11 February 2013

Article by Bryan Hunter, Ian Gobin and Charlotte Beales-Hart APPLEBY

In a move designed to include the Cayman Islands in a growing international movement towards the enhancement of corporate governance standards in the financial services market, the Cayman Islands Monetary Authority (“CIMA”) commenced a private sector consultation on corporate governance in January 2013.

The proposals being put forward are, broadly, as follows:

To extend the current Statement of Guidance (the “SOG”) issued by CIMA on corporate governance, which currently applies only to licensees, to registered entities, such as a typical hedge fund structure. CIMA’s objective is to make the SOG more generic and suitable for cross-sectoral application and to reinforce fundamental corporate governance standards by outlining key management oversight and corporate governance principles, without imposing compulsory rules or standards on the industry.

To develop a public database containing certain pertinent information to complement the due diligence process for the industry.

To simplify and provide clarification on the current legislative framework for directorships provided under the Companies Management Law and Mutual Funds Law and to implement greater consistency in the regulation and supervision of directorship services.

To allow for assessment and approval of persons acting as directors in a professional capacity by requiring persons or entities who act as a director for six or more entities, and for reward or profit, to obtain permission from CIMA to act or be offered or provided as a director, irrespective of their geographical location.

To implement a requirement for all directors of regulated entities, who are not otherwise approved as a director of a licensee or via the professional directors route discussed above, to register with CIMA. Such registration will entail a proposed director providing personal and contact details, information regarding their role, the director’s experience and knowledge of the sector they will be overseeing, and information regarding any previous or ongoing regulatory, legal or judicial enforcement action against the director. Directors required to be registered will have an ongoing obligation to inform CIMA of any changes to the information provided.

To recommend various legislative changes to implement the above proposals.

CIMA has invited comments on the consultation by 18 March 2013 in order to provide it with a comprehensive assessment of industry views on corporate governance. CIMA will then review the industry views when finalizing the rules on the corporate governance standards.

We are in the process of providing our comments and we would welcome the opportunity to hear your views on CIMA’s Corporate Governance Consultation.

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