New Regulatory Changes in the Cayman Islands

All those contemplating registering an investment foundation in the Cayman Islands should keep in mind the recent changes in the country’s regulatory regime. Related primarily to the setting up of investment foundations in the Cayman Islands, they’re expected to profoundly impact the overall regulatory landscape in the country. 

So, let’s take a closer look at them.

Privately Owned Foundations

The Law on Private Foundations is applicable to foundations qualifying as ‘private foundations’ & liable for registration with CIMA. According to the law, all foundations to which it’s applicable must submit registration applications before August 2020. It is specifically applicable to foundations which have commenced their activities before the introduction of the said  transition period. Foundations that have started their activities after the said period must abide by registration-related requirements contained in the law.

Open-ended funds not liable for registration with CIMA & carrying out business activities in the Cayman Islands are also governed by the recently amended Law on Mutual Funds. According it, the maximum number of investors in foundations like these mustn’t exceed fifteen.

Under the new laws, a transition period of six months is introduced. Applicable to countries with anti-misappropriation legislation in place, the laws require individuals seeking to open a business in the Cayman Islands to do risk assessment for each country or region where their clients live.

In practical terms, that means collaboration with administrators of foundations & AML-compliant providers of services. Organizations responsible for overseeing compliance with AML legislation are obliged to ensure that administrators of the countries where their clients live or work have done proper risk assessment.

As per amended legislation, financial institutions are granted a reporting deadline extension (to May & November). 

Under the new set of laws, the following activities now fall under the definition of ‘operations with virtual currencies’:

• exchanging virtual currencies;
• storing virtual currencies;
• issuing virtual currencies.

Virtual currency operators are now required to apply for a cryptocurrency exchange license with CIMA. According to the new laws, operators of foundations that issue redeemable tokens are required to register them or apply for a license authorizing cryptocurrency activities in the Cayman Islands. Virtual currencies are now regulated by the amended SIB Law, which defines them as:

• derivatives of securities referred to in the amended legislation;
• assets convertible into securities referred to in the amended legislation.

Now, corporate entities or individuals involved in operations with virtual currencies must apply for registration or obtain a securities license in the Cayman Islands. 

E-signatures & e-contracts are regulated by the Law on E-Transactions. According to it, e-contracts are considered valid if they’re concluded in accordance with Caymanese legislation & meet the requirements contained in the original contract. E-signatures are deemed valid & enforceable if they’re used as per Caymanese legislation & meet the registration criteria contained in the law.