Form ADV Amendments For Non-U.S. Sponsors In Light Of Re-Registration Requirement Under The Securities Investment Business Law Of The Cayman Islands

Author:Mr John Fadely and Albert Cho
Profession:Gibson, Dunn & Crutcher
 
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On June 18, 2019, the Securities Investment Business (Amendment) Law, 2019 (the "Amendment Law") entered into force in the Cayman Islands, significantly amending the Securities Investment Business Law (2019 Revision) ("SIBL"), including by requiring non-U.S. sponsors with Cayman Islands fund managers or investment advisers to re-register such entities with the Cayman Islands Monetary Authority ("CIMA").1 Further, non-U.S. sponsors that have made Form ADV filings with the U.S. Securities and Exchange Commission (the "SEC") should promptly consider whether to update the disclosures in their Form ADV filings. To elaborate:

The Amendment Law affects persons registered as "excluded persons" under SIBL ("Excluded Persons"). Excluded Persons include entities incorporated or registered in the Cayman Islands that carry on "securities investment business" (as defined under SIBL) but satisfy the requirements for one of the exemptions set out in SIBL from the need to obtain a full license under SIBL.2 Prior to the enactment of the Amendment Law, non-U.S. fund sponsors that operate fund manager or investment adviser entities in the Cayman Islands typically registered such managers/advisers as Excluded Persons. Under SIBL before the Amendment Law, Excluded Persons were required only to register as "excluded persons" with CIMA but not to obtain a full license. Under SIBL as amended by the Amendment Law (the "Amended SIBL"), subject to certain limited exceptions, Cayman Islands fund managers and investment advisers currently registered as Excluded Persons will have to apply to CIMA for registration as "registered persons" under the Amended SIBL ("Registered Persons").3 The deadline to re-register with CIMA as a Registered Person is January 15, 2020.4 Non-U.S. sponsors with Cayman Islands fund managers or investment advisers required to re-register as Registered Persons need to consider the implications on the disclosures in their Form ADV filings with the SEC under the U.S. Investment Advisers Act of 1940, as amended. In particular, a fund manager or investment adviser that has indicated in its response to Item 1.M of Form ADV that it is not registered with a foreign financial regulatory authority should consider changing the response to indicate that it has become registered with a foreign financial regulatory authority (i.e., CIMA) since the ADV filer will become subject to additional regulatory supervision and oversight following its re-registration...

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