Regulatory Policy – Licensing Securities Investment Business (May 2018)

Summary

This is CIMA's May 2018 Regulatory Policy on Licensing Securities Investment Business, which sets out the criteria and process CIMA applies when assessing applications for a licence under the Securities Investment Business Law (SIBL) and the related Licence Applications and Fees Regulations. It applies to entities (not natural persons) proposing to carry on securities investment business in or from the Cayman Islands, such as companies, general and limited partnerships, exempted limited partnerships, and registered foreign companies, where a licence is required under section 6 of the SIBL. Entities listed in Schedule 4 of the SIBL and bank branches not conducting securities business themselves are excluded from scope.

Documentation and Standards Required

• Fitness and propriety: Applicants must demonstrate the fitness and propriety of directors and senior management.
• Ownership and control: Transparency of ownership and control is required, including disclosure of beneficial ownership and trust structures.
• Financial resources: Applicants must demonstrate adequate financial resources.
• Business plan: A three-year business plan must be submitted.
• Internal systems: Applicants must have internal systems and risk management arrangements in place.
• Outsourcing oversight: Adequate oversight of any outsourcing arrangements is required.
• AML/CFT and KYC: Compliance with AML/CFT and know-your-customer requirements is required.
• Record-keeping: Applicants must maintain proper record-keeping.
• Market conduct: Applicants must provide market conduct disclosures.
• Legal structure: The legal structure must be suitable for CIMA supervision.
• Physical presence: Applicants must maintain a physical presence in the Cayman Islands.

The policy also states CIMA's typical processing timeframe for applications and the grounds on which it may reject or return an application.

Ongoing Obligations After Licensing

• Audited accounts: Licensees have an ongoing statutory obligation to have annual accounts audited and filed with CIMA within six months of financial year-end under section 13 of the SIBL.
• Changes in management: Prior CIMA approval is required for changes in directors and senior officers.

Key obligations

• Prospective applicants must submit a written application to CIMA under section 6 of the SIBL, accompanied by the documents/information required by the Schedule to the Licence Applications and Fees Regulations 2003 and the prescribed fee.
• Applicants must not be natural persons.
• Applicants must provide a Personal Questionnaire and supporting documentation for shareholders holding 10% or more of shares/voting power (or, if none, for the ten largest shareholders).
• Applicants must maintain at least two directors (companies) and ensure the business is conducted by at least two individuals with sound experience, generally with directors having a minimum of five years' relevant senior-level experience.
• Any changes in directors and senior officers must be approved by CIMA.
• Applicants must provide a corporate chart showing all entities under common ownership or management, including non-financial entities.
• Where held by a trust, applicants must provide the trust deed and disclose trustees, settlor, protector and beneficiaries.
• Applicants must provide a written commitment to maintain an independent audit function and demonstrate application of the 'four eyes' principle for significant management decisions on an ongoing basis.
• Applicants must submit a detailed business plan covering at least the first three years of projected activity, including required content items (financial plan, pro forma statements, risk management strategy, marketing strategy, investment policy, remuneration plan, AML/CFT systems, corporate governance policy, etc.).
• Applicants must demonstrate AML/CFT and know-your-customer policies, procedures and systems consistent with the Proceeds of Crime Law and Anti-Money Laundering Regulations/AML Guidance Notes.
• Applicants must demonstrate adequate record-keeping systems and ensure CIMA has reasonable access to records at all reasonable times.
• Licensees must have their accounts audited annually by an approved auditor and file audited accounts with CIMA within six months of the end of the financial year (SIBL section 13); applicants must supply an Auditor's Letter of Consent.
• Applicants must maintain a physical presence in the Cayman Islands through which business operations take place, subject to CIMA's discretion on outsourcing and location of functions.
• Applicants must disclose all jurisdictions where they intend to conduct business and commit to complying with applicable laws and regulations there.
• Applicants must properly assess and oversee outsourced service providers, including managing conflicts of interest.

Applies to

securities investment business licensees/applicants, companies incorporated under the Companies Law, general partnerships, limited partnerships, exempted limited partnerships, foreign companies registered under Part IX of the Companies Law

Deadlines

• six (6) to eight (8) weeks: Typical timeframe for CIMA to process a licence application (Full or Restricted), commencing once all required documents/information are received.
• within six (6) months of the end of the financial year: Licensees must file audited accounts with CIMA pursuant to Section 13 of the SIBL.