1. regulated by the Authority;
   2. regulated by a recognized overseas regulatory authority;
   3. any of whose securities are listed on a recognized securities exchange;
   4. or who – by virtue of knowledge and experience in financial and business matters is reasonably to be regarded as capable of evaluating the merits of a proposed transaction and participates in a transaction with a value or in monetary amounts of at least $80,000 in the case of each single transaction.

A SFO that is conducting securities investment business, as defined in section 4 of the Securities Investment Business Law (SIBL), is required to be licensed or registered (if it falls under one of the categories of persons specified in Schedule 4) under the SIBL.

Refer to the Securities Statistics.

Under the Securities Investment Business (Financial Requirements and Standards) Regulations, Securities Investment Business licensees are required to have base financial resource requirements. In the case of broker dealers, market makers and securities managers, the base financial resource requirement is CI$100,000 and in the case of all other licensees, the requirement is CI$15,000.

Although an entity can choose an auditor from the Authority’s approved list, the entity also has an option to select a qualified auditor, pursuant to Section 13(1) of the Securities Investment Business Law, of its choice to provide these services.

All Securities Investment Businesses licensed under the Securities Investment Business Law (the “SIBL”) must have and maintain adequate insurance coverage. The licensee must have insurance to cover i) Professional Indemnity, ii) Professional Liability of Senior Officers and Corporate Secretaries, and iii) Business Interruption, as required by Section 4(1) of the Securities Investment Business (Conduct of Business) Regulations.

Please refer to Authority’s Statement of Guidance – Professional Indemnity Insurance for Trust, Insurance, Mutual Fund Administrator, Securities Investment Business and Company Management Licensees and Directors for guidance.

Coverage must be held with an insurer licensed to carry on domestic business in the Cayman Islands. Securities Investment Business licensees must have insurance to cover claims of i) The licensee, ii) Current or former officers or employees iii) any third party agents, service providers or consultants working for the licensee. The Professional Indemnity insurance should have a limit of at least CI$1,000,000/US$1,219,512.20 for any one claim and CI$1,500,000/US$1,829,268.29 in aggregate.

For the purposes of the Securities Investment Business Law (“SIBL”) and subject to Section 5(2), a person who carries on securities investment business, if that person is engaged, in the course of business, in any one or more of the activities set out in Schedule 2 and that person is:

(i) a company incorporated under the Companies Law;
(ii) a general partnership established under the Partnership Law;
(iii) a limited partnership registered under the Partnership Law;
(iv) an exempted limited partnership registered under the Exempted Limited Partnership Law;
(v) a foreign company registered under Part IX of the Companies Law; or

that person has established a place of business in the Cayman Islands through which such activities are carried on, then the SIBL will apply and a licence is required.

An entity which conducts securities investment business, as defined by Section 4(1) of the Securities Investment Business Law (“SIBL”) may be required to be licensed pursuant to the SIBL, unless otherwise exempted under Schedule 3 or is excluded from licensing pursuant to Section 5(2) and Schedule 4 of the SIBL.

Note: Entities registered as excluded persons are exempted from the requirement to obtain a licence to conduct securities investment business as they conduct business exclusively with persons or institutions as set out in Schedule 4 of the SIBL and are therefore not regulated by the Authority.

If the director of a licensee is also a director of a “covered entity”, he/she must complete registration on the Directors portal, pursuant to the DRLL. Please also note that he/she must also be formally approved by the Authority to act on a Securities Investment Business licence. To be clear, we note that authorization to act as a director of a licensee is a separate process from obtaining authorization to act as a director of a “covered entity”.

Note: According to the DRLL, a “covered entity” means (a) a company to which paragraphs 1 and 4 of Schedule 4 of the Securities Investment Business Law apply; or (b) a mutual fund regulated under the Mutual Funds Law.

The original Securities Investment Business licence issued by the Cayman Islands Monetary Authority must be returned for cancellation or in the case of a lost licence, an affidavit signed by the operator, stating that the licence will be returned to the Authority, if found, must be provided.

According to Section 8 of the Securities Investment Business Law (the “SIBL”), no shares in a company or interests in a partnership which is a licensee shall be issued and no issued shares or interests shall be voluntarily transferred or disposed of, without the prior approval of the Authority.

In addition, Section 14(1) of the SIBL states that a licensee shall not open outside of the Cayman Islands, a subsidiary, branch, agency or representative office or change its name, without the prior written approval of the Authority.

