Common Regulatory and Thematic Issues Pt 2 (2016-10-01)

Summary

This is the second edition of CIMA's Supervisory Information Circular, a general-industry notice covering several recurring regulatory and thematic issues CIMA identified through its supervisory work in 2016. It is not a new law or rule, but it restates and clarifies existing obligations under various regulatory laws (including the Directors Registration and Licensing Law, mutual funds regulations, banking regulations, and insurance market conduct rules) and flags upcoming regulatory developments.

• Annual fee and filing compliance: Reminds licensees that lack of a courtesy reminder from CIMA does not excuse late payment or filing, and that enforcement/penalties apply regardless.
• Licence application timelines: Requires submission of complete application packages (with due diligence documentation) before CIMA begins formal processing, referencing Appendix E2 of the Regulatory Handbook.
• Mutual fund termination/cancellation: Sets out procedures and required documentation for mutual funds terminating registration or cancelling a licence, including audited financial statement requirements and a six-month completion window.
• Director resignation/surrender under DRLL: Details procedures for directors resigning from covered entities or surrendering their DRLL registration/licence, including annual renewal deadlines and penalty accrual.
• REEFS electronic filing platform: Provides updates including mandatory use of FAR 3.0 for fund annual returns and a new requirement for separate FAR filings per sub-fund/segregated portfolio.
• Basel II/III obligations for banks: Reminds banks about existing Basel II ICAAP/stress-testing obligations and forthcoming Basel III liquidity guidance.
• Insurance market conduct: Flags compliance issues identified among insurers, agents and brokers regarding disclosure of charges and use of gross versus net estimated returns.

The circular applies broadly across CIMA-regulated sectors, including banking, insurance, mutual funds, and fiduciary/trust services, as well as to individuals registered or licensed as directors under the DRLL.

Key obligations

• Licensees and registrants must pay annual fees and submit required regulatory filings on time regardless of whether they receive a courtesy reminder from CIMA; failure exposes them to enforcement action or penalties.
• Applicants for a licence must submit a complete application package, including due diligence documentation, before CIMA will commence formal processing.
• Funds seeking to terminate registration or cancel a licence must submit the core requirements (original certificate of registration, certified Operator resolution stating cessation date, and prescribed surrender fee) and must be up to date with audited financial statements before de-registration/cancellation can be completed.
• Funds must submit all outstanding documents and/or fees necessary to complete the de-registration/licence cancellation process within six months of the date of the application.
• A director resigning from a covered entity must ensure CIMA receives written resolutions or an updated register of directors, stamped by the Registrar of Companies, notifying it of the resignation.
• A director wishing to surrender DRLL registration/licence must first resign from all covered entities, complete the Surrender process via the Director Gateway, pay the surrender fee, and submit a formal letter confirming resignation from all covered entities and intent not to act as a director going forward.
• Directors must complete surrender requirements before 31 December to avoid accruing the next year's annual fee, or face penalties calculated at 1/12th of the annual fee for each month or part-month after 15 January that the fee remains unpaid.
• Directors continuing to provide directorship services must renew their DRLL registration or licence on or before 15 January each calendar year via the Director Gateway, providing the prescribed information and paying the annual fee.
• Fund administrators/licensees must use FAR Form 3.0 for all FAR filings made after 1 July 2016.
• For funds with a year-end of 15 September 2015 or later, an individual FAR Form must be submitted for each sub-fund, series trust or segregated portfolio within a multi-fund structure.
• Cayman Islands-incorporated banks must continue to implement the Basel II ICAAP annually, including stress testing their balance sheets and reflecting results in Pillar II calculations.
• Insurers, agents and brokers must comply with Rule 5.3 of the Rule and Statement of Guidance on Market Conduct, including full disclosure of policy charges and costs, provision of net (not just gross) estimated returns, and providing required written information to customers before or at contract conclusion.

Applies to

licensees/registrants generally, mutual funds, banks, insurers, insurance agents and brokers, registered/licensed directors of covered entities, fiduciary/trust and corporate services entities

Deadlines

• within six (6) months of the date of the application: Funds must submit all outstanding documents/fees to complete de-registration or licence cancellation.
• before the 31st of December: Deadline for a director to complete surrender requirements to avoid accruing the next year's annual fee under the DRLL.
• on or before the 15th of January in each calendar year: Deadline for directors continuing directorship services to renew their DRLL registration or licence via the Director Gateway.
• after the 15th of January: Point after which penalties of 1/12th of the annual fee per month accrue for unpaid director surrender/renewal fees.
• 1 July 2016: FAR Form 3.0 becomes mandatory for fund annual return filings made after this date.
• 15 September 2015 and later: Funds with a year-end on or after this date must submit an individual FAR Form for each sub-fund, series trust, or segregated portfolio.