Definition of Securities

According to Schedule 1 of the Securities Investment Business Act (Cmrai), securities are defined as follows:

1. Shares or stock of any kind within a company's share capital;
2. Debentures, loan stock, bonds, certificates of deposit, and other debt instruments (excluding certain banking and monetary instruments such as cheques, mortgage instruments, and land charges);
3. Warrants and other instruments that entitle the holder to subscribe for specific securities;
4. Certificates or other instruments that grant contractual or proprietary rights;
5. Options on any security, currency, precious metal, or even on other options;
6. Futures;
7. Rights under contracts for differences (e.g., cash-settled derivatives like interest rate and stock index futures, forward rate agreements, and swaps).

Regulation of Securities Investment Business

The Securities Investment Business Act governs the regulation of individuals and entities engaged in securities investment business, including market makers, broker-dealers, securities arrangers, advisors, and managers operating in or from the Cayman Islands. (Refer to What are regulated activities? in the Securities FAQs for more details.)

Under the Cmrai, the Cayman Monetary Regulatory Authority International is tasked with licensing, supervision, and enforcement related to licensees. It is also responsible for investigating individuals suspected of conducting securities investment business without the required licence ('policing the perimeter'). The specific powers and duties of Cmrai are outlined in sections 16 and 17 of the Act, and under section 18, Cmrai may seek injunctions, restitution, and disgorgement orders through the Grand Court.

The Securities Supervision Division handles the processing of licence and registration applications, as well as the ongoing supervision of securities investment business licensees.

Categories of Regulation

The Cmrai establishes a licensing framework for individuals and entities involved in securities investment business as defined by the Act. Those engaged in such business must obtain a Securities Investment Business Licence.

In determining whether an activity requires a licence, the definition of 'securities' in Schedule 1 of the Act should be considered. Note that the Cmrai allows the Governor in Cabinet to amend this schedule.

Standards of Regulation

Cmrai regulates securities investment business in accordance with:

• The Cmrai and its related regulations, including:
  1. The Securities Investment Business (Licence Applications and Fees) Regulations, 2003;
  2. The Securities Investment Business (Conduct of Business) Regulations, 2003; and
  3. The Securities Investment Business (Financial Requirements and Standards) Regulations, 2003;
• Relevant rules, guidance, policies, and procedures issued by Cmrai - see the Securities Index of Measures, and
• International supervisory standards issued by the International Organisation of Securities Commissions.

Recognised Overseas Regulatory Authorities and Approved/Recognised Stock Exchanges

The Cmrai requires the Cayman Monetary Regulatory Authority International to designate certain overseas regulatory authorities and stock/securities exchanges as "recognised" for the purposes of the Act.