CSX Chief Warns Against Trend Of Over-Regulation

by Amanda Banks, Tax-News.com, London

07 March 2005

Warning against a global tide of regulatory “creep and drift,” Anthony Travers, chairman of the Cayman Islands Stock Exchange, has the urged the Cayman regulatory authorities against the temptation to over-regulate in order to attract reputable business to the jurisdiction.

In a speech to the Caribbean Compliance Conference last month, Mr Travers, who is also a senior partner at law firm Maples and Calder, explained to the delegates how even the most strict onshore regulatory regimes have failed to prevent major corporate scandals, such as Enron and Parmalat, from unfolding.

“We need to focus on the paradox that the major failures, whether it is Enron, Parmalat, the UK split capital trust, insurance or pension debacles, have all occurred in heavily regulated jurisdictions. Yet these failures have predictably been seized on by onshore regulatory authorities as reasons why pan global regulation should be extended,” he observed.

However, Mr Travers went on to warn that there has been “troubling evidence” recently of regulatory “creep and drift” from the Cayman Islands Monetary Authority.

He noted that a balance must be struck between sending a signal to international business that regulation in the Caymans is sound, and not allowing that new regulation to become so onerous that it discourages new and existing business.

He pointed to mutual fund legislation as an example of how regulation works best in practice.

“The Cayman Islands Mutual Fund legislation was drafted on the very clear principle of ‘caveat emptor’; that is to say, full disclosure of the range of investment objectives in offering documentation and acceptance of the entire risk by the investor,” he observed.

“It is unreasonable to suppose that any regulatory authority can meaningfully affect or improve the nature of the investment decisions made in relation to funds marketed under that regime. The risk sits where it should, with the investor,” he argued.

Mr Travers pointed to the impressive mutual fund registration statistics from 2004, when more than 1,100 new funds were domiciled in the Caymans, representing a 100% increase on the previous year and taking to total figure to almost 6,000 regulated funds.

“The fact that there have been so few failures in the Cayman Islands is testimony to the effectiveness of the current system,” he noted.

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