From The Financial Times

Don Seymour, credited with developing the Cayman Islands ’ regulator y framework for hedge funds and founder of DMS O­ffshore Investment Services, explains the islands ’ role in the financial world and how they became the biggest centre for hedge funds.

“Cayman contributes to a very efficiently functioning global financial system. You don’t have the friction that you would normally find in more bureaucratic economies; friction that is imposed by overly burdensome regulation or by heavy tax. That slows down the pace of innovation and stifles growth. Cayman off­ers an alternative, which is why the Islands have become successful.

“It is dicult for most people to understand how financial services benefit their lives unless they have a direct connection to the industry. Although the Cayman Islands caters to sophisticated financial services users and not retail clientele, these users ultimately represent main street interests. They will have an impact on businesses from farming to mortgage provision. Even hedge funds that are perceived to be solely for the wealthy ultimately represent the retirement interests of teachers, doctors, nurses, firemen and policemen.

“When I developed the regulatory framework , it wasn’t to please politicians or anyone other than the users we wanted to attract . Because I had worked with institutional players, I understood what they wanted and that is what I developed.

“The Cayman Islands had always been a banking jurisdiction, which is probably why I had such a free hand with developing the framework for hedge funds because everyone else was focused on banking and nobody thought that hedge funds would amount to much.

“Transparency is essential to the successful growth of the hedge fund industry. Post financial crisis, it is the new norm. There are many databases that are available to investors where they can get information on directors. Most managers have to be registered with the US Securities and Exchange Commission and director details are disclosed in the o­ffering document made available to investors.

“The Directors Association here comprises 98 per cent based in Cayman, who adhere to very strict professional standards. What we need to do something about is dealing with directors outside Cayman, where problems have arisen and this is something that the Cayman Islands Monetary Authority needs to resolve.

“With global inflation, the Cayman Islands is going to be a more and more expensive jurisdiction every year, but I believe that we will still be able to off­er the highest quality at the lowest price, relative to our competitors.

Don Seymour was talking to Peter Drennan.

For more on this story go to: