Hong Kong regulators warn of common instances of non-compliance in asset management

The Hong Kong Securities and Futures Commission (SFC) has recently conducted around 250 inspections of licensed corporations engaged in asset management business, and has identified a number of common instances of regulatory non-compliance among them, which it has set out in its circular of 15 September 2017 (with appendix). In the circular, the SFC also sets out its expectations and calls on asset managers to review their internal control procedures and operational capabilities and enhance them (if necessary) to meet the SFC’s expectations. The Hong Kong Monetary Authority (HKMA) has also issued a circular to bring the SFC circular to the attention of registered institutions engaging in asset management business.

The above follows earlier circulars from the SFC and the HKMA on 31 July and 2 August 2017 respectively, which covered a number of potential regulatory concerns identified in the course of the SFC’s supervision of licensed corporations engaged in managing private funds and discretionary accounts (see our earlier e-bulletin here). The SFC’s latest circular of 15 September 2017 highlights various other issues noted among asset managers in general.

In view of the recent measures by the SFC and the HKMA to heighten the accountability of senior management at licensed corporations and registered institutions, the issues highlighted in the SFC circular should be brought to the attention of the senior management at asset managers. The SFC has expressly stated that it will continue to monitor compliance by asset managers and will not hesitate to take action against any asset managers and/or their management for non-compliance.

Our recent bulletin regarding the above can be accessed here. If you wish to discuss this further, please do not hesitate to reach out to our Hong Kong team (the contact details of which are set out in the bulletin) or your usual Herbert Smith Freehills contact.

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