CAYMAN ISLANDS Law and Practice Contributed by: Jason Ta, Ben Magahy, Paul Walters and Gemma Walters, Travers Thorp Alberga
2.8 Outsourcing of Regulated Functions While outsourcing is permitted to regulated or unregulated entities, CIMA emphasises that responsibility and accountability for effective oversight of all regulated activities, whether out - sourced or not, rests with the governing body and senior management of the regulated entity. The recent Statement of Guidance (April 2023) applies to most entities regulated by CIMA. The Guidance applies regardless of whether the out - sourcing arrangement established by a regulat - ed entity is with a related or unrelated entity. A regulated entity should assess the material - ity of its outsourcing arrangements, and without limiting the scope of its assessments, should consider: • the impact of the outsourcing arrangement on its finances, reputation and operations, or a significant business line, particularly if the service provider, or group of affiliated service providers, should fail to perform over a given period of time depending on the nature of the outsourced function/service; • its ability to maintain appropriate internal controls and meet regulatory requirements, particularly if the service provider were to experience problems; • the cost of the outsourcing arrangement; • the risk of potential loss, temporarily or per - manently, of access to important data; and • the degree of difficulty and time required to find an alternative service provider or to bring the business activity in-house. 2.9 Gatekeeper Liability The extent to which fintech providers are deemed to be “gatekeepers” will depend on the nature of the platform. If, for example, the platform is unregulated and is merely a venue to share infor - mation, then it is expected that there would be
little in the way of “gatekeeper” responsibility. If, however, the information being shared on the platform amounts to investment advice (either from the platform provider or between users of the platform) then the platform may be subject to licensing or registration requirements under SIBA. 2.10 Significant Enforcement Actions CIMA may take action to enforce the require - ments of the regulatory laws and other rele - vant legislation. Enforcement options available to CIMA include: (i) suspension of the licence of a licensee and preservation of its records, (ii) revocation of the licence of a licensee, (iii) requiring the substitution of a director, operator, senior officer, general partner, promoter, insur - ance manager or shareholder of the licensee (as applicable), (iv) appointing a person to assume control of the affairs of the licensee, (v) appoint - ing a person to advise the licensee on the proper conduct of its affairs, (vi) applying to the Grand Court of the Cayman Islands for orders directing the winding up of the relevant entity, and (vii) the imposition of administrative fines. There have been a number of enforcement actions in the recent past, including: • cancellation of the registration of two individ - ual directors in accordance with Section 6(2) of the Directors’ Registration and Licensing Act for failure to provide information and pay licensing fees; • cancellation of the registration of a company as a Securities-Registered Person in accord - ance with Section 17(2A)(a) of SIBA for failing to provide information, give declarations, pay fees and to have qualifying directors; • revocation of the banking licence of a com - pany in accordance with Section 18(5)(b) of the Banks and Trust Companies Act for enter -
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