CIMA Wins Appeal Against Non-Licensee Trading Company

(Grand Cayman - Thursday, 7 December 2017) The Court of Appeal of the Cayman Islands upheld the ground-breaking decision of the lower courts to enforce an order which required Select Vantage Inc. to comply with a Direction served on it, by the Cayman Islands Monetary Authority (“CIMA”) on behalf of another overseas regulator.

Select Vantage is a proprietary trading firm which reportedly has over 2,700 staff and traders operating in 79 countries that specialise in intra-day trading strategies. Select Vantage is not a licensee but is registered in the Cayman Islands as an Exempt Company and is currently under investigation by the Australian Securities and Investments Commission (ASIC) for potential market manipulation in the Australian capital markets.

An integral part of CIMA's work is its interaction with regulatory, standard-setting and other relevant bodies within and outside of the Cayman Islands. Such involvement is necessary for CIMA to carry out its functions and fulfill its obligations under the Monetary Authority Law, international agreements and regulatory laws. This includes the exchange of information and other assistance with overseas and local regulatory authorities, the negotiation of memoranda of understanding and similar agreements to facilitate that external assistance and the participation in international organisations and initiatives.

CIMA had been co-operating with ASIC by providing assistance pursuant to its mandate under Section 6 (1c) of the Monetary Authority Law (2016 Revision) and international obligations under the IOSCO (International Organisation of Securities Commissions) multi-lateral memorandum of understanding. As part of its statutory obligations, CIMA specifically requested that Select Vantage provide information and documents concerning traders as per the original request by the Australian regulators. 

As Select Vantage failed to comply with the Direction, CIMA took the matter to court and obtained an ex parte Order from the Grand Court (Financial Services Division), the Order was upheld at a subsequent inter partes hearing. Following the hearing, the Honourable Justice Raj Parker ordered Select Vantage to provide the information requested in accordance with CIMA’s Direction. CIMA were also awarded costs.

Select Vantage however, pursued the matter further and before the Court of Appeal argued at various stages that; (i) the judge at first instance had formed an adverse view, in part, from the material he had seen at the ex parte hearing and had taken this into account when deciding the issue of whether it was possible for Select Vantage to comply with the direction; (ii) the non-disclosure of material to Select Vantage rendered the inter partes hearing fundamentally unfair and contrary to the rules of natural justice; (iii) it was wrong for the judge to place any reliance on s.50 (1) of Monetary Authority Law as justification for sealing the Court file; (iv) the ex parte order should therefore be discharged.

However, the final judgment was handed down on 8 November 2017 by Sir Richard Field, JA of the Court of Appeal. Select Vantage’s arguments were not accepted by the Court of Appeal, the appeal was dismissed in its entirety and it was held that:

(i) It is beyond contrary argument that, save where justice requires disclosure, there is a strong public interest in protecting the confidentiality of authorised dealings between overseas regulators, for otherwise their regulatory powers will be seriously undermined and regulators may be reluctant to extend to, or request assistance from, each other.

(ii) The Authority can in fact bring an ex parte application for an order sought pursuant to its regulatory powers in certain circumstances.

(iii) Costs for the application were awarded to CIMA.

CIMA’s Managing Director, Mrs. Cindy Scotland expressed her sincere gratitude to all staff who were involved. She also added, “The outcome of this case is very significant for CIMA and the Cayman Islands as it is another testament of CIMA’s continued commitment to promote good governance, engage with various international regulatory bodies, while maintaining a sound financial system within and outside of the Cayman Islands.”

CIMA’s litigation was conducted at the hearings in the Grand Court by Deputy General Counsel Mr. André Mon Désir, Legal Counsel Ms. Angelina Partridge and Legal Counsel Mr. Menelik Miller. In the Court of Appeal, CIMA were represented by Mr. Neil Timms QC. and Menelik Miller.

Select Vantage Inc. is part of group of companies collectively referred to as the Select Vantage Group. Daniel Schlaepfer is the President of Select Vantage Inc. and its affiliates.