Hot Topics For managers of Cayman funds - March 2019 - assets.kpmg

 
Hot Topics For managers of Cayman funds - March 2019 - assets.kpmg
Hot Topics
For managers of Cayman funds

March 2019
kpmg.ky
Hot Topics For managers of Cayman funds - March 2019 - assets.kpmg
Overview                            Cayman                                                EU & US                                                       Tax                          Other
                                           Regulatory                                            Regulatory

       Contents
     Global Thought Leadership
 New     Top 10 Trends in Asset Management for 2019                                                                                 4

     Cayman Regulatory
 New     Cayman Islands Economic Substance Bill                                                                                     6

 New     Cayman Master Feeder Redemptions                                                                                           8

 New     AIFMD – MFL (2019 Revision), SIBL (2019 Revision)                                                                         10

Updated  Cayman AML Requirements                                                                                                   12

         Cayman Data Protection Law                                                                                                14

     EU & US Regulatory
         AIFMD & UCITS rules for Depositaries and Sub-Custodians                                                                   16

Updated  Senior Managers & Certification Regime (“SMCR”)                                                                           18

 New     SEC: 2018 Investigations                                                                                                  20

         NFA: Cybersecurity Interpretive Notice Amendment                                                                          22

         SEC: Fee Risk Alert                                                                                                       24

                        © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                        International”), a Swiss entity. All rights reserved.
                                                                                                                                                                                                     2
                                               This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
Hot Topics: March 2019                         firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.           2
                                               All rights reserved.
                                                                                    Document Classification: KPMG Confidential
Overview                                     Cayman                                                EU & US                                                       Tax                          Other
                                                           Regulatory                                            Regulatory

               Contents
               Tax
                    2018 German Investment Tax Reform                                                                                             26

                    10% Capital Gains Tax on Indian Publicly Traded Shares                                                                        27

                    FATCA and CRS                                                                                                                 28
                    U.S. Tax Reform                                                                                                               30
                    Virtual Currency & US taxation                                                                                                33
       Updated  Partnership Audit Rules                                                                                                           34

              Other
         New        Responsible Investment and ESG                                                                                                36
       Updated  Brexit: Update and Temporary Permissions                                                                                          38
                    Brexit: Contract Certainty                                                                                                    40
                    IFRS 9 – Financial Instruments                                                                                                42
                    IFRS 15 and ASC 606 - Revenue from Contracts with Customers                                                                   43

              Articles Discontinued from Previous Hot Topics                                                                                       44

Disclaimer
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to
provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in
the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Any advice in this
communication is limited. Tax law, regulations, and the judicial and administrative interpretations thereof are subject to change or modifications, retroactively and/or
prospectively, and any such changes could affect the validity of this presentation.

                                        © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                                        International”), a Swiss entity. All rights reserved.
                                                                                                                                                                                                                     3
                                                               This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
   Hot Topics: March 2019                                      firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.           3
                                                               All rights reserved.
                                                                                                    Document Classification: KPMG Confidential
Global Thought Leadership
            Top 10 Trends in Asset Management for 2019
            The start of 2019 is looking tough – markets are down, geopolitical risks are high but it’s also one in which we believe the
            asset management industry can thrive. China holds considerable opportunity, notwithstanding trade disputes; the trend
            toward sustainable investment has room to run, with better defined standards; and asset managers are creating value through
            technology.

            1. Competition for China heats up                                                                                                        3. Sustainability measurement gets more sophisticated
                                                                                                                                                     Over the last few years, Environmental, Social and
            By all accounts, 2019 will be an exciting year for China’s asset
                                                                                                                                                     Governance (ESG) priorities finally took their place on the
            management industry. On the domestic front, firms will
                                                                                                                                                     asset management agenda. This year, the real work
            experience intense competition – and more innovation – as
                                                                                                                                                     continues as regulators start to more clearly define their
            they fight to protect and capture market share. New rules
                                                                                                                                                     expectations for the industry.
            related to the way Chinese banks manage client assets and
            recent efforts to stimulate the stock market should also catalyse
            significant activity.
                                                                                                                                                     4. Managers start looking for value in their technology
            2. Private Equity (“PE”) continues strong run                                                                                            In 2019, we expect to see more asset managers connect their
                                                                                                                                                     technology dots in ways that unlock an entirely new level of
            Last year, was another strong year for PE with buyout volumes                                                                            agility, efficiency and value. For some, this will start with
            in Americas and Europe both at record highs. Investor                                                                                    basic cloud enablement – a fundamental requirement for
            confidence appears to remain very robust with another solid                                                                              digital enablement to deliver on today’s customer
            year of fundraising (albeit a little off the exceptional volumes of                                                                      expectations.
            2017) and hence the stock of dry powder to supporting ongoing
            investment activity remain at record levels. The situation in Asia
            Pacific is slightly different, deal volumes in recent years have                                       5. The regulatory scope widens
            yet to grow in line with exceptionally strong fundraising resulting
                                                                                                                   All signs suggest that the asset management sector will
            in dry powder growing substantially. While understanding the
                                                                                                                   continue to see increasing regulatory oversight, particularly
            advantages of PE as a source of capital in the region has
                                                                                                                   related to systemic risk and investor protection, such as
            increased considerably, leading managers will still need to
                                                                                                                   leverage and costs.
            continue their efforts to broaden PE’s appeal as a capital
            solution, particularly at the larger deal sizes. This will ensure
            the market grows to     absorb
                                 © 2018 KPMG, athe  committed
                                                Cayman               capital.
                                                       Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                                                                                                                                                                                                                                                                              4
                                              International”), a Swiss entity. All rights reserved.

