(CNS Business): The Cayman Islands Monetary Authority (CIMA) has signed an MOU with the US Securities and Exchange Commission which will give greater oversight of regulated entities, such as investment advisers, investment fund managers, broker-dealers and credit rating agencies, that operate on a cross-border basis in the US and the Cayman Islands. CIMA Managing Director Cindy Scotland and the SEC Chair Mary Schapiro signed the agreement, which became effective on 9 March. The SEC said in a release that it attaches particular importance to the Cayman Islands as a major offshore financial centre and home to large numbers of hedge funds, investment advisers and investment managers that frequently access the US market. 

The US regulatory agency has also signed an agreement with the European Securities and Markets Authority (ESMA).

“Supervisory cooperation arrangements help the SEC build closer relationships with its counterparts to cooperate and consult on each other’s oversight activities in ways that may help prevent fraud in the long term or lessen the chances of future financial crises,” said Ethiopis Tafara, Director of the SEC’s Office of International Affairs.

The MOU with CIMA details the scope of consultation, cooperation and information exchange between CIMA and the SEC; the procedures for carrying out on-site inspections and for the execution of requests for assistance; the permissible uses of information provided; the confidentiality of information, and the process for onward sharing of information in certain circumstances. CIMA said it supplements the International Organisation of Securities Commissions (IOSCO) multilateral MOU on cooperation in securities regulation, to which both the SEC and CIMA are signatories and which focuses more on cooperation on enforcement matters between the parties.

The SEC said that its supervisory cooperation arrangements generally establish mechanisms for continuous and on-going consultation, cooperation and the exchange of supervisory information related to the oversight of globally active firms and markets. Such information may include routine supervisory information as well as the types of information regulators need to monitor risk concentrations, identify emerging systemic risks, and better understand a globally-active regulated entity’s compliance culture.

The CIMA-SEC MOU is the 23rd cooperation and information exchange agreement that CIMA has effected with overseas regulatory authorities since 1998.

Cayman Islands Premier McKeeva Bush, who is also Minister responsible for Finance, said, “Through this MOU, CIMA has demonstrated its commitment to continuing to work with the SEC to fulfill their respective regulatory mandates. It shows, too, the commitment of the Cayman Islands to providing the highest quality domicile for financial services. The signing of this MOU adds to the growing list of international regulatory and supervisory bodies with which the Cayman Islands has entered agreements and is a key endorsement of our financial services regime. We are convinced that this is not only good for ensuring stability and integrity of the global financial system, but is good for business for this jurisdiction.”

Scotland explained that the process of negotiating the latest agreement was enhanced by the solid ties that the two authorities have established over time. “CIMA and the SEC have had a strong working relationship for many years,” she said. “This has enabled us to collaborate on several levels. For example, we have been able to obtain information from, and provide information to, the SEC that has been valuable in both regulators’ routine supervisory activities as well as, on occasion, in criminal investigations that have resulted in convictions. We have conducted joint on-site inspections of Cayman-regulated funds and securities entities, and have worked together to provide training for Cayman and regional regulators. ”

CIMA Chair George McCarthy said, “The Monetary Authority is committed to collaboration and cooperation with financial services authorities in all the jurisdictions with which Cayman-regulated entities do business. In addition to the agreements that CIMA already has in place, we actively seek to formalise cooperation with other regulators. This MOU with the SEC is particularly important as Cayman is a major domicile for hedge funds and securities in which US institutions and persons of high net worth invest. It will enable more effective supervision on both sides.”

The SEC entered into its first supervisory cooperation MOU in March 2006 with the United Kingdom’s Financial Services Authority, but, following the recent financial crisis, the SEC has expanded its emphasis on this form of continuous supervisory cooperation in an effort to better identify emerging risks to US capital markets and the international financial system.

As part of this effort, the SEC has co-chaired an international task force in 2010 to develop principles for cross-border supervisory cooperation. These principles have since proven to be a useful guideline for structuring MOUs around the type of information to be shared, the mechanisms which regulators can use to share information, and the degree of confidentiality this information should be accorded.

The two MOUs reached this month follow on a similar supervisory arrangement that the SEC concluded with the Quebec Autorité des marchés financiers and the Ontario Securities Commission in 2010, and expanded to include the Alberta Securities Commission and the British Columbia Securities Commission last September.