Administrative Fines

01 January 2023 . 8 min read

Administrative Fines Regulations in respect of Cayman Private Funds

1. Administrative Fines Regulations in respect of Cayman Private Funds

1.1. The administrative fine regime in the Cayman Islands was implemented pursuant to the Cayman Islands’ Monetary Authority (Administrative) Fines (Amendment Regulations), 2020, as amended (“Administrative Fines Regulations”) and extend the application of the fines administered by CIMA from the Anti-Money Laundering regime, to all regulatory laws, regulations and any rules issued by CIMA thereto.

1.2. The Administrative Fines Regulations categorize breaches as ‘minor’, ‘serious’ or ‘very serious’. For example, a Private Fund which accepts capital contributions from investors in respect of investment before it is registered with CIMA as a Private Fund is a “very serious breach”.

1.3. The Administrative Fines Regulations impose a scale of fines dependent on the categorization of the breach as set out in paragraph 1.2 above, starting from an initial fixed fine of US$6,100 for a minor breach to a single fine up to a maximum of US$121,955 for individuals or US$1,219,515 for corporate bodies (e.g. exempt companies, SPCs, LLCs). Any administrative fines set out in the Administrative Fines Regulations which are applicable specifically to Private Funds, will be in addition to any fines which may be imposed on a Private Fund under the PFA.

2. Supervisory and enforcement powers of CIMA in respect of Private Funds

2.1. CIMA has broad discretionary supervisory and enforcements powers in respect of Private Funds.

2.2. If CIMA knows or has reasonable grounds to believe that a Private Fund:

2.2.1. is unable or appears likely to become unable to meet its obligations as they fall due;

2.2.2. is carrying on business fraudulently or otherwise in a manner detrimental to the public interest, to the interest of its clients or to the interest of its creditors;

2.2.3. is carrying on or attempting to carry on business or is winding up its business voluntarily in a manner that is prejudicial to its investors or creditors;

2.2.4. has contravened any provision of PFA or Anti-Money Laundering Regulations (2020 Revision) as amended;

2.2.5. has failed to comply with a condition of its registration; or

2.2.6. has not conducted the direction and management of its business in a fit and proper manner or has Directors, senior officers, managers or persons who have acquired ownership or control who are not “fit and proper persons”,

CIMA may take certain actions, including:

(a) cancel the registration of the Private Fund;
(b) impose conditions or further conditions on the Private Fund and to amend or revoke those conditions;
(c) require the substitution of any promoter or operator of the Private Fund;
(d) appoint a person to advise the Private Fund on the proper conduct of its affairs;
(e) appoint a person to assume control of the affairs of the Private Fund;
(f) apply to the Cayman Islands’ Grand Court for an order to take such other action as it considers necessary to protect the interests of investors in, and creditors of, the Private Fund; and
(g) if a magistrate is satisfied on an application made by CIMA or a police officer of the rank of Inspector or above that there are reasonable grounds for suspecting that an offence under the PFA has been, is being or is about to be committed in certain premises, the magistrate may issue a warrant authorizing CIMA or a police officer and such other persons as may reasonably be needed to enter and search the premises.

This publication is not intended to be a substitute for specific legal advice or a legal opinion. For specific advice on Funds in Cayman Islands, please contact your usual Loeb Smith attorney or any of the following:

E: gary.smith@loebsmith.com
E: robert.farrell@loebsmith.com
E: elizabeth.kenny@loebsmith.com
E: vivian.huang@loebsmith.com
E: yun.sheng@loebsmith.com
E: faye.huang@loebsmith.com
E: wendy.au@loebsmith.com

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