This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
                                                                                                                   Document Classification: KPMG Confidential
Global Thought Leadership
            Top 10 Trends in Asset Management for 2019….continued

              6. The definition of infrastructure investment broadens                                                                                    9. ETF players become more active
                                                                                                                                                         The ETF market continues to show strong signs of positive
              Over the past few years, in order to deploy their increasing
                                                                                                                                                         growth and many asset managers are starting to recognize
              capital into the largest possible universe of assets, we have
                                                                                                                                                         ETFs as an important part of the digital product offering. Yet,
              seen a growing number of fund managers start to (1) invest
                                                                                                                                                         until today, the market has largely been dominated by big
              directly, (2) explore non-core markets such as Eastern Europe
                                                                                                                                                         passive players.
              and Asia, (3) expand the definition of what constitutes an
              ‘infrastructure’ asset to include, for example, care homes, data
              centers and telecom assets and (4) compete with corporates in
                                                                                                                                                         10. Wealth managers embrace new models
              the energy sector, offshore wind being a hot spot for larger
              investors.                                                                                                                                 The outlook for wealth management is strong, driven by rising
                                                                                                                                                         levels of private wealth and the threat of significantly
              7. Real Estate investors get serious about data                                                                                            underfunded retirement savings. Yet, while it is clear that
                                                                                                                                                         demand for the industry’s core activities remains strong, our
              This year, expect more focus on data and leveraging                                                                                        view suggests that – in the short-term – challenges related to
              technology for analytics. Indeed, rather than just relying on                                                                              current market uncertainty and volatility may start to dampen
              experience and understanding of the markets and cycles, real                                                                               investor sentiment this year.
              estate investors are starting to place increasing value on data-
              driven decision-making tools and processes.
                                                                                                                                                         The complete article can be viewed on Tom Brown’s
              8. Institutional investors start to tell their story                                                                                       (Global and UK Head of Asset Management) linkedin
                                                                                                                                                         page:
              Against a backdrop of increased protectionism and nationalism,
                                                                                                                                                         https://www.linkedin.com/pulse/top-10-trends-asset-
              many institutional investors are finding some foreign investment
                                                                                                                                                         management-2019-tom-brown/
              markets to be increasingly challenging (particularly when it
              comes to foreign investments into core infrastructure assets).).

                                              © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                                              International”), a Swiss entity. All rights reserved.
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This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
                                                                                                                   Document Classification: KPMG Confidential
Overview                              Cayman                                                EU & US                                                       Tax                          Other
                                               Regulatory                                            Regulatory

Cayman Islands Economic Substance Bil
What is it?
The International Tax Co-Operation (Economic Substance) Law, 2018 (the
“Law”) is the latest in a series of steps by the Cayman Islands to meet its
commitment as an Inclusive Framework member under the OECD’s global
BEPS initiative. It also reflects Cayman’s commitment to meet new EU
requirements modelled after BEPS Action 5.
The Law was passed into law on December 21, 2018 with an effective date of
January 1, 2019 for newly-formed entities in 2019, and a 6-month transitional
period for pre-existing entities (effective July 1, 2019).
                                                                                                                                    Does your Relevant Entity have Relevant
Version 1.0 of Guidance Notes was issued on Feb 22, 2019. Industry
expects Version 2.0 of Guidance Notes, with industry specific comments,                                                             Activities? If so, you need Substance – the Relevant
to be issued in April 2019. Cayman’s law is subject to EU approval, thus                                                            Entity is required to:
there may be changes. The final EU approval is expected on March 12,
2019.                                                                                                                               o        Conduct core-income generating activities in
Key Concept: Every Cayman Islands entity needs to consider if it                                                                             Cayman
is a relevant entity conducting relevant activities.                                                                                o        Be directed and managed in an appropriate
                                                                                                                                             manner from Cayman
                                                                                                                                    o        In connection with the entity’s relevant activities,
     Relevant Entities: Includes Cayman companies, limited liability                                                                         the entity must have adequate operating
     companies (LLC) and limited liability partners (LLP). Limited partnerships                                                              expenditure, premises and full-time employees
     are not relevant entities under the Law.                                                                                                with appropriate qualifications, in Cayman
     Cayman entities which are tax resident outside of Cayman are not
     relevant entities.
     Investment funds are also not relevant entities.

     Relevant Activities: There are nine relevant activities, including fund
     management business, insurance business and holding company
     business.
                            © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                            International”), a Swiss entity. All rights reserved.
                                                                                                                                                                                                         6
                                                   This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
 Hot Topics: March 2019                            firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.           6
                                                   All rights reserved.
                                                                                        Document Classification: KPMG Confidential
Overview                               Cayman                                                EU & US                                                       Tax                          Other
                                                  Regulatory                                            Regulatory

