Definition of Securities

Securities investment business is regulated in the Cayman Islands by the Securities
Investment Business Law. For the purpose of the Law securities are defined as:

• shares or stock of any kind of the share capital of a company;
• debentures, loan stock, bonds, certificates of deposit and any other instrument that creates or acknowledges debt (excluding various banking and monetary instruments e.g. cheques, mortgage instruments and land charges);
• warrants and other instruments that allow the holder to subscribe for certain securities;
• certificates or other instruments which confer contractual or proprietary rights;
• options on any security and on any currency, precious metal or an option on an option;
• futures;
• rights under contracts for differences (e.g. cash-settled derivatives such as interest rate and stock index futures, forward rate agreements and swaps).

Regulated Activities and Types of Licenses

The following transactions with securities are, for the purpose of the Law, regulated activities:

Dealing in Securities, which means:
a) buying, selling, subscribing for or underwriting securities as an agent (type of license: broker-dealer); or

b) buying, selling, subscribing for or underwriting securities as principal (type of license: market maker) where the person entering into that transaction:

i. holds himself out as willing, as principal, to buy, sell or subscribe for securities of the kind to which the transaction relates at prices determined by him generally and continuously rather than in respect of each particular transaction;
ii. holds himself out as engaging in the business of underwriting securities of the kind to which the transaction relates; or
iii. regularly solicits members of the public with the purpose of inducing them, as principals or agents, to buy, sell, subscribe for or underwrite securities and such transaction is entered into as a result of such person having solicited members of the public in that manner.

Arranging Deals in Securities (type of license: securities arranger), which means making arrangements with a view to:
a) another person (whether as a principal or an agent) buying, selling, subscribing for or underwriting securities; or

b) a person who participates in the arrangements buying, selling, subscribing for or underwriting securities

Managing Securities (type of license: securities investment manager), which means managing securities belonging to another person in circumstances involving the exercise of discretion.

Advising on Securities (type of license: securities investment advisor), which means advising a person on securities if the advice is:
a) given to the person in his capacity as an investor or potential investor or in his capacity as agent for an investor or a potential investor; and

b) advice on the merits of his doing any of the following (whether as principal or agent):

i. buying, selling, subscribing for or underwriting a particular security; or
ii. exercising any right conferred by a security to buy, sell, subscribe for, underwrite a security.

Any license can be full or restricted. The license is restricted if the number of clients to whom the licensee may provide services or setting the minimum value of an individual client’s investment is specifically stated in the license application form.

Application Requirements

Any person wishing to carry out any of the above activities must submit an application to the Cayman Islands Monetary Authority supported by the following documents and information:

a. Brief resume of the applicant’s history and reasons for seeking a Securities
Investment Business Licence in the Cayman Islands;

b. A detailed business plan

c. Organizational structure chart (NB! Where the applicant is a company, it should have at least two directors);

d. Group structure chart (if applicable) and the outline of the major sources of the group’s income;

e. Description of governance arrangements and internal control mechanisms;

f. Auditor’s letter of consent;

g. Audited financial statements (in case the applicant has been established for more than 6 months);

h. Evidence of professional indemnity insurance;

i. A personal questionnaire completed by each shareholder, beneficial owner, proposed director, manager and officer of the applicant company supported by due diligence information and documentation;

j. Prescribed application fees;

k. Any other information or documentation as may be required by the regulator

Financial Resources

A licensee’s base financial resources requirement shall be the greater of ¼ of their relevant annual expenditure plus:
a) CI$100,000 in the case of broker-dealers, market makers and securities managers; and

b) CI$15,000 in the case of all other licensees.

A licensee shall at all times maintain financial resources in excess of its financial resources requirement.

Fees

Government (CIMA’s ) Fees

The below fees are charged by the regulator and are quoted in Cayman Islands Dollars CI$ (US$1.00 = CI$ 0.82):

Regulatory Activity / Application fee / Fee payable on first grant / Annual renewal

(a) Broker dealer 500 / 8,000 / 8,000
(b) Securities arranger 250 / 4,000 / 4,000
(c) Securities manager 500 / 8,000 / 8,000
(d) Securities advisor 500 / 8,000 / 8,000
(e) Market maker 500 / 8,000 / 8,000
(f) Any additional license after the first, for each license 500 / 4,000 / 4,000

Professional Fees

Contact us for our basic package fee, which covers the following services:

• initial compliance oversight in respect of the applicant company’s shareholders, beneficial owners and directors;
• formation of a Cayman Islands company that will act as a license applicant;
• one set of original corporate documents and a rubber seal;
• provision of the company registered agent and registered address during the first year;
• compiling a due diligence file for each director, shareholder and officer of the company for the purpose of submission of the file to CIMA (this includes providing guidance for the completion of personal questionnaires; advising on requirements for KYC documents, perusing the documents collected and formation of the file);
• assistance with drafting a license application;
• collecting license application supporting documents from the client (i.e. those listed in section 3 above), verifying same against the check-list, advising the client of obvious deficiencies;
• formation of the application pack;
• submitting the application to the CIMA and attending to the regulator’s queries until the application is finalized

As an additional service, we will be in the position to assist with: the preparation of the business plan, financial projections, AML manual; governance arrangements and internal control mechanisms, finding statutory officers and auditor, obtaining an insurance cover and setting up a bank account. Please refer to Schedule I of this document where relevant fees and charges are disclosed.

Our professional fees are exclusive of any government fees and disbursements.

Time Frame

A complete license application is normally reviewed by CIMA within 4-5 months after being submitted to the Authority.