Obtain a Securities Dealer Licence in the Cayman Islands

A securities dealer licence in the Cayman Islands can be obtained in order to launch a regulated investment structure with access to international operations with shares, bonds, derivatives and other financial instruments. The supervisory functions in this sphere are performed by CIMA — the Cayman Islands Monetary Authority. 

The Securities Investment Business Licence relates to regulated activity with investment securities under the specialised law SIBA. Obtaining a Cayman permit for dealing activity on the securities market is required by companies that carry out transactions with financial instruments on their own behalf or participate in the placement and circulation of such assets.

Obtaining a Securities Dealer Licence in the Cayman Islands: What Falls under the Securities Investment Business Licence 

A dealer structure is usually used for operations on one's own behalf and at one's own expense. The company may purchase and sell financial instruments, maintain the liquidity of the market, act as a counterparty in transactions or participate in the placement of assets.

Obtaining a securities dealer licence in the Cayman Islands is necessary for the following operations:

• the purchase and sale of investment instruments;

• trading at one's own expense;

• maintaining quotes and liquidity;

• participation in the placement of issues;

• operations for investment funds and corporate groups;

• working with institutional clients.

SIBA classifies the following categories of assets as securities:

• shares;

• interests in partnerships;

• debt obligations;

• warrants;

• options;

• futures;

• contracts for difference;

• derivatives.

Which Companies Usually Obtain a Securities Investment Business Licence in the Cayman Islands

The CIMA permit is used for international investment activity and cross-border operations with financial assets.

Most often, a Cayman dealer licence for securities operations is obtained by:

• broker-dealer structures;

• trading companies;

• investment groups;

• over-the-counter trading divisions;

• platforms for maintaining market liquidity;

• structures for trading with professional market participants;

• treasury companies of international holdings.

The Cayman Islands are actively used as an international trading hub thanks to the combination of English common law, a developed corporate infrastructure and a high concentration of investment funds. A dealer not infrequently works jointly with SPVs, funds, master-feeder structures and investment holdings. Many groups use a specialised structure for operations with investment instruments and intra-group financing.

The Requirement for a Physical Presence in the Cayman Islands

The requirements for obtaining a licence for dealing activity with securities in the Cayman Islands depend on the business model, the nature of the operations and the applicability of the economic substance rules. The International Tax Cooperation (Economic Substance) Act is in force in the islands. Some dealer structures may fall under regulated activity for the purposes of substance. When arranging a securities dealer permit in the Cayman Islands, the analysis touches upon:

• distribution and service operations;

• financing and leasing;

• intra-group financing;

• operations with the group's own capital.

If the structure falls under the economic substance regime, it will be necessary to confirm a sufficient level of management and activity within the jurisdiction.

A registered office is mandatory for any structure. The address is provided by a licensed local corporate provider. Depending on the business model, the following may be required to obtain a securities dealer licence in the Cayman Islands:

• directors with experience of working in the financial market;

• an internal control officer;

• a suspicious-transactions reporting officer and their deputy;

• local administrators and corporate service providers.

For large institutional structures, CIMA usually expects a higher level of operational presence.

The Capital Investment Requirements for Obtaining a Securities Dealer Licence in the Cayman Islands

The minimum authorised capital for all dealer structures is 100,000 KYD (about 120,000 USD). The exact amount of financing is determined after an analysis of the business model and the level of risk. When arranging a Cayman permit for dealing activity with securities, CIMA assesses the adequacy of the resources separately for each application. The regulator analyses:

• the nature of the activity;

• the anticipated volume of transactions;

• trading at one's own expense;

• the use of clients' funds;

• transactions with derivative financial instruments;

• the raising of debt financing;

• the risk of a lack of liquidity;

• the burden of obligations to counterparties.

Many companies allocate working capital of from 100,000 to 500,000 USD and above. For trading with professional market participants and operations with borrowed funds, the amount may be considerably larger. The regulator assesses not only the paid-up capital. When arranging a permit of a dealer in investment instruments in the Cayman Islands, the liquid resources and the financial stability of the group are analysed.

The Requirements for the Owners and the Management

CIMA conducts a detailed check of the owners, directors and persons controlling the company's activity. The regulator analyses:

• the origin of the funds;

• the origin of the capital and assets;

• the business reputation;

• the presence of sanctions restrictions;

• litigation disputes and criminal risks;

• experience of working in the financial sector.

When arranging a securities dealer permit in the Cayman Islands, a check of business suitability and professional reputation is also carried out. The following are assessed:

• experience of working with securities;

• knowledge in the field of risk management;

• an understanding of the rules for countering money laundering and the financing of terrorism;

• participation in regulated financial projects.

To obtain a permit for dealing activity with securities in the Cayman Islands, an internal control system is required. Usually the following are prepared:

• internal rules for countering unlawful enrichment;

• internal control procedures;

• rules for the identification and checking of clients;

• the procedure for notifying of suspicious operations;

• internal rules on sanctions control and the monitoring of operations.

How to Obtain a Securities Dealer Licence in the Cayman Islands

The procedure for registering a securities dealer permit in the Cayman Islands consists of the following stages:

Conclusion

We support the project from the choice of the regulatory model to the obtaining in the Cayman Islands of a permit for dealing operations on the stock market. The team prepares the corporate documentation, the AML policies, a description of the business processes, the internal procedures and the package for the regulator. Additionally, interaction is organised with the registered-office provider, auditors, administrators and local service companies in the Cayman Islands.