Today’s Editorial for July 13: Law needs changing

It’s
been said by legislators that laws often need to be lived before anyone can
tell if they’re going to work as envisioned. 
The truth is that despite good intentions, some laws leave unexpected
loopholes that can lead to abuses.

Such
is the case with the Securities Investment Business Law.  Passed with the best of intentions in 2002,
eight years of living the law have shown it has some weaknesses.

One
of those weaknesses relates to the excluded person provisions in the law. The
intention of the law was to create a less onerous regulatory regime for financial
service providers who dealt exclusively with sophisticated, high-net-worth
investors, many of whom would have been institutional investors.  These are the types of investors who do their
own due diligence before conducting business and who don’t really need a regulatory
body to look out for their interests. 
The problem with the law is that categories of companies that qualified
as excluded persons were made too broad and many more entities applied for the
classification than was ever anticipated.

The
problem is really not the fault of anyone; the law just needed to be lived a
while to uncover its shortcomings. However, what is needed now is prompt
attention of legislators in fortifying the areas of the law that have proved
insufficient.  That is where things
become frustrating.  The Cayman Islands
Monetary Authority has known about some of the weaknesses of the Securities
Investment Business Law for several years and had a working group begin
studying the problems and make recommendations more than a year ago.  In these situations, government is often too
slow to react.  For instance, it took
more than three years and a change of government before recommendations of the
2007 Mercer Report were adopted in the National Pensions Law.

When
it comes to the reputation of Cayman’s financial services industry, the country
really can’t afford to wait several years for government to act on closing the
gaps of the Securities Investment Business Law. 
Given the damage to the image of the Cayman Islands over the past couple
of years, the country simply cannot afford any black eyes caused by an
inadequate regulatory regime

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