An amendment to the Monetary Authority Law passed in the Legislative Assembly Monday will make it easier for foreign regulatory bodies to obtain information from the Cayman Islands Monetary Authority.
In presenting The Monetary Authority (Amendment) Bill, 2007, Financial Secretary Kenneth Jefferson noted that the bill was being expedited – with the suspension of several Standing Orders – ‘because it is in the interest of the Cayman Islands that this bill be enacted in a timely manner’.
The need to change the law rises from CIMA’s desire to become a member of the International Organisation of Securities Commission.
‘IOSCO is regarded as the international standard setter in the area of securities regulation,’ Mr. Jefferson said. ‘Some 183 regulators in the world are now members of IOSCO, including leading members such as the United States’ Security and Exchange Commission and the United Kingdom’s Financial Services Authority, as well as regulators from our offshore competitors such as Jersey, Isle of Man, Singapore, Hong Kong, Bermuda, the Bahamas, Dubai, and more recently, the British Virgin Islands.’
CIMA applied for IOSCO membership in 2002 but the application ‘stalled since 2003 because of doubts by some leading IOSCO members about the adequacy of the existing provisions in the Monetary Authority Law for providing assistance to other securities regulators’.
The change to the Monetary Law brings it in line with the IOSCO Multilateral Memorandum of Understanding, which Mr. Jefferson said is regarded as the benchmark for cooperation in securities matters.
‘Failure to find a solution would put Cayman in further conflict with IOSCO, the Financial Stability Forum and the major securities regulators like the SEC and FSA, which are members of IOSCO that make requests for assistance from CIMA from time to time in order to carry out the enforcement of the securities laws in their respective jurisdictions,’ Mr. Jefferson said.
The provisions of section 50 of the Monetary Authority Law are the ones affected by the changes made Monday.
Prior to the change, Section 50 did not enable CIMA to independently consent to the use of information provided to other securities regulators in criminal investigations and proceedings for contraventions of securities laws or regulations.
‘In order to address this concern, the bill, as reflected in Clause 50(3), would allow CIMA to consent to the use of information provided by CIMA to an overseas regulatory authority for the purposes of criminal investigations and proceedings related to the violation of laws and regulations administered by a requesting authority without the need to obtain approval from any third party authority,’ Mr. Jefferson said. ‘This is in addition to its existing ability to provide information for civil and administrative investigations and proceedings.’
Speaking afterward, Mr. Jefferson said the old Monetary Authority Law wasn’t fully in adherence with the IOSCO Multilateral Memorandum of Understanding.
‘What IOSCO has said is that there was the potential for the Attorney General and myself to frustrate the ability of an overseas regulatory authority to be able to obtain information from CIMA on a timely basis,’ he said. ‘In real terms, there haven’t been any delays, but the potential was there.’
Other changes to section 50 of the Monetary Authority Law make it clear that requests for assistance by an overseas regulatory authority will be treated as confidential and are subject to disclosure only through established gateways existing in the law; and that CIMA will not require a specific, separate undertaking of confidentiality from a requesting overseas regulatory authority when ‘the Authority has satisfied itself that the intended recipient authority is subject to adequate legal restrictions on further disclosure.’
Mr. Jefferson spoke about the urgency of getting the amendments to the law passed immediately.
‘CIMA has been advised by the relevant IOSCO Standing Committee that it supports the proposed amendments given in this bill and would encourage CIMA to reapply for IOSCO membership once the amendments are enacted,’ he said. ‘There is, however, a very short window for CIMA’s application to be processed as the application will need to be reviewed by a screening group that will meet in December 2007 and in early 2008 before the next annual meeting in June, at which time CIMA’s application could be approved.’
If not approved in June 2008, the next time the application could be approved would be June 2009, Mr. Jefferson said.
‘In the interim, the jurisdiction stands to suffer reputational damage and be put at a competitive disadvantage.’
Mr. Jefferson explained afterwards that elements of Cayman’s private sector had said some of this jurisdiction’s competitors use their IOSCO membership as a marketing tool to show they have adopted all the latest compliance standards.
Because of this, some in Cayman’s private sector had expressed the desire to see CIMA get IOSCO membership for competitive reasons.
Although the private sector was not consulted broadly about the impending change, Mr. Jefferson said the Financial Services Council – which has members in most sectors of Cayman’s financial services – was told about it, and that they supported the move.
Mr. Jefferson declined to say which IOSCO member states had complained about the Monetary Authority Law, but Leader of the Opposition McKeeva Bush spoke to that point when he rose to support he bill.
‘When discussions and negotiations about the European Union Savings Directive were in progress [in 2002 and 2003] we said we would not just sign on and agree to the directive; that we wanted some things done for our jurisdiction,’ Mr. Bush said. ‘We asked for support to join IOSCO.
‘The UK said it wouldn’t stand in our way and that it would help us indirectly.
‘Then an objection [to Cayman’s IOSCO membership] came from the UK’s Financial Services Authority because of our law,’ he revealed.
‘Hopefully, this bill would be the last step [to CIMA’s IOSCO membership].’