Oct 2024
There are a variety of information gathering and other compulsory notices available to regulatory and enforcement agencies based in the Cayman Islands, as tools these agencies can draw on to carry out their functions. In this edition of our Regulatory Disputes Series, our regulatory enforcement experts share some practical tips to minimise flow-on litigation risk when responding to regulatory notices.
Regulatory Notices in the Cayman Islands
By way of background, the following table provides a high level overview of some of the types of compulsory information gathering notices available to Cayman Islands regulatory and enforcement agencies.
| No. | Type | Applicable legislation | Issuing Authority | Scope | Consequences of non-compliance | Grounds to withhold information |
| 1 | General information gathering | Monetary Authority Act (2020 Revision) s 34(8) and (11) | Cayman Islands Monetary Authority (CIMA) | Any person reasonably believed to have information relevant to the exercise of any of CIMA’s regulatory functions must provide specified information, documents, and/or attend court to be examined by oath. | Potential criminal liability, administrative fine and/or CIMA may apply to the court for an order requiring compliance. | Legal professional privilege |
| 2 | Assistance to overseas regulatory authority | Monetary Authority Act (2020 Revision) s 34(9) and (11) | CIMA | Where satisfied that assistance should be provided to an overseas regulatory authority, CIMA may direct any person reasonably believed to have information relevant to the overseas request to provide specified information, documents, any form of assistance and/or attend court to be examined by oath. | Potential criminal liability, administrative fine and/or CIMA may apply to the court for an order requiring compliance. | Legal professional privilege |
| 3 | Disclosure order | Proceeds of Crime Act (2024 Revision) s 160 | Director of Public Prosecutions (DPP) | A court order that a person the DPP considers to have information relevant to a confiscation or civil recovery investigation must answer questions in person and/or provide information or documents. | Potential criminal liability | Legal professional privilege; excluded material (e.g. confidential personal records) |
| 4 | Production order | Criminal Justice (International Cooperation) Act (2023 Revision) s 11 | DPP | A court order that a person produce or provide access to material the DPP considers it necessary to obtain in connection with a request for mutual legal assistance. | Potential criminal liability | Legal professional privilege |
Managing Your Litigation Risk
On receipt of a regulatory notice, it is important to carefully consider your approach to responding and to seek the support you need to ensure that the nature and content of your response does not give rise to further or unnecessary litigation risk. Although each notice needs to be considered in its unique context, the following key steps are intended to provide a general framework to guide you in any response.
1. Seek legal advice
Noting the serious penalties for non-compliance and the often very tight timeframes for providing a response, it is prudent to promptly seek specialist Cayman Islands legal advice to support you with your response. Getting this advice as early as possible will give your legal advisors the best opportunity to contain issues and ensure minimal impact and distraction to your business.
2. Confirm procedure and deadlines
Give detailed consideration to wording of the notice and the enabling provisions in the associated legislation. This will confirm from the outset important matters such as the relevant deadlines, procedural steps and any confidentiality and/or non-disclosure obligations that apply to you as a notice recipient. For example, disclosure of some types of notices can carry ‘tipping off’ risks and there may be criminal offences associated with the disclosure.
3. Identify stakeholders
Determine who across your business will need to be involved in responding to the notice, including those with authority to sign off on any production, and get them involved as early as possible. If there is a large amount of digital data potentially within scope, you may require the support of your in-house IT or technology team, or even a third party service provider to facilitate locating and searching the relevant data repositories
4. Triage and communicate early
Consider the scope of the request, the feasibility of the deadline and any hurdles in your way to complying with the terms of the notice. Perhaps the regulator has sought a number of broad categories of information, some of which would place a disproportionate burden on your business to locate and search because they are unlikely to contain any relevant information. The earlier you identify these issues, the better placed you or your legal advisers will be to approach the issuing authority and raise these difficulties before the production deadline.
5. Identify, collect and preserve responsive information
Do you have the responsive information at your fingertips? Or is the process of locating it going to be time consuming and difficult? Do you need to restore it from external archives? A third party? Your lawyers can support you by preparing custodian questionnaires, deploying technology to increase efficiency and advising you on important matters such as what potentially relevant data held by third parties is within and outside your control on the terms of the notice.
6. Careful review
It is crucial to allow sufficient time for the careful review of potentially responsive material to assess what is within the scope of the notice, and what you have a right to withhold from production on grounds such as irrelevance, legal professional privilege, or any other applicable exemptions. This can be a complex and time consuming exercise, sometimes warranting a page-by-page, line-by-line analysis to identify what material requires redaction.
While it may appear like the simplest and most cost effective solution is to just hand over everything to the regulator, this can be a dangerous path because you may inadvertently waive legal professional privilege or breach contractual obligations of confidentiality to a counterparty by disclosing confidential information beyond that compelled by law.
7. Debrief and next steps
Finally, once your response is complete and the immediate urgency is over, it is important to carefully reflect on the lessons learnt from the request and assess whether its presentation suggests that there are further future regulatory risks to your business. There are a range of different potential questions for you to consider at this stage, depending on the circumstances of the notice. These might include:
a) Reviewing the documents and information disclosed and considering whether any of the content gives rise to any potential legal liability for your business, now that it is in the hands of the regulator;
b) Conducting an internal investigation to determine the factual circumstances surrounding a particular issue identified in the notice, which may include an assessment as to whether the issue is isolated or systemic;
c) Considering whether any remediation steps are required to prevent the issue arising again; and
d) If material liability risk is identified, consider whether the business needs to make any formal notifications, such as to insurers or through self-reporting mechanisms to one or more regulators.
How Conyers can help
When responding to regulatory notices, it is important to seek the support of a legal team that sees the bigger picture and can provide strategic insight into what might be yet to come. There can be significant benefit in containing potential issues early, before they manifest, minimising the cost and disruption to your business of regulatory investigations and flow-on enforcement proceedings.
The Conyers team of Regulatory Disputes specialists have market-leading experience supporting their clients through high value, high profile and challenging regulatory disputes, including those involving multiple regulators and jurisdictions. We are uniquely placed to advise and appear in the most complex matters and work hand in hand with our Regulatory & Risk Advisory practice to deliver a full service offering across the entirety of the regulatory life cycle.
Stay tuned for the next edition of our Regulatory Disputes Series, which will take a deeper dive into one of the hot topics we featured at the start of the Series.
Please note: This article is not intended to be a legal opinion or a substitute for legal advice. It deals in broad terms and is intended to provide only general information.