Finally, Section 10 of the Securities Investment Business (Financial Requirements and Standards) Regulations clarifies that a licensee shall obtain the written consent of the Authority before seeking to reduce or change the nature of its capital or rights and obligations of shareholders; a licensee shall also report to the Authority the acquisition of 10% or more of the voting shares of another company; and obtain the prior written consent of the Authority regarding any agreement to sell or merge the whole or any part of a licensee to or with a third party.

Items that must be submitted to the Cayman Islands Monetary Authority for cancellation of a Securities Investment Business licence:

• The original Securities Investment Business Licence issued by the Authority must be returned for cancellation or in the case of a lost licence, an affidavit signed by the operator, stating that the licence will be returned to the Authority, if found;
• The prescribed fee payable for the surrender of the licence;
• A certified copy of the directors resolution, which confirms that the licensee has ceased licensable securities investment business, duly signed and dated by the directors;
• A certified copy of the Certificate of Dissolution (only applicable if the licensee is being dissolved);
• An affidavit from the directors which verifies the following:
•              The licensee is no longer conducting business under the Securities Investments Business Law;
•              The date in which such business ceased;
•              The licensee has operated in accordance with its Articles of Association; and
•              The licensee has not been wound up in a manner prejudicial to its creditors.

• Stamped copies of the CWR Forms 19 and 20, which are filed with the Registrar of Companies (where a liquidator has been appointed);
• Audited Financial Statements covering from the date of the last financial year end (for which audited statements have been filed) either to the date of commencement of the winding up, where third party liquidator(s) have been appointed, or to the date of the directors resolution which confirms the date the licensee has ceased to provide licensable securities investment business, if no third party liquidator(s) have been appointed; and
• A copy of the liquidators report (if applicable) or confirmation from the licensee’s auditor that the licensee has no outstanding liabilities or creditors.

In addition to the above, the licensee must also be up-to-date with payment of fees and filing of statutory requirements in order to proceed with the cancellation of its licence.

Note: The Cayman Islands Monetary Authority reserves the right to request additional information as deemed necessary.

Should there be any change to the licensee’s service provider, the licensee should notify the Authority of any possible change(s) and where necessary, submit a letter for the appointed service providers’ acceptance along with the specified fee for the records of the Cayman Islands Monetary Authority to be updated.

Documentation required by the Cayman Islands Monetary Authority to appoint a director to a licensee:

• A police clearance certificate / affidavit of no convictions
• One (1) financial reference and two (2) personal references
• Personal Questionnaire, duly completed
• Application fee

If the Applicant is an existing Director on another Licensee, references need not be submitted.

See Securities Licensing and Authorisation Requirements.
 

Disclaimer:

Please note that entities registered as Excluded Persons are exempted from the requirement to obtain a licence to conduct securities investment business as they conduct business exclusively with persons or institutions as set out in Schedule 4 of the SIBL and are therefore not regulated by the Authority. 

The registration fee for an Excluded Persons is CI$5,000.00 / US$6,097.56.

It takes approximately 3-5 business days to register an Excluded Persons once the required Declaration Form and registration fee have been received by the Authority.

The annual fee for an Excluded Persons is CI$5,000.00 / US$6.097.56.

Excluded Persons shall pay the prescribed annual fee on or before the 31st of January in each year.

It is the best practice of the Authority to appoint two (2) individuals to act in the capacity of director of any registered entity. However, one (1) director will suffice when registering as an Excluded Persons.

It is a requirement of the Authority that a local service provider is appointed to provide Registered Office services.

As an Excluded Persons is considered a covered entity as per the Director Registration and Licensing Law, 2014, any individual acting in the capacity of director will be required to be registered with the Authority.

Excluded Persons are not issued a Certificate of Registration. However, the Authority will issue a formal letter notifying the entity that it has been registered as an Excluded Persons.

The prescribed annual fee and Declaration Form is required to be submitted to the Authority on or before the 31st of January in each year.

The Authority will accept an electronic filing of the Declaration Form on the basis that the original form will be filed within one (1) month.

The Authority requires a formal letter from the director(s) or authorized service provider confirming that the entity is no longer conducting securities business in any capacity and no longer wishes to be registered with the Authority.

There is no fee required to deregister an Excluded Persons.

The Authority will issue a formal letter confirming that the entity is no longer registered as an Excluded Persons.