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Securities Investment Business Law (SIBL) Licensees

The Securities Investment Business Law, (as Revised) (“the Law”) regulates securities investment business in the Cayman Islands. The Law provides that a person or entity shall not carry on securities investment business unless they are licensed under the Law or exempt from holding a license.

The Law has been recently amended (The Securities Investment (Amendment) Law, 2019) (the “2019 SIBL”), the principal effect of which is to introduce important changes to the regulatory and supervisory framework applicable to those persons currently registered as ‘excluded persons’ under the Law including Cayman Islands fund managers, investment advisers and brokers dealers.

Timeframe 2-4 Months
Capital US$ 100,000
Accounting Required Accounting Required
Nominee Required Nominee Required
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Securities Investment Business Law (SIBL) License

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Benefit of Securities Investment Business Law (SIBL) Licensees in Cayman

  • Cayman Islands are one of the major financial hubs
  • No local presence required
  • Bank account can be held in any bank (not necessarily in local bank)
  • No local income, corporation, capital gains, profits or withholding taxes for Cayman exempted companies

Scope of License

Securities Investment Business Law (SIBL) defines the regulated activities as:

  • Dealing in securities

Buying, selling, subscribing for, or underwriting securities as agent or principal, including market maker activity. This definition inherently excludes own-account dealing as a principal is only captured where there is ‘holding out’ and ‘solicitation’.

  • Arranging deals insecurities

Making arrangements with a view to another person (whether as principal or agent) buying, selling, subscribing for, or underwriting securities.

  • Managing securities

Managing securities belonging to another person in circumstances involving the exercise of discretion.

  • Advising on securities

Advise an investor or potential investor (including acting as an agent on behalf of an investor) on buying, selling, underwriting, subscribing for, or exercising any right conferred by security.

The SIBL applies only to persons that engage in the above activities in the course of business i.e. persons who provide services for profit or reward.

License Application Requirements

An application for a license to carry on securities investment business must be made in the prescribed form (available upon request) together with the prescribed fee and accompanying documentation. In summary, an applicant will need to satisfy the Authority that:

  • the applicant will be able to comply with the SIBL and any regulations thereunder;
  • the applicant will be able to comply with The Anti-Money Laundering Regulations (Revised);
  • approval of the application will not be against the public interest including the need to protect investors;
  • the applicant has the necessary qualified personnel and facilities having regard to the nature and scale of the applicant’s business; and
  • the senior officers and managers of the applicant are fit and proper persons.

You can find more information about the checklist of document requirements here

License Application Requirements

Who needs to apply SIBL in Cayman

The Law applies to:

  • Any company, foreign company or a partnership (whether general, limited or exempted) incorporated or registered in the Cayman Islands which carries on securities investment business anywhere in the world; and
  • Any entity which has established a place of business in the Cayman Islands through which securities investment business is carried on
Who needs to apply SIBL in Cayman
FAQs

FAQs

1. What is a Master Fund in Cayman?

A "master fund" means a mutual fund incorporated or established in the Cayman Islands that holds the investments of and conducts trading activities on behalf of one or more regulated feeder funds. A "regulated feeder fund" means a CIMA regulated mutual fund that conducts more than 51% of its investing through another mutual fund.

2. What are the Requirements for AML in Cayman?

The Cayman Islands anti-money laundering and countering terrorist financing (AML) regime requires mutual funds to maintain AML procedures as appropriate to the size of the fund.

The requirements include: 

  • Adoption of a risk-based approach to monitoring investors and financial activities, together with adequate systems to identify risk (including checks against all applicable sanctions lists) in relation to persons, countries, and activities of the mutual fund; 
  • Observance of the list of countries that are non-compliant, or do not sufficiently comply, with the recommendations of the Financial Action Task Force; 
  • Procedures for: 
    • investor identification and verification 
    • risk-management;
      record-keeping; 
    • suspicious activity reporting;
      monitoring, and testing the systems for, compliance with AML and proliferation financing regulatory requirements; and 
    • Other internal control and communication procedures (eg a risk-based independent audit function)
3. Which entities fall within the scope of the revised definition of Private Funds?

The revised definition both clarifies the position for certain entity types and extends the scope of the PFL to additional entities. This clarification and extension may have changed the position for a number of entities, including but not limited to certain master funds, certain alternative investment vehicles and funds formed for a single investment.

4. Is there a transitional period for private fund registration?

The PF Law provides that private funds covered by the legislation must be registered by 7 August 2020. This applies both to private funds that were carrying on business on the date of the commencement of the PF Law (being 7 February 2020) and private funds that commence business within the six-month transitional period from 7 February 2020 to 7 August 2020. Private funds that launch on or after 7 August 2020 will need to comply with the registration timing requirements contained in the PF Law, as summarised below.

5. What does the Securities Investment Business Law consider to be securities?

Securities Investment Business Law (SIBL) defines "securities" as:

  • Shares or stock of any kind of the share capital of a company (endnote)
  • Debentures, loan stock, bonds, certificates of deposit, and any other instrument that creates or acknowledges debt (excluding various banking and monetary instruments e.g. cheques, mortgage instruments, and land charges).
  • Warrants and other instruments that allow the holder to subscribe to certain securities
  • Certificates or other instruments which confer contractual or proprietary rights
  • Options on any security and on any currency, precious metal or an option on an option
  • Futures
  • Rights under contracts for differences (e.g. cash-settled derivatives such as interest rate and stock index futures, forward rate agreements and swaps)
6. Is there a minimum net worth requirement for a Securities Investment Business licensee and if so, what is the minimum?

Under the Securities Investment Business (Financial Requirements and Standards) Regulations, Securities Investment Business licensees are required to have base financial resource requirements. In the case of broker-dealers, market makers, and securities managers, the base financial resource requirement is CI$100,000 and in the case of all other licensees, the requirement is CI$15,000.

7. Is a Securities Investment Business Licence required to have an insurance policy in place?

All Securities Investment Businesses licensed under the Securities Investment Business Law (the “SIBL”) must have and maintain adequate insurance coverage. The licensee must have insurance to cover 

  • Professional Indemnity, 
  • Professional Liability of Senior Officers and Corporate Secretaries, and 
  • Business Interruption, as required by Section 4(1) of the Securities Investment Business (Conduct of Business) Regulations.

Please refer to Authority’s Statement of Guidance – Professional Indemnity Insurance for Trust, Insurance, Mutual Fund Administrator, Securities Investment Business and Company Management Licensees and Directors for guidance.

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