A new government consultation signals a clear tightening of regulation for Cayman’s securities and fund management sector. The intent appears to be alignment with international standards.

The Cayman Ministry of Financial Services & Commerce has launched an industry consultation proposing major enhancements to the Securities Investment Business Act (SIBA), 2020. According to the Ministry, the goal is to bring Cayman’s framework for securities investment business in line with IOSCO standards while strengthening investor protection and market integrity.

Under the draft SIB (Amendment) Bill, 2025, core prudential and conduct requirements that currently apply to licensed entities would extend to Registered Persons (RPs).

As of December 2023, 1,411 RPs managed an estimated US $730 billion in assets, compared with just 42 licensed entities managing around US $16.9 billion. That disparity explains why regulators view the RP sector as systemically important and why the proposed changes matter.

These requirements include capital and liquidity standards, audited financials, internal controls, and client asset safeguards.

Other proposed measures introduce:

  • A risk-based registration model to ensure proportionate supervision
  • Prior approval for changes in ownership, governance, or key personnel
  • Mandatory audits and reporting obligations for all RPs
  • Authority oversight of expansion plans and branch offices
  • Flexibility for the Cabinet to capture new “SIB-like” activities as markets evolve

Taken together, these reforms point clearly in one direction: stronger regulation, greater accountability, and closer oversight.

The consultation document cites several risks that appear to justify these reforms, including:

  • Systemic risk: the RP sector’s sheer size means that any failure could ripple across the domestic market.
  • Market conduct: deregistered or lightly supervised entities operating outside the regulatory perimeter could expose investors to abuse.
  • Reputational risk: failure to meet international benchmarks, such as IOSCO and FATF standards, could damage Cayman’s standing as a trusted financial centre.

In other words, the government’s stated rationale is not only investor protection, but also the preservation of Cayman’s credibility in the eyes of global standard-setters.

What’s our take on the new proposed regulations?

It’s hard to escape the conclusion that the level of regulation is increasing. That much is clear from the consultation. What’s less clear is the underlying motive.

Over recent years, the Cayman Islands Monetary Authority (CIMA) has steadily tightened supervision of securities businesses. First, RPs became “authorised,” bringing them within inspection scope. And the number of firms fell from around 2,500 to roughly 1,000.

Then came the Economic Substance framework, requiring physical presence, management and operating expenses on-island.

Now, the new proposals would require annual audits and hold RPs to near-licensee standards.

Yet these entities typically serve high-net-worth and sophisticated investors, often managing funds within the same corporate group. They are not retail businesses that warrant intensive investor protection.

The Ministry’s stated policy intent is to “balance competitiveness with robust oversight”, but many in the industry feel that balance is tipping. The challenge is to ensure that stronger supervision doesn’t come at the expense of Cayman’s reputation for being both well-regulated and commercially pragmatic.

Other jurisdictions, like the BVI, have opted for a more flexible, two-tier approach. Managers with assets under management below $400 million face lighter regulation and minimal substance requirements. That balance has made the BVI increasingly attractive for fund managers. As a result, many Cayman law firms now recommend a Cayman fund with a BVI (or other jurisdictional) manager.

The direction of travel is unmistakable: higher standards, greater compliance obligations, and fewer grey areas.

Whether this ultimately strengthens Cayman’s global standing — or pushes some managers elsewhere — will depend on how proportionately these rules are applied.

The consultation closed on 29 September 2025 and wb.group will monitor developments as they unfold.

To discuss how these proposals may affect your business, please email paul.muspratt@wb.group.