I spoke to Mr Christopher Johnson, well known personality and senior partner of Cayman liquidation firm, Chris Johnson Associates Ltd., concerning the Cayman Islands Monetary Authority’s (CIMA) stance on “transparency”.

The word “transparency” is the much used “in word” at the moment and has been the flavour not of the month but of the year.

Everyone is using it. Every wannabe and hoping to-still-be MLA is using it so many times in their speeches that if I got paid $100 every time it was used I would be very rich.

iNews Cayman has published two stories today (10) under the umbrella “Travers on CIMA transparency and DMS apply for Judicial Review”.

I have to “replay” Tony Travers’ excellent comments on the word as implied by the CIMA:

“The expression “transparency” carries no particular meaning and so the question of what is available to an investor under current law must first be answered. What must be ignored are the pleadings of irrelevant third parties, including journalists who seek to erode the legitimate right to confidentiality between commercial parties. On the subject of greater transparency, certain benefits of the immediate CIMA proposals appear helpful, if of marginal benefit, but with respect to corporate governance standards it neither enhances nor clarifies the existing position. It seeks to provide a “governance lite” set of guidelines useful only to those who are not aware of the current applicable legal principles and which in several notable areas conflict with those principles.”

He also states, “There appears no recognition of the argument that governance of an institutional fund may be a matter best left to discussion between investors and the board prior to investment.”

Now we have Don Seymour, managing director of DMS Offshore Investment Services and a previous director of the Cayman Islands Monetary Authority, taking the CIMA to Cayman’s High Court in an application for Leave for Judicial Review to try and block Cayman regulator’s plans to make directors more accountable and transparent.

Seymour is legally challenging proposals by the CIMA to enhance corporate governance and provide greater transparency in the jurisdiction’s financial services industry.

Seymour’s DMS group provides professional directors to hundreds of offshore hedge funds.

In an article that appeared last year in the New York Times they said:

“At the heart of the hedge fund business here is Don Seymour, who has financed a mini-empire on the island with his directorship services company, DMS Management. Mr. Seymour, a onetime hedge fund auditor at PricewaterhouseCoopers, declines to say how many boards he sits on, though he says he selectively tells investors. A review of the S.E.C. filings shows Mr. Seymour occupies roughly 180 board seats, according to the Foundation for Fund Governance.

“Mr. Seymour likens his work as a hedge fund director to that of a top doctor, who can see hundreds of patients a year. Just as every patient is not equally sick, every directorship is not equal, he says. He points to proprietary computer systems that track information about the hedge funds served by DMS directors. And associate directors at his firm handle much of the day-to-day responsibilities.”

When Seymour headed the investment services at the CIMA in 1998 he said he was “the guy that actually created the regulatory framework for hedge funds here.”

In a Financial Times (FT) article in 2011 it said, “Don Seymour, the founder of the Cayman’s largest fiduciary services firm, DMS, and the holder, in 2006, of more than 560 directorships, likens the issue to medicine: ‘A doctor working on his own can service about 400 patients a year. That same doctor in a hospital can serve 4,000 patients a year.’ he says.”

In the same FT article it also used the word “transparency” as:

“The revelation of the figures, in a Financial Times investigation, comes amid calls from some of the world’s leading hedge fund investors for greater transparency in the Caymans as part of a global effort to improve fund governance.”

It quoted Kevin Ryan, former head of hedge fund research for ABN Amro as likening CIMA’s role in Cayman’s Hedge Fund business as the “’Walmart model’ of governance”!

And what does Mr. Johnson say about all this? I have the oracle to have the last word(s):

Chris:

“What I can say is that Travers, Seymour and CIMA have it all wrong.

“By licensing CIMA regulated entities a dual standard and regulation of directors is created. Directors outside of CIMA such as those running development companies and/or hotels can still run amok. There have been numerous examples of negligent directors in the Cayman Islands who are outside of the financial arena. I include incidentally those who are directors of Government owned entities and Statutory Boards.  These must bear the same responsibility as those who are in it.

“It is time for a Directors’ Disqualification law and for indemnities provided to directors to be outlawed as they are in the UK and many Commonwealth countries.. Both these matters are one of public interest not just for the chosen few.

“The AG should be looking at this, not CIMA.”