Expert View: A Look At Securities Services In The Cayman Islands - Conyers Dill & Pearman

Craig Fulton Conyers Dill & Pearman Attorney Cayman Islands 9 January 2013

Expert View: A Look At Securities Services In The Cayman Islands - Conyers Dill & Pearman

Editor’s note: The following article, originally published by LawInContext in its online cross-border financial services multi-country resource, is by Craig Fulton, of the international firm Conyers Dill & Pearman, Cayman Islands. The information in this article is intended to provide an overview to cross-border conduct and the provision of securities services in the Cayman Islands.  It is not a full description and is not intended to constitute legal advice. If you are in any doubt about any of the content in this article, you should consult a professional advisor.


As is the case with most jurisdictions, a licence is required to provide securities services to clients in and from the Cayman Islands. Thus, in the case of a foreign bank (i.e. a bank situated outside the Cayman Islands), which is not locally licensed in the Cayman Islands, a licence is required to provide securities services to clients in and from the Cayman Islands.

Permissible Inbound Securities Related Services

That said, it is noteworthy that residents of the Cayman Islands may have offshore accounts through which they may invest in securities. Moreover, a foreign non-locally licensed bank (a “foreign bank”) may offer some securities related services from offshore (i.e., from outside the Cayman Islands), particularly pursuant to a client's request (i.e., in a reverse solicitation context). It should be noted that this exception is very limited and that, for the most part, it only applies where the client has initiated the contact with the foreign bank.

So, for example, if the foreign bank provides such securities services (i) exclusively from outside the Cayman Islands or (ii) primarily from outside the Cayman Islands but with occasional visits to the Cayman Islands to discuss such securities services and/or with communications provided at the request of clients with regard to such services, a licence is not required.  It should, however, also be noted that anyone visiting the Cayman Islands with the intention of working in the Cayman Islands, which may include meetings with clients, is generally required to have a work permit, although there are certain exemptions which may apply in each instance.

Accordingly, such foreign banks should be careful to ensure that unless they are appropriately licensed in the Cayman Islands that they do not initiate the relationship with the Cayman Islands-resident customer. General marketing activities which constitute unsolicited offers to do business are regulated activities in the Cayman Islands and a foreign bank would need to become licensed to conduct business in the Cayman Islands. 

Client services

This general rule in respect of foreign banks applies regardless of the nature of the client and accordingly there are no exemptions in respect of clients such as (i) sophisticated persons, (ii) high net worth persons, or (iii) companies, partnerships or trusts whose members are one or more persons in categories (i) or (ii). Furthermore, the nature of the services being offered is also not relevant as to the application of this rule and accordingly all investment advice, brokerage, or managed account services would be caught by this.

Commentary in relation to local presence

With regard to the actual reverse solicitation, the contact does not need to be initiated by the client directly.  Hence, if an appropriately licensed entity located in the Cayman Islands introduces one of their clients to the foreign bank then the foreign bank will be able to act in relation to that client.  

Registration and licensing in the Cayman Islands

In order to become registered and licensed to provide securities services to clients in and from the Cayman Islands, the service provider would need to consider the following:

Local Companies (Control) Law

The LCCL provides that no company shall carry on business in the Cayman Islands unless it is at least sixty per cent-controlled by Caymanians or it is licensed under that law and the Trade and Business Licensing Law. Any company which fails to comply with the LCCL will be liable to criminal penalties.

The LCCL defines "company" to mean a company incorporated in the Cayman Islands by virtue of the Companies Law and also a "foreign company" registered under that law or purporting to carry on securities investment business without a licence or a licence exemption.

There are exemptions available to the LCCL:

Companies Law

Section 184 of the Companies Law requires that every foreign company must register and file certain documentation with the Registrar of Companies within one month of becoming a foreign company. Section 183 defines "foreign company" to mean an overseas company which (1) establishes a place of business or (2) commences carrying on business within the Cayman Islands.

Determining precisely when certain activities will constitute engaging in a trade or business in the Cayman Islands will depend upon the exact facts and circumstances of the particular case. Factors which will play into the determination of this issue include the frequency of the activities in question, their scope and overall nature and import.

Securities Investment Business Law

SIBL provides a system for licensing investment service providers. Any person carrying on securities investment business in or from the Cayman Islands must hold a licence issued by the Cayman Islands Monetary Authority, unless they qualify for exemption from this requirement. Investment managers, advisors, market makers, brokers, dealers and market intermediaries should expect to be required to apply for a licence.

The Securities Investment Business Law contains a broad definition of "securities investment business" which applies to a foreign company registered as such under the Companies Law. Certain activities are expressly excluded from the definition of securities investment business, including issuing or redeeming one's own securities or making arrangements for issuing or redeeming one's own securities.

An exemption to the licensing requirement is available to persons carrying on securities investment business exclusively for one or more of the following classes of person: (a) a sophisticated person; (b) a high net worth person; or (c) a company, partnership or trust (whether or not regulated as a mutual fund) of which the shareholders, unit holders or limited partners are one or more persons falling within (a) or (b). However, please note that even if exempted from the licence requirement, a person carrying on or purporting to carry on securities investment business is still required to register with CIMA as an “excluded person”, file an annual declaration with the CIMA and pay an annual fee.

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