Cayman Islands Economic Substance Bil …continued
Key Definitions                                                                                                   What is the Economic Substance Test (ES Test)?
Fund management business is the business of managing securities as set out in                                     All three factors must be met.
paragraph 3 of Schedule 2 to the Securities Investment Business Law, 2015
(“SIBL”), carried on by a relevant entity licensed under that Law for an investment                               1. Conducts Cayman Islands core-income generating activities (CIGA):
fund.
                                                                                                                  •     Activities that are of central importance to a relevant entity in terms of generating
                                                                                                                        income and that are being carried out in Cayman. In respect of fund management
Holding company business means the business of a pure equity holding
                                                                                                                        business CIGA entails:
company, which is further defined as a company that only holds equity
                                                                                                                        • Taking decisions on holding and selling of investments
participations in other entities and only earns dividends and capital gains. A
                                                                                                                        • Calculating risk and reserves
reduced economic substance test may apply if certain requirements are met.
                                                                                                                        • Taking decisions on currency or interest fluctuations and hedging positions
          • It has complied with all applicable filing requirements under the
                                                                                                                        • Preparing reports or returns, or both, to investors or CIMA, or both
             Companies Law; and
          • It has adequate human resources and premises in Cayman for                                            2. Is directed and managed in an appropriate manner from Cayman:
             holding and managing equity participations in other entities.
                                                                                                                  •     The board of directors, as a whole, has the appropriate knowledge and
Investment fund means an entity whose principal business is the issuing of                                              expertise in line with its role;
investment interests to raise funds or pool investor funds with the aim of enabling                               •     Board meetings are held in Cayman at adequate frequencies, given the level of
a holder of such an investment interest to benefit from the profits or gains from                                       decision making required;
the entity’s acquisition, holding, management or disposal of investments and                                      •     A quorum of directors must be present in Cayman during board meetings;
includes any entity through which an investment fund directly or indirectly invests                               •     The minutes of the board meetings must record the making of strategic decisions
or operates, but does not include a person licensed under the Banks and Trust                                           of the relevant entity at the meeting; and
Companies Law (2018) or the Insurance Law (2010), Building Societies Law                                          •     The minutes of all board meetings, along with appropriate records of the relevant
(2014) or Friendly Societies Law (1998).                                                                                entity, must be maintained in Cayman.
Reporting and Penalties                                                                                           3. Having regard to the level of relevant income derived from the relevant
Cayman entities that are within the scope of the Law must submit an annual                                           activity carried out in Cayman:
report beginning in 2020, within 12 months after the end of each fiscal year (e.g.
                                                                                                                  •     Adequate amount of operating expense incurred from within Cayman;
FYE 12/31/2019, reporting due FYE 12/31/2020). In addition to the annual report,
                                                                                                                  •     Adequate physical presence in Cayman (e.g. office space; maintaining plant and
there is a separate annual notification requirement. Guidance Notes are expected
                                                                                                                        equipment); and
to provide detail on these information requirements. The annual notification and
                                                                                                                  •     Has an adequate number of full-time employees or other personnel with
report filings are expected to be filed with the Cayman Islands Tax Information
                                                                                                                        appropriate qualifications in Cayman.
Authority.
                                                                                                                  Under certain circumstances, the ES Test may be met for Cayman Islands CIGA
Willful neglect of compliance of the Law may result in fines ranging from                                         through outsourcing. Guidance Notes are expected to clarify the circumstances for
$10,000 (year 1) to $100,000 (year 2), plus possible court-ordered strike off.                                    outsourcing.

                               © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                               International”), a Swiss entity. All rights reserved.
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                                                      This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
   Hot Topics: March 2019                             firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.           7
                                                      All rights reserved.
                                                                                           Document Classification: KPMG Confidential
Overview                               Cayman                                                EU & US                                                       Tax                          Other
                                            Regulatory                                            Regulatory

      Cayman Master Feeder Redemptions – Impact of Ardon
      Maroon Court Case
      What is it?
      A 2018 judgment in the Grand Court of the Cayman Islands has
      had ramifications for industry participants relating to master feeder
      structure subscriptions and redemptions.
      The facts                                                                                                                             Key Points
      In the liquidation of the Ardon Maroon Asia Master Fund Limited                                                                       o Cayman Grand Court upheld separate
      (the “Master Fund”) and the Ardon Maroon Asia Dragon Feeder                                                                               legal identity of feeder funds.
      Fund (the “Feeder Fund”), the Master Fund liquidators rejected a                                                                      o Reliance on industry practice of “back-
      proof of debt filed on behalf of the Feeder Fund for redemptions.
                                                                                                                                                to-back” subscriptions and
      This on the basis that (amongst other points) the Feeder Fund had
      not correctly completed the redemption process, as required by                                                                            redemptions between master funds
      the articles of association of the Master Fund, as it had not                                                                             and feeder funds questioned.
      submitted a written redemption notice.                                                                                                o Review of feeder constitutional
      The Feeder Fund appealed this rejection of the proof of debt,
                                                                                                                                                documents and offering documents
      arguing in summary that:                                                                                                                  required to determine validity of
                                                                                                                                                current process followed for
      1.   A valid redemption had occurred as it was standard industry
                                                                                                                                                subscriptions and redemptions in
           practice for a ‘back-to-back’ redemption to automatically take
           place between the Feeder Fund and Master Fund and that                                                                               master feeder structures.
           this could be understood from the Feeder Fund’s PPM; and
      2.   As the directors of both the Feeder Fund and Master Fund
           were the same, and acted on the basis that a ‘back-to-back’
           automatic redemption process was followed, that the actions
           of the directors were sufficient to be a determination of the
           directors to process the redemption or that any such written
           notice requirements had been waived by the directors.
      The Feeder Fund was unsuccessful in its appeal in all respects.
                         © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                         International”), a Swiss entity. All rights reserved.
                                                                                                                                                                                                      8
                                                This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
Hot Topics: March 2019                          firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
                                                All rights reserved.
                                                                                                                                                                                                      8
                                                                                     Document Classification: KPMG Confidential
Overview                            Cayman                                                EU & US                                                       Tax                          Other
                                            Regulatory                                            Regulatory

         Cayman Master Feeder Redemptions – Impact of Ardon
         Maroon Court Case….continued
                                                                                                                      Actions for Managers
     Main themes
                                                                                                                      It is recommended managers of Cayman master feeder structures
     •   Unless the relevant constitutional and offering documents of                                                 take the following actions:
         Cayman master and feeder funds are written in such a way that a
         formal process is not required between a feeder fund and a                                                   a)      Discuss with their administrator and board of directors what the
         master fund to effect a subscription/redemption (i.e. written                                                        current process is followed between the master/feeder funds on
         subscriptions/redemption documents completed), then the                                                              a subscription/redemption and whether written notices are being
         process as set out in the constitutional documents must be                                                           sent;
         followed for a valid subscription or redemption to take place.
                                                                                                                      b)      Review the fund(s) constitutional documents and determine
     •   Industry practice is not an appropriate reason for the terms of the                                                  whether they are following the terms of the fund documents
         relevant fund documents not to be followed and, while it is                                                          correctly; and
         operationally helpful for the directors of a master and feeder fund
         to be the same, sufficient and clear corporate records should                                                c)      changing the process or, if required, the fund documents so that
         always be maintained by separate legal entities documenting any                                                      the redemption process and documents for the feeder and
         actions and resolutions of the directors.                                                                            master meet with what they wish to occur in practice.

