Setting Up and Registering a Cayman Fund Management Company

A Cayman fund management company is a limited liability entity that acts as investment manager, investment adviser or broker-dealer to a fund and receives its management and performance fees. Where it carries on securities investment business only for sophisticated or high net worth persons, it is usually registered with CIMA as a registered person under the Securities Investment Business Act (As Revised).

Key takeaways

• Securities investment business carried on in or from the Cayman Islands requires registration or a licence under the Securities Investment Business Act (As Revised), unless the person is non-registrable.
• "Securities" is widely defined and includes shares, partnership interests, derivatives and virtual assets.
• Registered person status covers group business, business for sophisticated or high net worth persons and their vehicles, and businesses regulated by a recognised overseas regulator.
• CIMA requires at least two directors, fit and proper directors, senior officers and shareholders, directors registered or licensed under the Directors Registration and Licensing Act (As Revised), and details of AML officers.
• A registered person must also consider whether it falls within the Cayman economic substance regime.

Why a fund management company sits alongside the fund

Fund managers launching a fund and conducting securities investment business as investment manager, investment adviser or broker-dealer will usually want a limited liability entity to sit alongside the fund and receive the management fees and any performance fees it generates. A Cayman company registered as a "registered person" is a common way to achieve this, including for managers of digital asset and crypto funds.

The fund vehicle itself is covered in our overview of Cayman investment fund structures and regulation. The management company is the subject of Bell Rock's Cayman investment manager registration support.

The Securities Investment Business Act (As Revised) (the Act) provides for the licensing and control of securities investment business carried on in, or from, the Cayman Islands. A person must not carry on, or purport to carry on, securities investment business without being registered or licensed under the Act, unless it is exempt as a non-registrable person.

What is securities investment business?

For the purposes of the Act, a person carries on securities investment business if, in the course of business, it engages in any of the following activities:

• dealing in securities as an agent or, where it holds itself out as dealing in securities for other persons, as principal;
• arranging deals in securities with a view to another person dealing in securities;
• participating in the arrangements for dealing in securities;
• discretionary management of securities belonging to another person;
• advising a person on securities, where the advice is given to that person in their capacity as an investor or as agent for an investor, and the advice is on the merits of dealing in a security or of exercising a right conferred by a security to deal in securities;
• managing or marketing an EU Connected Fund; or
• acting as a depositary for an EU Connected Fund.

The term "securities" is widely defined in the Act. It includes shares, partnership interests, trust units, debt instruments, warrants, options, futures, contracts for differences and virtual assets. A manager of a digital asset strategy therefore analyses its activities under the Act in the same way as a manager of a traditional strategy. The fund side of that structure is set out in our guide to setting up a Cayman crypto and blockchain fund.

Who needs to register with CIMA as a registered person?

The following persons need to register with CIMA as registered persons:

• companies that carry on securities investment business exclusively for one or more companies within the same group;
• persons that carry on securities investment business exclusively for sophisticated persons or high net worth persons, or for companies, partnerships or trusts (whether or not regulated as a mutual fund) whose shareholders, limited partners or unitholders are sophisticated persons or high net worth persons, and that have a registered office or a place of business in the Cayman Islands for which services are provided by a person licensed to provide those services; and
• persons that would otherwise be required to be licensed under the Act, but are regulated in relation to securities investment business by a recognised overseas regulatory authority in the country where that business is conducted.

Sophisticated persons

Sophisticated persons are certain regulated persons, and persons who, due to their knowledge and experience, are regarded as capable of evaluating proposed transactions, where the minimum single transaction value is US$100,000 or its equivalent in any other currency.

High net worth persons

A high net worth person is an individual whose net worth is US$1,000,000 or its equivalent in any other currency, or any person with total assets of not less than US$5,000,000 or its equivalent in any other currency.

How does registration with CIMA work?

To register, a completed application is submitted to CIMA through its online portal, together with the applicable registration fee and any other information CIMA requests. CIMA publishes the current amounts in its fee schedule.

Registration is subject to the applicant:

• being in good standing;
• having a minimum of two directors;
• having directors, senior officers and shareholders whom CIMA considers to be fit and proper persons; and
• having directors in good standing who are registered or licensed under the Directors Registration and Licensing Act (As Revised).

Applicants are also required to provide details of their anti-money laundering compliance officer and reporting officers. The wider AML framework that applies to securities investment business is set out in our article on AML obligations for Cayman entities conducting relevant financial business. CIMA determines every application.

Will the economic substance regime apply?

The International Tax Co-operation (Economic Substance) Act (As Revised) imposes economic substance requirements on companies and limited liability companies in the Cayman Islands, and the regime has applied since 1 January 2019. Registered persons under the Act need to consider whether they fall within scope of the regime. The tests, notifications and reports are explained in our guide to Cayman economic substance requirements.

Where Bell Rock fits

Bell Rock Group is licensed by CIMA as a company manager under the Companies Management Act (As Revised). It forms Cayman fund management companies, coordinates their registration with CIMA and provides ongoing corporate services: registered office, independent directors through named, CIMA-registered individuals, AML officer roles, economic substance support and coordination of bank account opening. Bell Rock is not the investment manager or adviser, and the management company remains responsible for the securities investment business it carries on.

Frequently asked questions

Does a Cayman investment manager need to be registered or licensed?

A person carrying on securities investment business in or from the Cayman Islands must be registered or licensed under the Act unless it is a non-registrable person. A manager acting exclusively for sophisticated or high net worth persons, or for funds whose investors are such persons, is usually registered as a registered person.

How many directors does a registered person need?

At least two. Each director must be in good standing, registered or licensed under the Directors Registration and Licensing Act (As Revised), and considered fit and proper by CIMA.

Can a registered person act as manager of a crypto fund?

Yes. Virtual assets fall within the Act's definition of securities, and a Cayman registered person can act as investment manager to digital asset and crypto funds where it meets the registration conditions.

Where are CIMA's registration fees published?

CIMA publishes its current registration and annual fees on its website. Check the schedule on the day of filing, as the amounts change.

Related reading

• Cayman fund platform vs standalone fund launch
• Cayman fund directors: duties and appointment criteria
• Cayman master-feeder funds: structure and governance
• SIBA Registered Persons: Registration and Annual Obligations for Cayman Managers

For the management company itself, see Bell Rock's Cayman investment manager registration service.