Statement of Guidance - Market Conduct (Securities Investment Business)

Summary

This is a CIMA Statement of Guidance setting out expected standards of market conduct for holders of a Securities Investment Business Licence (SIBL) under the Securities Investment Business Law. It explains that the SIBL regime exists to protect investors, promote fair and transparent markets, and reduce systemic risk, and that licence holders are expected to conduct their business to the highest professional standards so as not to damage the Cayman Islands' reputation as a financial centre.

The guidance focuses on two main areas: enabling clients to make informed investment decisions, and managing conflicts of interest.

• Licence holders must avoid misleading or deceptive representations.
• Licence holders must not recommend transactions primarily for their own benefit.
• Managing conflicts of interest: Conflicts must be disclosed and managed through methods such as disclosure, declining to act, information barriers ('Chinese walls'), or a written independence policy.
• Claims of independence or impartiality: Such claims must be accurate and adequately disclosed.
• Material interest in a transaction: Firms with a material interest in a transaction must take reasonable steps to ensure fair treatment of customers before advising or exercising discretion.

As a Statement of Guidance, this document expresses CIMA's expectations for how SIBL licensees should conduct themselves rather than imposing new statutory requirements directly, but it is used by CIMA to assess compliance with market conduct expectations under the SIBL regime.

Key obligations

• Take all reasonable steps to enable clients to make informed investment decisions and avoid misleading or deceptive representations or practices
• Avoid making recommendations motivated largely by benefit to the licence holder unless demonstrably advantageous to the client
• Seek to avoid conflicts of interest and, where they arise, deal with clients fairly and disclose the conflict so an informed decision can be made
• Establish means of controlling conflicts of interest as a duty of management
• Not claim independence or impartiality unless true, and ensure any such claim adequately discloses relevant facts about the specific transaction
• Where a material interest or conflict-generating relationship exists, not knowingly advise or deal in the exercise of discretion unless reasonable steps are taken to ensure fair treatment of the customer
• Where using a written independence policy, supplement it with other steps such as specific disclosure to ensure compliance, since the policy alone is not sufficient
• Disclose to a client any relationship with an associate before advising the client to use that associate's services

Applies to

Securities Investment Business licence holders (SIBL licensees)