                         © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                         International”), a Swiss entity. All rights reserved.
                                                                                                                                                                                                      9
                                                This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
Hot Topics: March 2019                          firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
                                                All rights reserved.
                                                                                                                                                                                                      9
                                                                                     Document Classification: KPMG Confidential
Overview                             Cayman                                                EU & US                                                       Tax                          Other
                                           Regulatory                                            Regulatory
 Alternative Investment Fund Managers Directive (“AIFMD”) - Mutual Funds Law (2019
 Revision) and Securities Investment Business Law (2019 Revision)
 Background
 In August 2015, the Cayman Islands, through the Legislative
 Assembly, enacted legislative changes and passed the Mutual Funds
 (Amendment) Law, 2015 and the Securities Investment Business
 (Amendment) Law, 2015 (collectively, the “Amendment Laws”). This
 facilitated the creation of a frame work for Cayman Islands Managers
                                                                                                                                            Key Points
 and Funds to voluntarily “opt-in” via a passport regime to the
 European Union’s (“EU”) AIFMD system in order to manage or                                                                                 o Election to apply for licence or to be
 market funds to investors domiciled in the EU.                                                                                                registered as an EU Connected Fund
                                                                                                                                               and/or EU Connected Manager.
 In December 2016, the Cabinet approved the AIFMD Regulations i.e.
 the Mutual Funds (EU Connected Fund (Alternative Investment Fund
                                                                                                                                            o Notification requirements to the
 Managers Directive)) Regulations, 2016 and the Securities                                                                                     Cayman Islands Monetary Authority
 Investment Business (EU Connected Fund (Alternative Investment                                                                                (the “Authority”) if marketing in a
 Fund Managers Directive)) Regulations, 2016 setting out the details                                                                           country or territory within the
 of the Amendment Laws.                                                                                                                        European Economic Area (“EEA”),
 Further to a Commencement Order approved in December 2018, the                                                                                using prescribed forms.
 Amendment Laws and the AIFMD Regulations came into force                                                                                   o Special     audit   requirements    for
 on January 1, 2019.                                                                                                                           regulated EU Connected Funds and
 On February 19, 2019 and February 21, 2019, the Mutual Funds Law                                                                              annual report requirements for
 (2019 Revision) (the “MFL”) and the Securities Investment Business                                                                            Cayman Islands AIFMs for each EU
 Law (2019 Revision) (the “SIBL”), respectively, came into effect.                                                                             Connected Fund.
                                                                                                                                            o Penalties for non-compliance with the
                                                                                                                                               relevant Amendment Laws.
 Who does the MFL and SIBL apply to?
 o   EU Connected Funds
              Hot Topics: March 2019
 o   EU Connected Managers
 o   Licensed (regulated) or registered mutual funds

                        © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                        International”), a Swiss entity. All rights reserved.
                                                                                                                                                                                                     10
                                               This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
Hot Topics: March 2019                         firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.           10
                                               All rights reserved.
                                                                                    Document Classification: KPMG Confidential
Overview                               Cayman                                                EU & US                                                       Tax                          Other
                                             Regulatory                                            Regulatory
 AIFMD - MFL (2019 Revision), SIBL (2019 Revision)….continued
 Notifications and Attestation Requests
  EU Connected Funds                                                                                             EU Connected Managers

  a) Within three months of the commencement date of the AIFMD                                                   a) An EU Connected Manager that is an existing licensee making a notification
     Regulations, an EU Connected Fund that is marketing in a country or                                            pursuant to section 5(2)(A) of the SIBL, shall notify the Authority within three
     territory within the EEA, shall notify the Authority that the EU                                               months of the commencement date of the AIFMD Regulations.
     Connected Fund is marketing in a country or territory within the EEA.
                                                                                                                 b) An EU Connected Manager that has elected to be licensed pursuant to section
  b) An EU Connected Fund that commences marketing in a country or                                                  5(2) of the SIBL, shall notify the Authority within twenty one days of the EU
     territory within the EEA after the commencement date, shall within                                             Connected Manager receiving its licence.
     twenty one days of the commencement of marketing in a country or
     territory within the EEA, notify the Authority that the EU Connected                                        c) A licensee shall inform the Authority in writing of a change in any of the
     Fund is marketing in a country or territory within the EEA.                                                    information provided to the Authority within stipulated timelines (ranging from
                                                                                                                    immediate to 21 days). A licensee shall also inform the Authority in writing
  c) An EU Connected Fund shall notify the Authority within twenty one                                              within seven days of ceasing to be a Cayman Islands AIFM.
     days of the date upon which marketing ceased in all Member States
     and of any changes made to information provided to the Authority,                                           Particulars to be submitted to the Authority, as applicable, include the name of
     within twenty one days of the date of the change.                                                           each fund and the jurisdiction of establishment of each fund managed or marketed
                                                                                                                 by the EU Connected Manager; name of each Member State in which the
  Particulars submitted to the Authority, as applicable, include the date on                                     securities investment business is being carried on; date on which the person
  which such marketing commenced/is expected to commence; the name of                                            commenced or will commence carrying on the securities investment business;
  the competent authority(ies) in the Member State in which the marketing                                        capital sufficiency evidence; a declaration of compliance with the AIFMD
  takes place/is expected to take place; the name and contact details of the                                     requirements applicable where authorized as an AIFM in a particular Member
  EU Connected Fund’s manager and country of authorization; a declaration                                        State; prescribed information regarding the AIFM’s remuneration policies and
  that the EU Connected Fund is marketed in each of the Member States in                                         practices and delegation/sub delegation arrangements with third parties of key
  accordance with the laws in force in that Member State etc.                                                    relevant functions; policy regarding use of leverage etc.

