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Cayman Economic Substance – What Fund Managers Need to Know

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The International Tax Cooperation (Economic Substance Law) 2018 (the “ESL”) introduced certain reporting and economic substance requirements for “relevant entities” conducting “relevant activities”, such as fund management et al. The Cayman Islands Government published the Securities Investment Business (Amendment) Bill in April 2019 which, in combination with recent changes in the ESL, will require the typical fund management company to comply with economic substance requirements for the first time.

For more information on the relevant entities and activities:

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REPORTING DEADLINE FOR REGISTERED SIBL ENTITIES IS JULY 31, 2019

REPORTING REQUIREMENTS
The Securities and Investment Business (Amendment) Bill, 2019 (the “Bill”) and the Directors Registration and Licensing (Amendment) Bill, 2019 were both passed by the Cayman Islands Government recently.

It should be noted that this Bill proposed a number of amendments to the Securities Investment Business Law (2019 Revision) (“SIBL”) and is relevant to managers using a Cayman Islands domiciled fund management company. These amendments will not affect fund vehicles, however, they will impact all persons registered with the Cayman Islands Monetary Authority (“CIMA”) as ‘Excluded Persons’ under SIBL. In particular, the amendments create a category of “registered persons” which require authorization by CIMA.

Given that the ESL recently expanded the definition of “fund management business” from just licensed entities to include “otherwise authorized” fund managers, the SIBL amendments trigger the application of the ESL to previously excluded fund management companies.

In advance of this new regulatory regime, CIMA is requiring reporting for risk assessment purposes and the relevant guidance documents AIR-157-75 and ARC-158-75 are available here.

The reporting deadline for these entities is 31 July 2019 with the full registration due by 15 January 2020.

Consequential changes to the Directors Registration and Licensing Law (DRLL) will remove directors of these investment managers from coverage under the DRLL as they will instead be subject to the full CIMA approval process under the new process.

NEXT STEPS
DMS understands well the changing landscape around regulatory risk and how to guide relevant entities through the transformation necessary to comply with applicable Laws and Regulations. Our experts can assist you in redefining and evolving your current business model to prepare for the future. Please contact any of your usual DMS contacts to find out how we can assist you further.

Don W. Ebanks - Managing Director at DMS Governanace

Don W. Ebanks

Managing Director

The post Cayman Economic Substance – What Fund Managers Need to Know appeared first on DMS Governance.


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