LA passes laws for financial services sector
Minister of Financial Services, Commerce and Environment
(CNS Business): Several bills relating to the Cayman Islands’ offshore financial services sector were passed in the Legislative Assembly last week, when parliament members convened for the second meeting of the budget year. Minister of Financial Services Wayne Panton highlighted four bills he said were critical for the financial future and the investment firms of this country.
As the uncertainty over whether the Cayman Islands will be granted the EU’s Alternative Investment Fund Managers Directive (AIFMD) passport lingers, two laws that were approved on Wednesday, the Mutual Funds Law (MFL) and the Securities Investment Business Law (SIBL) 2015, are said to pave the way and allow the Cayman Islands to better qualify for a “third country passport” under the European directive.
With the fear that hedge fund managers in Cayman may no longer be able to sell their funds on the European market, Panton said both bills make certain enhancements to the existing Cayman funds regime and help make existing funds become fully compliant under the EU passport application. This comes after the European Securities and Markets Authority (ESMA) decided not to grant a Europe-wide marketing passport to non-European countries.
“The position for us is that we need to have in place a framework implemented through legislation which supports the requirements of the AIFMD in order to have an opportunity to be assessed by ESMA and be compliant technically and reserve their blessing, their recommendation and to be a part of the advice they pass along to the EU commission and parliament,” the minister explained.
The Mutual Funds (Amendment) Bill makes provision for the regulation of Cayman investment funds that elect to be regulated by CIMA for AIFMD passport purposes. In the bill, a Cayman investment fund that makes such an election is referred to as a ‘regulated EU connected fund’, a category available to both open-ended funds as well as closed-ended funds.
The Securities Investment Business (Amendment) Bill makes provision for the regulation of Cayman fund management entities that engage in certain EU connected activities, as specified in the bill; and elect to be regulated by CIMA for AIFMD passport purposes. In this bill, a Cayman fund management entity that makes such an election is referred to as an ‘EU Connected Manager’, a category available to both current licensees under the Securities Investment Business Law and entities that are currently not required to be licensed under such law.
ESMA issued its initial set of recommended countries for EU’s AIFMD passport last month. So far, of the more than 40 jurisdictions that ESMA is expected to assess in relation to the passport extension, the independent EU authority has assessed six. Panton revealed that Jersey, Switzerland and Guernsey were recommended by ESMA, while Hong Kong, Singapore and the US were deferred at this time.
Panton stressed that with the passage of both bills, Cayman would be “in a position, to be positively assessed and not be in a position that we are deferred for any reason” by the AFIMD. He explained that both bills are designed to put in place two separate opt-in regimes for prudential regulation of both EU-connected funds and EU-connected managers which are consistent with the AIFMD.
Currently, the Cayman Islands and the other countries have to apply to national regulators in each EU member state for permission to sell their funds.
Panton explained to the LA that Cayman’s investment funds are currently marketed in the EU under national private placement regimes (NPPRs). The NPPR and passport regimes will coexist until at least 2018, by which time ESMA will have decided, and acted upon, whether or not the passport regime should entirely displace NPPRs.
“It’s not clear at this point if the private placement mechanism will go away all together, but it is important to have countries adopt the passport to manage our market funds within the country and in the US,” the minister stated.
The Monetary Authority (Amendment Bill) was also discussed during Wednesday’s meeting, with plans to amend the 2013 revision and replace the word “Governor” with the word “Cabinet” wherever it appears in the law. Panton explained this change would transfer responsibility for certain functions from the financial secretary to the minister charged with the responsibility for financial services and to the minster charged with responsibility for finance, as the case may be.
The fourth and final bill that was on table in the Legislative Assembly was the Companies Amendment 2015, which proposed extending the time limit to register changes in directors and officers with the Registrar of Companies from 30 days to 60 days. The amendments included changes to the penalties payable for any default, such as limits on the amount payable and new sanctions for intentional default, as well as new provision designed to assist clients who have larger groups of Cayman companies.
Finance leaders believe this new law will help clients who have large number of Cayman entities and who had historically struggled to meet the exiting 30 day deadline, which results in large fines.
Category: Financial Services, Law
Let us be clear. These “investment firms” do not have people on the ground in Cayman. The funds are not “managed” in Cayman. Generally the fund is “managed in New York, London, or wherever. Independent offshore directors are used to found a Cayman based version of the fund. Solicitations are booked by third party Fund Administration companys that have a presence in Cayman. But the Fund is not “managed” in Cayman. Or rarely is.
It would be cool of a Hedge Fund set up in Cayman to provide employment however I cannot see that happening. To many restrictions.