The Cayman Islands Monetary Authority (the “Authority”) issued a reminder on January 3, 2023, that all licenced entities conducting securities investment business and registered persons are expected to undertake regular internal audits of their controls and infrastructure.
The purpose of the internal audits, according to the Authority, is to ensure that the controls and infrastructure are suitably robust considering the nature and scale of their operations.
The requirement applies to entities carrying out securities investment business under the Securities Investment Business Act, in particular, those that do the following:
Dealing in securities by buying, selling, subscribing for, or underwriting securities as an agent or buying, selling, subscribing for, or underwriting securities as principal where the person entering into that transaction Making arrangements with a view to another person (whether as a principal or an agent) buying, selling, subscribing for, or underwriting securities or a person who participates in the arrangements buying, selling, subscribing for, or underwriting securitiesManaging securities belonging to another person in circumstances involving the exercise of discretion.Advising a person on securities if the advice is given to the person in that person’s capacity as an investor or potential investor or in that person’s capacity as agent for an investor or a potential investor, and advice on the merits of that person’s doing certain activities outlined in the Securities Investment Business Act
The Authority’s January 3 circular also included a request that the relevant entities provide the Authority with a schedule of internal audit reviews that the entities are planning for the period from January 1, 2023, through to December 31, 2023. (The Authority said that the deadline to respond to this circular was within five (5) working days from the date of the circular.)
Once the internal reviews are completed, the Authority expects to receive any issued internal audit report within three (3) months following completion.
Should entities subject to this requirement require further clarification, they should contact the Authority via email at [email protected]
Entities should also contact their Cayman Islands legal counsel to confirm the scope of the internal review, in particular, whether the review will lead to any duplication of work by these entities since they are already in the process of engaging auditors to complete full financial audits covering their annual operations.