As part of its strong core approach, Cayman recognises that innovative legislation and regulatory compliance is its muscle, and staying abreast of investor trends is its lifeblood, says Wayne Panton, Minister for Financial Services, Commerce and Environment.
Because government and the private sector continue to invest time and energy into our vital funds sector, the number of funds in the Cayman Islands remains in line with global trends; indeed, we’ve experienced steady growth in overall assets managed. Our leading market share bears out the prudency and wisdom of continuing our core approach—which, albeit simple, requires deep knowledge, experience and skill—of meeting investor needs while maintaining our track record of adhering to global standards.
We are therefore well prepared for the EU’s Alternative Investment Fund Managers Directive (AIFMD) and we recently published the highly anticipated Limited Liability Companies (LLCs) Bill. Moreover, regulations for limited liability partnerships (LLPs) are in draft, and we are positioning ourselves for a trio of global assessments, scheduled for this year and 2017. This activity comes while Cayman continues to successfully manage our international tax cooperation responsibilities.
The European Securities and Markets Authority (ESMA) has confirmed that Cayman will be included in the ‘second wave’ of its technical assessment of non-EU countries, due for completion this June, for AIFMD.
In preparation, in 2015 Cayman’s Legislative Assembly passed the Securities Investment Business (Amendment) Law 2015 and the Mutual Funds (Amendment) Law 2015, which would facilitate the extension of the AIFMD passport to the Cayman Islands. This passport would allow Cayman-based funds to be blanket-marketed across the EU, therefore eliminating our reliance on the more involved National Private Placement Regime.
Prepared in collaboration with industry and our regulator, the Cayman Islands Monetary Authority (CIMA), these two principal law amendments establish an opt-in regime for regulating Cayman Islands-domiciled investment funds and managers connected to the EU.
"It's not just the quantifiable global economy that benefits when our jurisdictional legislative and regulatory framework is sound; there’s a qualitative benefit as well."
Collaboration continues with the production of new regulations under the principal laws. These regulations, which will set new standards consistent with AIFMD, are key to satisfying ESMA’s assessment. Recognising that ESMA’s assessment is merely the first step in the process, government continues to engage with European stakeholders to promote Cayman in relation to extension of the AIFMD passport by the European Commission.
Also in line with meeting commercial needs, the Cayman LLCs legislation was published officially in December 2015, and will be debated at the first meeting of the Legislative Assembly in 2016. Cayman LLCs will simplify fund administration for fund operators who both need and want the flexibility of capital accounts within a vehicle with separate legal personality, and allow for more diverse corporate structures and joint ventures. Cayman LLCs also provide a closer match of the legal framework between onshore and offshore investors, which may result in cost efficiencies for industry.
Industry consultation on LLCs during 2015 was robust. It included our local industry; Registrar of Companies; CIMA; and US legal practitioners from top-notch US law firms. Considering the depth and breadth of this consultation, we are confident that Cayman LLCs will be a prime offering to clients.
Legislation that would allow the formation of LLPs is now being drafted, and is expected to be tabled in the Legislative Assembly this year. This vehicle will be targeted to those who want to operate in a partnership structure, but with the added feature of the partnership having separate legal personality.
Preparations are underway for our next round of reviews in 2016 and 2017 by the Global Forum on Transparency and Exchange of Information for Tax Purposes; the Caribbean Financial Action Task Force; and the International Monetary Fund. Several public/private working groups continue to work collaboratively on legislative and/or policy enhancements to ensure compliance with international standards, and demonstrate the effectiveness of our regulatory regime.
In 2015, Cayman’s cooperation in tax matters saw the first reporting of Foreign Account Tax Compliance Act (FATCA) data to the Internal Revenue Service under our intergovernmental agreement with the US. With more than 28,000 financial institutions registered on Cayman’s automatic exchange of information portal, and approximately 16,000 returns submitted, this represents a huge effort by our financial institutions and our Department for International Tax Cooperation. To prepare for 2016 UK FATCA reporting, we are now updating the software for our IT systems.
More broadly, the recently published Common Reporting Standard (CRS) regulations took effect on January 1, 2016 and, as an early adopter of the CRS, Cayman will join more than 50 jurisdictions in beginning exchanges in 2017. Overall, there are more than 94 jurisdictions committed to CRS first exchanges of data in 2017 and 2018, and these exchanges will be proactively monitored by the Global Forum on Transparency and Exchange of Information for Tax Purposes.
The Cayman Islands government and the jurisdiction’s financial services industry recognise that in order to maintain and grow a healthy, stable, and responsible funds sector, we must maintain and grow healthy, stable and responsible relationships with our stakeholders. This, of course, includes investors. We welcome the fact that clients are much more knowledgeable and involved in their financial services choices, because this speaks to the heart of what we do.
The general public may be unaware that funds are used to support endeavours that are central to their wellbeing, such as pensions, healthcare plans, educational aspirations, and capital investments. Yet clients realise that these activities are vital for social and economic stability and just as important, for socioeconomic mobility across all strata.
In this context, Cayman considers the general public as extensions of our clients. Our motivation for supporting a responsible funds sector is rooted in the belief that it’s not just the quantifiable global economy that benefits when our jurisdictional legislative and regulatory framework is sound; there’s a qualitative benefit as well, for the people who live and work in our communities.
As the Minister of Financial Services, and as a former commercial legal practitioner, I appreciate the fact that the Cayman Islands government can and does work closely with industry to ensure that you have the right mix of products that clients need, coupled with the excellent customer service and robust regulation that is synonymous with jurisdiction. Thank you for your collaboration, and for your confidence in the Cayman Islands.
Wayne Panton, Minister for Financial Services, Commerce and Environment, Cayman Government, AIFMD, Legislation, Regulatory Compliance, Cayman