Do you need to register your fund under the Securities and Investments Act (SIBA)?
When establishing a new company in the Cayman Islands, it is essential to understand the requirements for registration and licensing, particularly when it comes to securities dealing. The Cayman Islands Monetary Authority (CIMA) oversees the regulation of securities dealers. However, not all companies engaged in securities-related activities are required to be registered or licensed as securities dealers. Below we will explore the criteria for registration and highlight an exemption under the Securities Investment Business Act (SIBA) that could apply to certain activities.
Excluded Activities Under SIBA
According to SIBA, the definition of securities includes "instruments creating or acknowledging indebtedness." However, there is an exemption for activities considered as "excluded activities" under Schedule 3 of SIBA. Specifically, if a person or company acts as a principal, selling securities that create or acknowledge indebtedness in relation to loans, credits, guarantees, or similar financial accommodations provided by the person or company, it is not considered securities investment business.
From Schedule 3 of SIBA:
(1) Securities evidencing indebtedness:
Where a person as principal or agent buys, sells, subscribes for or underwrites securities and such securities create or acknowledge indebtedness in respect of any loan, credit, guarantee or other similar financial accommodation or assurance which
Issuing Company Debt Instruments
For instance, when a company issues its own bonds, debentures, or other debt instruments, it falls within the scope of excluded activities. This means that the company issuing its own debt instruments is not required to be registered or licensed as a securities dealer with CIMA. The issuance of these instruments does not classify as dealing in securities for the purpose of registration.
Third-Party Debt Instruments
On the other hand, if a company engages in buying unrelated third-party debt instruments, it would likely be considered dealing in securities. In such cases, the company would need to be registered as a securities dealer with CIMA.
Understanding the regulations surrounding securities dealer registration in the Cayman Islands is crucial for new companies engaging in securities-related activities; it is important to always obtain legal advice and work with compliance specialists to ensure your business remains compliant. While the Securities Investment Business Act (SIBA) defines securities broadly, there are exemptions for certain activities categorized as excluded activities. If a company is solely issuing its own debt instruments, such as bonds or debentures, it likely falls within the excluded activities and if so, would not be required to register as a securities dealer with CIMA. It is important for companies to carefully assess their activities and seek legal advice to ensure compliance with the applicable regulations in the Cayman Islands.