  An EU Connected Fund that is not a regulated mutual fund shall submit,                                         REEF Forms for the Notification and Attestation Requests of EU Connected
  among other particulars, the type of fund, setting out why the EU                                              Fund Managers and EU Connected Mutual Funds pursuant to the AIFMD
  Connected Fund is not required to be regulated.                                                                Regulations are available within the Regulatory Enhanced Electronic Forms
               Hot Topics: March 2019                                                                            Submissions (REEFS) portal.

                                                                                                                 Please get in touch if you would like to discuss how we can help your fund or
                                                                                                                 firm with these new requirements.
                          © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                          International”), a Swiss entity. All rights reserved.
                                                                                                                                                                                                       11
                                                 This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
Hot Topics: March 2019                           firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.           11
                                                 All rights reserved.
                                                                                      Document Classification: KPMG Confidential
Overview                             Cayman                                                EU & US                                                       Tax                          Other
                                          Regulatory                                            Regulatory

      Cayman AML requirements
      Regulatory changes
      • The Cayman Islands’ Proceeds of Crime Law (“POCL”) has
        been updated to widen the list of activities classified as
        Relevant Financial Business (“RFB”).
      • RFB is now defined to include entities “otherwise
        investing, administering or managing funds or money on
        behalf of other persons”.
      • Therefore, unregistered Cayman Islands based investment                                                                               Key Points
        entities, such as private equity or closed-ended funds, are                                                                           o The deadline for designation and
        now required to be compliant with the AML requirements.                                                                                   notification to CIMA was the 31 May
                                                                                                                                                  2018 for newly established Cayman
                                                                                                                                                  Islands domiciled funds.
      What must Financial Service Providers do?
      • Financial service providers must appoint a natural person in                                                                          o        The deadline was extended to 30
        the Cayman Islands as Money Laundering Reporting Officer                                                                                       September 2018 for existing funds.
        (“MLRO”), Deputy Money Laundering Reporting Officer
        (“DMLRO”) and Anti-Money Laundering Compliance
        Officer (“AMLCO”).
      • They must notify the Cayman Islands Monetary Authority
        (“CIMA”) of the designation immediately for newly
        established funds and by 30 September 2018 for existing
        funds.

                       © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                       International”), a Swiss entity. All rights reserved.
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Overview                             Cayman                                                EU & US                                                       Tax                          Other
                                          Regulatory                                            Regulatory

      Cayman AML requirements…continued
      AMLCO                                                                                                      MLRO
      The AMLCO must have sufficient skills, expertise and                                                       The MLRO must have sufficient skills, expertise and be at senior
      resources to take this appointment. They must also be                                                      management level to take this appointment. They must also be
      independent and have access to the books and records of the                                                independent and have access to the books and records of the RFB.
      RFB.                                                                                                       The following are some of the tasks which they are required to
      The following are some of the tasks which they are required to                                             undertake:
      undertake:                                                                                                 •    The MLRO is responsible for receiving and investigating internal
                                                                                                                      suspicious activity reports (“SAR”).
      • Liaise with CIMA on any requests for information.
                                                                                                                 •    They are responsible for making the determination to file a SAR
      • Establish the RFB’s AML policies and procedures and
                                                                                                                      with the Financial Reporting Authority (“FRA”).
        oversee the testing and maintenance of same.
                                                                                                                 •    The MLRO is responsible for the submission of the SAR on
      • Ensure the Know-Your-Customer checks are conducted on                                                         behalf of the entity.
        new investors and new employees.
      • Ensure staff are aware of the reporting obligations and
        channels of reporting for suspicious activity.                                                           DMLRO

      • Conduct or organize employee AML training on a regular                                                   The DMLRO must discharge the duties of the MLRO in their
        basis.                                                                                                   absence.

      • Report on a regular basis to those tasked with governance.
      The AMLCO may hold the role of either MLRO or DMLRO but
      not both.

                       © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                       International”), a Swiss entity. All rights reserved.
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Overview                              Cayman                                                EU & US                                                       Tax                          Other
                                           Regulatory                                            Regulatory

      Cayman Data Protection Law
      As of September 2019, The Data Protection Law, 2017 (“DPL”) will
      come into force in the Cayman Islands. It will be applicable to all
      organisations (including funds) which are established in the Cayman Islands
      or processing data there. It introduces a set of data protection principles
      for content, consent and duty to comply in relation to the processing of
      personal data.
      Key Requirements of the DPL
                  To protect personal data against risks, such as the                                                                               Key Points
                  loss or unauthorised access, or unauthorised                                                                                      o At the request of industry, the
                  destruction, use, modification or disclosure of                                                                                       Cayman Islands Data Protection
                  personal data or other misuses.                                                                                                       Law coming into force date has
                                                                                                                                                        been postponed until September
                  To notify the Ombudsman “without undue delay”,
                                                                                                                                                        2019.
                  within 5 days in the case of a security breach leading
                                                                                                                                                    o The ombudsman has confirmed
                  to the accidental loss or unlawful destruction or
                  unauthorised disclosure of or access to personal
                                                                                                                                                        that funds do not need to appoint
                  data which is likely to adversely affect an individual.                                                                               a data protection officer.
                                                                                                                                                    o All Cayman entities have to
                  To ensure that personal data is used fairly and lawfully;                                                                             comply.
                  in accordance with the rights of individuals; for limited                                                                         o Must report breaches likely to
                  specified purposes; is adequate, relevant and not                                                                                     affect individuals privacy to the
                  excessive; is accurate and kept up-to-date and is not                                                                                 Ombudsman and the individual(s)
                  kept for longer than is necessary for that purpose or                                                                                 affected.
                  those purposes.                                                                                                                   o Must assess data protection
                  To formally assess the level of protection provided by third parties                                                                  conducted by third parties.
                  for personal data, that it remains responsible for, to “reasonably
                  believe” that the level of protection provided by the third party is
                  equivalent to that stated under DPL prior to any potential transfer.

