Government has released a bill seeking to introduce a new registration and licensing regime for directors of mutual funds and companies licensed under the Securities Investment Business Law.
The Directors Registration and Licensing Bill, 2014 was published in the Gazettes on March 21.
The bill follows an industry wide corporate governance consultation conducted by the Cayman Islands Monetary Authority in 2013.
The bill requires that directors of funds and investment companies must either be registered or licensed.
It applies to resident and non-resident registered, professional and corporate directors of covered entities.
Professional directors, defined by the bill as anyone who is appointed as a director for 20 or more entities, will need to be licensed if the bill becomes law, unless they are working for a company that holds a company management or fund administrator license.
The exception also applies to directors working for fund managers regulated by CIMA or specified overseas regulators, as long as the directorship appointment relates to the fund manager.
All other directors and those falling under the licensing exception need to apply to be registered under the new law.
CIMA can refuse to register a director if the applicant has been convicted of a criminal offense involving fraud or dishonesty or is subject of an adverse finding, penalty, sanction or disciplinary action by a regulator, self-regulatory organization or professional disciplinary body.
Professional directors must also meet the fit and proper test similar to the one set out in the Mutual Funds Law, including honesty, integrity and reputation, competence and capability, and financial soundness.
Natural persons who are currently acting as directors will have up to three months from the new law entering into force to either register or apply for a license.
Anyone who is appointed to be a director after the law has taken effect will need to be registered or licensed before the appointment.
Directors acting without registration would be subject to a fine of up $50,000 and a maximum prison sentence of 12 months. The maximum fine increases to $100,000 for professional directors acting without a license.
Professional directors are required to take out professional liability insurance with a minimum aggregate cover of $1 million and a minimum cover of $1 million per claim. Insurance policy details have to be filed with CIMA.
Under the bill licensed and registered directors have to inform CIMA of any significant changes to the information supplied with their application within 21 days.
Directors will also be required to make an annual filing and pay a prescribed fee no later than Jan. 15 in each calendar year.
Directors must submit an application to the Cayman Islands Monetary Authority together with the applicable fee to register or apply for a license. The size of the fees has not been published with bill.
The application forms and details about the information that has to be submitted by directors have also not been released yet. However, in its consultation paper the Monetary Authority said in 2013 that the registration would entail the provision of personal and contact details, information regarding the role, the director’s experience and knowledge of the sectors he or she will be overseeing, as well as information about any previous or ongoing regulatory, legal or judicial enforcement action against the director.
The bill is subject to a short consultation period and may be amended before the new law is enacted. The bill could come before the Legislative Assembly as early as next month.
Corporate directors, corporate bodies that are appointed as directors of entities covered by the law, are subject to a separate licensing regime and have up to six months to apply for a license after the new law has taken effect.
A corporate director must be registered as an ordinary resident exempted or foreign company in accordance with the Companies Law. It must appoint to its board two directors who are registered under the proposed law and any new or additional directors appointed to the board must be approved by CIMA before their appointment.
Like professional directors, corporate directors and the members of their board must be fit and proper persons, comply with annual filing and fee requirements, and maintain insurance.
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