The newly formed Cayman Islands Directors Association had the chance to hear from Cayman Islands Monetary Authority Chair Tim Ridley at its 19 June lunch, who presented a checklist of suggestions, such as best practices and continuing education to ensure the organisation’s future success, while offering a useful contact point for companies looking for qualified directors.
While there to offer his personal remarks, Mr. Ridley commented that CIMA welcomes the establishment of professional associations like CIDA, which, when effective, contribute to the development, enhancement and improved standing of the financial services industry, and thus the Cayman Islands as a whole.
‘I urge CIDA to be as effective, expansive and inclusive as possible and to be mindful of broader community interests,’ he said, urging it to avoid being seen as self interested jobs for the boys organisation by encourage the widest possible membership.
‘If necessary, [do this] by having categories of membership that cater for both the experienced and inexperienced, while balancing this against the need not to be seen as having no or low standards,’ he said.
‘And, you may wish to consider overseas memberships in due course.’
Urging a commitment to best practices, Mr. Ridley suggested they be established through such avenues as codes of conduct, conflicts of interest codes, and ethics codes.
‘There are many useful precedents already existing, although I recognise that some tailoring to the jurisdiction may be needed,’ he said.
Mr. Ridley also proposed CIDA work together with existing organisations such as UCCI and the Chamber of Commerce to establish educational and awareness programmes at all levels, both theoretical and practical, for current and prospective directors.
Mr. Ridley emphasised the benefits of a good relationship between CIDA and CIMA
‘CIDA should become actively involved in the CIMA consultation process on proposed rules and statements of guidance as this is a vital part of CIMA’s goal to ensure that our regulatory regime is appropriate and up to date,’ said Mr. Ridley.
‘It is most important that the procedure works smoothly. That requires those consulted to respond in a timely and considered manner . . . some associations are both constructive and timely; a few, not. I trust that CIDA will fall into the former category on matters that concern it.’
Education and training
Mr. Ridley went on to stress the need to expand the qualified director pool in Cayman.
‘There are simply too few today. And this is but one example of the human resources challenge we face in the Cayman Islands,’ he remarked.
One of the outcomes of this shortage, he said, is that it may lead to individuals arguably holding too many directorships.
He outlined the possible resulting problems, among which include overburdened directors who are not able to meet their responsibilities, ignoring or not dealing with inevitable conflicts, or directors simply not qualified or experienced enough to carry out their functions as required.
‘I see CIDA providing resources to alleviate these problems through education and training,’ he said.
He also underscored the importance of CIDA reaching out into all areas where the performance of directors requires improvement.
‘That means not only the offshore sector, which typically receives most scrutiny, but also local companies and statutory authorities,’ he said.
‘Bearing in mind the comments made in the recent Commission of Enquiry Report about the weaknesses in the governance and board performance of certain statutory authorities and Government owned companies, the much publicised problems with compliance with the Health Insurance and Pensions Law by certain private sector corporate employees and the likely difficulties with compliance with the ESO National Accounts Survey, it is evident that help is needed,” he said.
‘Good governance is good governance everywhere and I see CIDA as having a valuable role to play in the local sector.’
Not just funds
Mr. Ridley also commented that despite its focus on the funds sector, CIDA can play an important role in the offshore arena in general by reaching out to directors and potential directors in sectors such as the growing reinsurance industry.
‘If we are to develop as a credible domicile for open market re-insurers, many of which will be publicly quoted, and to encourage substantive decision making, real economic activity and expanded employment in Cayman, we need locally based persons of the necessary calibre and credentials to serve as directors at those re-insurers,’ he observed.
He noted those directors need not necessarily be people with insurance or re-insurance backgrounds, as boards should have broad multidisciplinary skills, and that their ranks should not just be limited to lawyers and accountants.
‘There is every reason why a strong local business entrepreneur in Cayman could be an excellent candidate to go on the board,’ he said.
‘But he would find it helpful to better understand Sarbanes Oxley and the many duties and risks of directors of public companies. That is where CIDA can come in.’
Urging CIDA to support its fellow financial services association, the Cayman Islands Financial Services Association, in both its international and domestic education and awareness programmes, Mr. Ridley stressed support for CIFSA’s efforts to ensure the offshore sector is able to continue its past successes.
Mr. Ridley also suggested CIDA can also function as a contact point for those seeking persons to serve as directors.
‘I am not suggesting that CIDA become an employment agency, but maintaining a list of those members qualified and willing to serve with resumes and contact details would be extremely useful to those setting up in Cayman. Needless to say, it would also be a significant benefit to CIDA members,’ he said.
International challenges: directors on front line
Mr. Ridley wound up his presentation with some words of caution.
‘Those who serve as directors are in the front line when it comes to risk and potential liability. You will be well aware of your legal responsibilities under Cayman law. Recent proceedings here against the directors of hedge funds underscore the local risks,’ he said.
‘But given the cross border activities of the companies on whose boards you serve, your liability does not stop at Owen Roberts airport. So it is incumbent on you to ascertain what the pitfalls may be in other relevant jurisdictions and to act accordingly.’
Citing the recent actions by the US with respect to the officers of foreign internet gambling companies, BAe and UBS, and the NatWest Three, Mr. Ridley observed a clear message has been sent that what goes on overseas does not stay overseas as far as the US is concerned.
He said that these events, along with the increasing stridency from Washington about offshore amendments to the Tax Code, greater pressure for better tax collection, and a possible Democratic victory in November, a renewed period of subpoenas being served on Cayman based persons while in the US is likely.
‘You should also listen and watch closely what is being said and done in the EU and UK developments with respect to offshore,’ he said.
‘At home, you should review carefully the proposed Proceeds of Crime Law and the Anti Corruption Law that are likely to be enacted during the current session of the Legislative Assembly. Noteworthy is that the ACL will make bribery of foreign public officials a crime.’
In his conclusion, Mr. Ridley noted that Cayman is very much impacted by increasing global standards required and expected of directors.
‘Most of our investors and service providers are global and we are subject to the close scrutiny of foreign governments, overseas regulators and law enforcement and international standard setters,’ he said.
‘The performance of the directors of Cayman companies, both local and offshore, is critical to the credibility and reputation of the Cayman Islands. I look forward to CIDA’s active participation in ensuring this performance more than meets the requirements and expectations of the international and local communities.’