                        © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                        International”), a Swiss entity. All rights reserved.
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Overview                              Cayman                                                EU & US                                                       Tax                          Other
                                           Regulatory                                            Regulatory

      Cayman Data Protection Law…continued
      What does this mean for you?
      Cayman based fund managers need to do the following to make sure they are in compliance with the law:
      •   Understand what personal data your organization is holding with regards to investors;
      •   Understand how this data is processed and stored;
      •   Update both internal and external policies to inform investors and employees about information held on them;
      •   Prepare for the processing of data requests such as: Assessing what data is held, corrections of data and removal of personal data;
      •   Prepare a strategy for reporting any data breaches to the Ombudsman and the individuals affected, as this must be done within 5 days;
      •   Review your company’s IT security strategy;
      •   Consider any third party providers that hold your data and what security measures they have in place to secure the data;
      •   Consider completing a privacy impact assessment.

      Conclusion
      Cayman fund managers have to take stock of all personal data they may be holding. Considering all personal data flows, in all media, legacy
      systems, cloud computing, third parties and email.
      After the number of large breaches in recent years regulators are taking data and IT security much more seriously and backing it up with
      significant fines.
      Fines for non-compliance with the DPL range up to $100,000 or imprisonment for a term of five years, or both.

      Further information on DPL can be found here:
      http://ombudsman.ky/data-protection

                        © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                        International”), a Swiss entity. All rights reserved.
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                                               This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
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                                               All rights reserved.
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                                                                                    Document Classification: KPMG Confidential
Overview                               Cayman                                                EU & US                                                       Tax                          Other
                                            Regulatory                                            Regulatory

      AIFMD & UCITS rules for Depositaries & Sub-Custodians
      Commission’s draft rules for fund assets
      Both the AIFMD and the UCITS Directive include requirements on
      depositaries and sub-custodians regarding the safe-keeping of
      fund assets. The current requirements are largely similar, but the
      co-legislators decided to apply an additional provision for UCITS
      relating to sub-custodians in third countries and applicable
      insolvency law, given that UCITS are marketed to retail investors.
      Both sets of current requirements include a provision requiring                                                                          Key Points
      multiple omnibus accounts to be held at each level down the                                                                              o The European Commission has
      custody chain.
                                                                                                                                                   published draft regulations amending
      In the light of The European Securities and Markets Authority’s                                                                              the AIFMD and UCITS rules for
      (ESMA) work on the different approaches by national regulators,                                                                              depositaries and sub-custodians of
      the Commission believes it necessary to amend both the AIF and
                                                                                                                                                   fund assets, including prime brokers
      UCITS rules. The Commission's intent seems to be to respond to
      the points highlighted by ESMA's work, but the drafting in various                                                                           that provide such services.
      places is causing significant concerns for various industry players.                                                                     o The amendments could have
      Also, applying the UCITS rules relating to insolvency law also to                                                                            significant implications for depositaries
      AIF assets is not in line with the co-legislators' original intent and                                                                       and sub-custodians, and therefore for
      could restrict EU professional investors' access to investments in                                                                           fund management companies and
      certain jurisdictions.
                                                                                                                                                   investor choice.

                         © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                         International”), a Swiss entity. All rights reserved.
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                                                This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
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                                                                                     Document Classification: KPMG Confidential
Overview                               Cayman                                                EU & US                                                       Tax                          Other
                                            Regulatory                                            Regulatory

      AIFMD & UCITS rules for Depositaries & Sub-Custodians…continued
      Commission’s draft rules for fund assets continued

      The current AIFMD Level 2 Regulation created an additional cost                                               •     Various new sub-paragraphs relate to information needing to be
      by requiring multiple omnibus accounts to be held at each level of                                                  passed by the sub-custodian to the depositary, so that “…on the
      the custody chain. The requirements were subsequently                                                               basis of which the depositary can at any time establish the precise
      incorporated into UCITS V. The Commission now proposes that                                                         nature, location and ownership of those assets”.
      this requirement be removed, which will be welcomed by many
      market participants. The Commission is proposing several other                                                A new section is added for AIFs (which already exists for UCITS)
      amendments:                                                                                                   requiring the depositary to receive independent legal advice confirming
                                                                                                                    that applicable insolvency law recognises various points and that the
      •   A new section for both UCITS and AIFs relates to the contract
                                                                                                                    sub-custodian complies with any necessary conditions. This was not
          between the depositary and sub-custodian. It is drafted in such
                                                                                                                    included in AIFMD precisely because it will cause significant issues in
          a way that it can be read as requiring the complete segregation
                                                                                                                    relation to investment into certain jurisdictions and in relation to the use
          of assets right down the custody chain, with separate
                                                                                                                    of US brokers (which operate under a different legal framework).
          accounts for each depositary and for each type of fund needed
          at each level of the custody chain.
                                                                                                                    Timeline
      •   A small textural change requiring sub-custodians to comply                                                To allow depositaries time to adapt to the new requirements, the
          with Art 89(1)(a)-(e) (rather than only (b)-(e)) can be read as                                           Commission proposes that the new rules should be deferred until six
          requiring the depositary to maintain duplicate records to the                                             months after publication of the Regulations in the EU's Official Journal.
          sub-custodian.
      •   The wording relating to the frequency of reconciliation has
          been eased by the change from “regular” to “as often as
          necessary” [or, in the UCITS amendment, to “as frequently as
          necessary”]. However, there is new text on the factors
          determining the appropriate frequency of reconciliations, which
          are drafted in terms of trading activity - including trading for
          other clients - rather than settlement activity (which is what
          the sub-custodians see).

