New enforcement powers for CIMA (Cayman Islands)
Cayman Islands December 15 2016
The Cayman Islands government is set to grant the Cayman Islands Monetary Authority (CIMA) new enforcement powers under an amendment to the Monetary Authority Law currently before the Cayman Islands Legislative Assembly. If passed in its existing form, the Monetary Authority (Amendment) Bill 2016 will allow CIMA to impose fines for breaches of regulatory laws by licensed or regulated individuals or entities.
This is of particular note for directors of mutual funds that are regulated under the Mutual Funds Law or companies registered as excluded persons under the Securities Investment Business Law, which could be subject to fines for breaches by the funds or investment managers of which they are directors, regardless of whether they are resident or present in the Cayman Islands.
The regulatory laws covered by the bill include:
the Banks and Trust Companies Law;
the Companies Management Law;
the Mutual Funds Law;
the Securities Investment Business Law; and
the Directors Registration and Licensing Law.
CIMA will also be able to impose fines for breaches of the Cayman Islands money laundering regulations and regulations made under the listed regulatory laws.
The bill introduces a new broad definition of 'breach' into the law, meaning that entities and individuals will need to be aware that inaction on their part, as well as intentional breaches of law, could lead to CIMA imposing a significant fine. Breaches will be classified as 'minor', 'serious' and 'very serious'.
The fines that CIMA will be able to impose are as follows:
For minor breaches, CIMA will be able to impose a fine of CI$5,000 (US$6,098), plus one or more continuing fines of CI$5,000 each, until the breach stops or the initial fine and all continuing fines are paid, up to a maximum of CI$20,000 (US$24,390);
For serious breaches, CIMA will be able to impose a fine of up to CI$50,000 (US$60,975) for an individual or CI$100,000 (US$121,950) for a body corporate; and
For very serious breaches, CIMA will be able to impose a fine of up to CI$100,000 for an individual or CI$1 million (US$1,219,500) for a body corporate.
For serious and very serious breaches, CIMA will have the discretion whether to impose a fine and to decide the amount of the fine.
In exercising its discretion, CIMA must take into account all relevant factors, including the need:
to promote and maintain a sound financial system in the Cayman Islands;
to ensure that licensees under regulatory laws and persons connected with them do not gain from breaching the relevant laws;
to punish intentional, reckless or inappropriately negligent breaches; and
to deter financial services businesses and others from breaching the relevant laws.
Details of breaches for which CIMA will be able to impose a fine, and of which breaches will be classed as minor, serious or very serious, as well as the procedure for imposing fines, appeals, payment and publication of fines imposed and other connected issues, are to be set out in further secondary legislation and rules which are yet to be published.
The bill sets out limitation periods on when CIMA will be able to impose a fine:
six months from the date on which CIMA becomes aware of a minor breach; and
two years from the date on which CIMA becomes aware of a serious or very serious breach.
CIMA will be unable to impose any fine for a breach that happened before the amendments to the law come into force.
The impetus behind this legislation is a combination of the jurisdiction's desire to remain at the forefront of relevant international regulatory standards and to enable the European Securities and Markets Authority to complete its assessment process in favour of granting the Cayman Islands access to the EU passport regime under the Alternative Investment Fund Managers Directive.
The bill is passing through the Legislative Assembly and, once approved, will come into effect on a later date approved by Cabinet.
For further information on this topic please contact Marco Martins at Harney Westwood & Riegels by telephone (+1 345 949 8599) or email (firstname.lastname@example.org). The Harney Westwood & Riegels website can be accessed at www.harneys.com.