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The Asian stock market is beginning to demonstrate its intention to provide alternatives to traditional stock structures that are more suitable for and attractive to Asian investors. The number of those wishing to establish a fund in the Caymans is growing every year. It is like a magnet for Asian investors and not only them as a springboard for creating hedge funds.

Moreover, the Caymans are diligently improving their regulatory framework with the intention to make the jurisdiction even more comfortable and safe for investment. Many new provisions have been added to regulate funds in the Cayman Islands. All innovations are now at the stage of realisation bringing more clarity as to what is now required from those who want to register a fund in the Cayman Islands and those already operating here.

New Requirements for Obtaining a Securities License in the Cayman Islands

Investment fund managers or advisors do not necessarily need to reside on the Islands or even be physically present here. Whether present or not, most managers and consultants in the Cayman Islands (and registered foreign entities acting in this status) must now carefully review the new licensing requirements due to their securities investment activities in the Caymans, which include:

  • conducting and organizing operations with securities;
  • management of securities;
  • consulting on transactions with securities and a number of others.

Organizations of this kind are now required to register as a "Registered Person" instead of an "Excluded Person", which has now lost its relevance. Cayman Consultant License required for all the aforementioned persons.

All Excluded Persons prior to January of this year were required to either re-register as a Registered Person or be restructured so that the entity would no longer engage in the securities investment business in the Caymans.

AML

Tightened measures to combat money laundering and illegal financial transactions. The Islands managed to rise in the ranking due to the important steps taken to develop legislation in this area. In particular, the law on counteracting illegal financial transactions came into force, which expanded the powers of the supervisory authorities and increased their responsibility for the decisions made.

NOTE:

 

Recall that the Cayman Islands were blacklisted by the EU less than a month after the UK left the EU. The British Caribbean Overseas Territories were listed on the basis that the investment funds based here do not show any real business activity that would take place on the islands. This may be due to the fact that investment instruments were created solely to reduce the tax burden in other jurisdictions.

Finally, if you plan to set up a fund in the Caymans, please keep in mind that the Islands have automatic information exchange regimes and financial institutions have certain due diligence obligations which are mandatory for all. 

Conclusion

The Cayman Islands intend to become a reputable jurisdiction for establishing funds by combining strict legal requirements and a pragmatic approach to doing business. This approach is already yielding positive results. We are currently seeing an increase in the number of hedge fund registrations in the Caymans, and this trend will only develop, experts predict. 

In order to know how to comply with the new regulatory requirements, you can order legal advice on the regulation of funds in the Cayman Islands. Contact our professional team by filling out the feedback form below.