                         © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                         International”), a Swiss entity. All rights reserved.
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                                                This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
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                                                                                     Document Classification: KPMG Confidential
Overview                               Cayman                                                EU & US                                                       Tax                          Other
                                            Regulatory                                            Regulatory

      Senior Managers & Certification Regime (“SMCR”)
      What is it?
      On the 4 July 2018, the Financial Conduct Authority (“FCA”)
      published near final rules on how they plan to extend the Senior
      Managers & Certification Regime (“SMCR”) to all financial services
      firms regulated by FCA operating under the Financial Services and
      Markets Act (“FSMA”). The goal of SMCR is to “reduce harm to
                                                                                                                                               Key Points
      consumers and strengthen market integrity by making individuals
      more accountable for their conduct and competence”. It also                                                                              o Approval of Senior Managers by
      impacts individuals outside the UK that have contact with UK clients                                                                         FCA.
      and incoming branches of non-UK firms that have permission to                                                                            o Annual assessment of Senior
      carry out activities regulated by the FCA.                                                                                                   Managers and individuals with
      The regulations are to be enforced from the 9th December 2019.                                                                               Certification Functions.
                                                                                                                                               o Conduct Rules required for all
      There are three main challenges in implementing the new
      regulations:
                                                                                                                                                   employees.
                                                                                                                                               o SMCR rules impact both individuals
      •   Impact assessment - Understanding the impact of SMCR on                                                                                  based in the UK, overseas
          operating models and group structures, in particular the
                                                                                                                                                   employees who deal with the UK
          challenges to implementation posed by complicated matrix
          management arrangements.                                                                                                                 and incoming of non-UK firms that
                                                                                                                                                   have permission to carry out
      •   Regulatory expectations - Obtaining sufficient clarity in terms of
                                                                                                                                                   activities regulated by the FCA.
          the regulatory requirements, especially around the proposed
          duty of responsibility.                                                                                                              o Enforcement to commence from the
                                                                                                                                                   9th December 2019.
      •   Maintaining compliance - Putting the right technology in place to
          manage and maintain compliance, whether that’s via an existing
          technology platform or purchasing an external solution from a
          provider. Either way, the answer lies in agile solutions that are fit
          for purpose.

                         © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                         International”), a Swiss entity. All rights reserved.
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                                                                                     Document Classification: KPMG Confidential
Overview                                Cayman                                                EU & US                                                       Tax                          Other
                                             Regulatory                                            Regulatory

      Senior Managers & Certification Regime…continued
      The KPMG view                                                                                                      Six key steps for asset managers
      It’s understandable that many in the asset management industry
                                                                                                                         •    Be proactive - make sure your CEO, Board and Executive
      are concerned about what SMCR means and how best to
                                                                                                                              Committee are fully engaged in the process and that a senior
      respond. There’s still a lack of clarity about elements of the new
                                                                                                                              level steering group is driving the implementation of the
      regime and a great deal of work to be done, particularly in
                                                                                                                              regime.
      formalising the internal policies and procedures to enable the
      regime to operate properly.                                                                                        •    Assess whether you have the right people in the correct
                                                                                                                              approved functions before the conversion of approved
      KPMG has already worked with numerous financial services firms                                                          individuals takes place.
      on the implementation of SMCR over the past four years. We
                                                                                                                         •    If you’re part of a group, consider the practicalities of running
      have a solid understanding of what asset managers should be
                                                                                                                              different regimes for different entities or ‘opting up’ core
      doing and when, plus how the new regime can be a catalyst for
                                                                                                                              entities to meet the more onerous enhanced arrangements.
      clarifying opaque responsibility allocations, simplifying complex
      matrix management structures and optimising management time.                                                       •    Examine the processes you already have in place and how
                                                                                                                              you can embed SMCR into your existing governance
      In the run-up to the implementation of the SMCR for banking firms                                                       structure. That includes the ability to manage and maintain a
      we saw that unsurprisingly the most proactive and early-engaging                                                        clear view of your workforce at all times, including, crucially,
      firms were better equipped for the go-live date and better                                                              when senior managers leave the company.
      informed to address any subsequent regulatory scrutiny. This is
      one of the most valuable lessons we can learn as an industry                                                       •    Create an effective communications plan for both internal
      when implementing SMCR.                                                                                                 and external audiences, including the regulators and parent
                                                                                                                              companies or branches of the firm.
                                                                                                                         •    Engage early with the regulator to be clear on what they will
     Further information can be found at the FCA’s website:                                                                   expect and engage with future industry consultation.
     \www.fca.org.uk/firms/senior-managers-certification-regime                                                          KPMG have a dedicated team in the UK assisting clients
                                                                                                                         with the implementation of SMCR. Please get in touch if
                                                                                                                         you would like to discuss how we can help your firm with
                                                                                                                         the implementation of SMCR.

                          © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                          International”), a Swiss entity. All rights reserved.
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                                                                                      Document Classification: KPMG Confidential
Overview                               Cayman                                                EU & US                                                       Tax                          Other
                                            Regulatory                                            Regulatory

      SEC: 2018 Investigations
      Investigations and findings
      SEC suspends trading company for making false
      cryptocurrency-related claims about being SEC regulated
      The SEC had to obtain an emergency court order to halt a planned
      initial coin offering (ICO), which backers falsely claimed was
      approved by the SEC. The SEC also had to suspend trading in the                                                                          Key Points
      securities of a company amid questions surrounding its statements                                                                        o SEC investigations and findings
      about partnering with a claimed SEC-qualified custodian for use                                                                             researched were from October
      with cryptocurrency transactions.
                                                                                                                                                  2018 to December 2018.
      Charges against company operating an unregistered exchange                                                                               o Main themes from the
      The SEC settled charges against a company which was the founder                                                                             investigations were the emerging
      of a digital "token" trading platform. This was the SEC's first                                                                             issues surrounding the rise of
      enforcement action based on findings that such a platform operated
      as an unregistered national securities exchange.
                                                                                                                                                  crypto currencies and digital
                                                                                                                                                  assets.
      Two ICO issuers settle SEC registration charges and agree to
      register tokens as securities
                                                                                                                                               o In 2018 the SEC brought 821
                                                                                                                                                  enforcement actions, up from 754
      The SEC settled charges against two companies that sold digital
      tokens in initial coin offerings (ICOs). These are the Commission’s
                                                                                                                                                  in 2017.
      first cases imposing civil penalties solely for ICO securities offering
      registration violations. Both companies agreed to return funds to
      harmed investors, register the tokens as securities, file periodic
      reports with the SEC and pay penalties.

