The Cayman Islands has introduced a new law requiring licensing for any one conducting securities investment business except where an exemption is available. The Securities Investment Business Law, 2001 (the “Law”) has been passed by the Cayman Islands Legislature but as of 14 August 2002 is only in force with respect to applications for exemptions. The remaining sections of the Law are expected to become effective by the end of 2002.
Gordon Howorth of Cayman commercial law firm, Solomon Harris, contributes the following review of the new law:
' Recognised as one of the world's leading jurisdictions for hedge fund registration and with a burgeoning local stock exchange it comes as no surprise that the Cayman Islands Government has now introduced a law regulating the business of trading in securities. All persons conducting investment business in or from the Cayman Islands should consider whether they are subject to the requirements of the new law. The Law requires licensing of anyone conducting securities investment business except where an exemption is available. The licensing requirement applies only to entities incorporated, formed or registered in the Cayman Islands or to any entity which, or person who, has established a place of business in the Cayman Islands through which securities investment business is carried on.
'Both securities and securities investment business are very broadly defined. Securities include shares, limited partnership interests, unit trust interests, debentures and bonds and other instruments evidencing indebtedness, warrants, certificates representing certain securities, options, futures and contracts for differences.
'Securities investment business includes dealing in securities, arranging deals in securities, managing securities and advising on securities, but certain activities are excluded from the definition.
'Excluded activities include:
'A licence is not required where a transaction is with excluded persons, subject to a requirement to file an annual declaration with the Monetary Authority and pay an annual fee of CI$1000 (US$1220) if certain exemptions are claimed. The definition of excluded persons includes:
'If an exemption is claimed because the transactions are inter-group activities, or because the transaction is carried on with sophisticated persons or high net worth persons, then the person claiming the exemption has to file an annual report with the Monetary Authority and pay an annual fee of CI$1000 (US$1220).
'It is interesting to note that there is no exemption from licensing for entities licensed under other legislation in the Cayman Islands. Therefore banks, trust companies, mutual fund managers and other licensed entities will have to apply for a licence under the Law if they engage in securities investment business other than with exempted persons.
'The Regulations to the Law, once passed, will include a description of the requirements for a licence. In general, a licence will not be granted unless the applicant has satisfied the Monetary Authority that the applicant will be able to comply with the Law and the Regulations, the applicant will be able to comply with Cayman Islands anti-money laundering laws, it is not against the public interest for the application to be approved, the applicant has personnel with the necessary skills, knowledge and experience and appropriate facilities and books and records, and the senior officers and managers of the applicant are fit and proper persons.
'In granting a licence the Monetary Authority can impose conditions limiting the nature and scope of the business, specifying whether or not the licensee may hold clients’ assets, and requiring the licensee or one of its senior officers or managers to maintain membership in a recognized securities exchange or a recognized securities organization.
'A person who carries on securities investment business without a licence is liable to a fine of CI $100,000 (US$122,000) and/or imprisonment for a term of one year plus a fine of $10,000 for each day the offence continues. Senior officers of a company which commits this offence are similarly liable.
'Regulations will also be passed dealing with conduct of business by licensees and financial requirements and guidance notes will also be issued by the Monetary Authority.
'The Law also creates offences for creating or attempting to create a false or misleading market or being involved in insider dealing.
'The false and misleading market offence is committed if a person creates or does anything which is calculated to create a false or misleading appearance of active trading in any listed securities or a false or misleading appearance with respect to the market for, or the price of, any such securities. The offence is punishable on summary conviction to a fine of CI$4000 (US$4900) and/or imprisonment for a term of one year and on conviction by indictment to a fine of CI$10,000 (US$12,200) and/or imprisonment for a term of 7 years. Senior officers of a company that commits this offence are similarly liable.
'The insider dealing offence is committed by an individual who has information as an insider if he deals in listed securities that are price-affected in relation to the information, he encourages another person to do so, or if he discloses the information other than in performance of his employment, office or profession. The offence is punishable on summary conviction to a fine of CI$4000 (US$4900) and/or imprisonment for a term of one year and on conviction by indictment to a fine of CI$10,000 (US$12,200) and/or imprisonment for a term of 7 years.
'It is a defence to a charge of insider dealing to show that no profit was expected attributable to the use of the price-sensitive information, to show the belief that the information had been widely disclosed so that no one would be prejudiced by not having the information, or to show that the transaction would have been completed even without the information. It is also a defence to the charge of disclosing insider information to show that you did not expect any person to deal in listed securities because of the disclosure or that you did not expect any such dealing to result in a profit attributable to the information. Further defences are available to market makers, persons dealing in market information where it was reasonable for a person in such a position to act as he did, and actions in connection with an acquisition or disposal which was under consideration or the subject of negotiation or in the course of a series of such acquisitions or disposals.
'An individual is only guilty of the offence of encouraging another person to use insider information or disclosing insider information if he was within the Cayman Islands at the time of the offence or the alleged recipient of the insider information was within the Islands at the time he is alleged to have received the information or encouragement. The offence of dealing with insider information is not subject to this limitation.
'This article is written for the purpose of providing a general description of certain provisions of the Law and is not intended as legal advice. Persons who are or may be affected by the law are advised to consult with their professional advisors.'
Gordon Howorth is an attorney with Solomon Harris in the Cayman Islands, specialising in international commercial and offshore business law, including investment funds, companies and other offshore entities, licensing requirements, banking, trusts, mergers and acquisitions, financing transactions and Latin American transactions.
Solomon Harris has been recommended along with only four other Cayman firms in a leading UK international law firm directory, “Chambers Global - The World’s Leading Lawyers” in 2000, 2001, and 2002. It is a full service law firm specialising in international offshore work with a number of niche specialisms. Its attorneys have a combined total of over 100 years of practising law. Main practice areas are banking, capital markets and SPV’s, captive insurance, commercial litigation and dispute resolution, e-commerce, investment funds, local licensing, mergers and acquisitions, real estate (including development, timeshare and financing), regulatory compliance, restructuring/insolvency, structured finance (including securitisation) and wealth management (including trusts).
Gordon Howorth may be contacted at Solomon Harris on +345 949 0488 (phone), +345 949 0364 (fax) or at GHoworth@solomonharris.com.
.
Network Tweets
Network BlogsContent
provided by
|
Archive | Resources | Partners | Site Map | Links | Newsletter Archive | Contact | RSS Feeds | About | Syndication | Advertising & Marketing | Recruitment | Terms & Conditions | Privacy & Cookies
Copyright © 2012 - All Rights Reserved - Tax-News.com
IMPORTANT NOTICE: Tax-News.com has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments.
Write a comment