New CIMA powers could see non-resident directors fined


Proposed legislative changes by the Cayman Government, which would give the Cayman Islands Monetary Authority (CIMA) significant new powers to impose administrative fines, would mean directors could be personally fined even if they are not based in Cayman.

The new powers would enable CIMA to issue non-discretionary fines of $5,000 (or potentially $20,000) for a minor breach to $1 million for a very serious breach.
CIMA would be able to impose cumulative fines of up to $20,000 for a single minor breach.

Law firm Walkers has warned that individual directors should ensure they understand the consequences of the proposed powers.

“It is important that individuals and entities take note, as the proposed changes mean that potentially contraventions or failures to act could give rise to fines,” Walkers said in a briefing note on the topic.

“Another key point is that directors of mutual funds regulated under the Mutual Funds Law or companies registered as excluded persons under the Securities Investment Business Law would be amongst those persons liable for fines, irrespective of whether or not that director is resident in the Cayman Islands.”

The draft legislation is in the form of a bill which is approved subject to a third and final reading in the Legislative Assembly. This Advisory focuses on the principal proposed changes in CIMA’s powers.

The relevant bill, the Monetary Authority (Amendment) Bill 2016 (the Bill) seeks to amend the Monetary Authority Law to empower CIMA to impose administrative fines for breaches of prescribed provisions of regulatory laws, the money laundering regulations or the Monetary Authority Law itself (the definition of which is expanded to include regulations and rules made under it).

The “regulatory laws” will include the Banks and Trust Companies Law, the Building Societies Law, the Companies Management Law, the Cooperative Societies Law, the Insurance Law, the Money Services Law, the Mutual Funds Law, the Securities Investment Business Law, the Development Bank Law and the Directors Registration and Licensing Law.

Walkers also noted that the Bill inserts the new definitions of “breach”, “fine”, “prescribed provision” and “rules”. “It is important to note that “breach” is defined broadly and includes not only positive actions but also failing to act or allowing a state of affairs to exist,” it said in the note.

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