                         © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                         International”), a Swiss entity. All rights reserved.
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Overview                              Cayman                                                EU & US                                                       Tax                          Other
                                           Regulatory                                            Regulatory

      SEC: 2018 Investigations…continued
      Recent developments
      The SEC’s focus for World Investor Week was on empowering the                                                The Division was pursuing keeping pace with technological change, mainly
      Main Street investors, which took place in October 2018. SEC staff                                           through a Cyber Unit, which became fully operational in fiscal year 2018.
      emphasized both the basics of investing and savings as well as                                               In conjunction with the Department of Justice, the Cyber Unit investigates
      important emerging issues like the rise of initial coin offerings and                                        and prosecutes cyber-related misconduct. The Division has pursued
      digital assets, distributed ledger technology, and other innovations.                                        registration violations, false regulatory filings used for price manipulation,
                                                                                                                   misuse of the dark web, and misconduct surrounding initial coin offerings
      In November, 2018, the SEC Enforcement Division (“Division”)
                                                                                                                   (“ICOs”), which have boomed over the past year, among other violations.
      released its Annual Report summarizing the past year’s
      enforcement activity. The report also highlights several significant
      actions and initiatives that took place in FY 2018 and presents the
      activities of the Division from both a qualitative and quantitative
      perspective.
      The core principles of the Division – focus on the Main Street
      investor, focus on individual accountability, keep pace with
      technological change, impose remedies that most effectively further
      enforcement goals, and constantly assess the allocation of
      resources. The Division’s adherence to these principles resulted in
      meaningful results, including the return of almost $800 million to
      harmed investors, holding individuals – including many at the
      highest level – accountable, barring bad actors from the securities
      markets, and sending strong messages of deterrence. The impact
      of these actions has unquestionably protected investors of all types,
      particularly retail investors. In the 2018 fiscal year, the SEC brought
      821 enforcement actions, up from 754 in fiscal year 2017.

                        © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                        International”), a Swiss entity. All rights reserved.
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                                               This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
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                                               All rights reserved.
                                                                                    Document Classification: KPMG Confidential
Overview                              Cayman                                                EU & US                                                       Tax                          Other
                                           Regulatory                                            Regulatory

      NFA: Cybersecurity Interpretive Notice Amendment
      NFA Amends Interpretive Notice Regarding Information Systems
      Security Programs—Cybersecurity
      The National Futures Association has issued an amendment to their
      Information Systems Security Programs (ISSP) Interpretive Notice
      which came into effect in March 2016. The amendment which will
      come into effect on April 1, 2019 seeks to clarify common questions
      relating to training obligations, program approval and sets forth the
      requirement for the reporting of certain cybersecurity incidents.
      What has changed?
      Specifically, the amendment addresses the following:
       Members must provide cybersecurity training to new employees                                                                               Key Points
        as part of their onboarding, and on a continuing basis at least once                                                                       Updated requirements from the NFA on:
        per year.                                                                                                                                  o Cybersecurity Training
       Previously the approval of the ISSP could be provided by an                                                                                o ISSP Approval
        executive level official. This has now been changed to specify a                                                                           o Incident Reporting
        senior level officer with primary responsibility for information
        system security, such as a Chief Technology Officer or a Chief
        Information Security Officer.
       Although the existence of a Cybersecurity Incident Response Plan
        was previously a requirement of the ISSP Interpretive Notice, it did
        not require notifying NFA of any incidents. The amendment will
        now require that Members report to the NFA any cybersecurity
        incidents that result in a loss of customer funds or Member’s
        capital. It will also now require that the NFA be notified of any
        cybersecurity incident whereby a Member would be required by
        federal or state law to notify it’s customers or counterparties.

                        © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                        International”), a Swiss entity. All rights reserved.
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                                               This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
Hot Topics: March 2019                         firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.           22
                                               All rights reserved.
                                                                                    Document Classification: KPMG Confidential
Overview                              Cayman                                                EU & US                                                       Tax                          Other
                                           Regulatory                                            Regulatory

      NFA: Cybersecurity Interpretive Notice Amendment…continued
       Key considerations for our clients                                                                                       How can KPMG assist?
       1. Does your current ISSP include an appropriate level of employee                                                       Related Services:
          training?
                                                                                                                                     Cyber Maturity Assessment
       2. Has your organization clearly assigned the responsibility of                                                               IT Controls Assessment
          information systems security to a senior level officer?                                                                    Vulnerability Scanning
                                                                                                                                     IT Security Awareness Training
       3. Do you have the people, processes and tools in place to know
                                                                                                                                     Simulated Phishing Attacks
          whether you have suffered a cybersecurity breach?
                                                                                                                                     Compromise Assessment
       4. Does your organization have a plan for dealing with cybersecurity                                                          Privacy Assessment
          incidents?                                                                                                                 Cyber Response Plan Development
                                                                                                                                     Cyber Response Services
       5. Do you understand your notification obligations towards your
          employees, customers, counterparts and regulators in the event of
          a cybersecurity breach?                                                                                               Benefits:
       6. Do you have a communications plan in place in the event of a
                                                                                                                                     Increase the cyber resilience of your organization
          cybersecurity breach?
                                                                                                                                     Enhance the level of cybersecurity awareness of your
                                                                                                                                      employees
                                                                                                                                     Have a clear plan for dealing with cyber breaches
                                                                                                                                     Understand Privacy regulations and laws that impact your
                                                                                                                                      organization

                 Hot Topics: Q1 2018

                        © 2018 KPMG, a Cayman Islands partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
                        International”), a Swiss entity. All rights reserved.
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                                               This Document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2019 KPMG, a Cayman Islands partnership and a member
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