The SFC has issued a circular to remind intermediaries to comply with the self-reporting obligation under paragraph 12.5 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. Licensed corporations and registered institutions should review their incident escalation and reporting mechanisms as soon as possible and consider whether any enhancements are required.
Paragraph 12.5 requires intermediaries to report to the SFC immediately upon the happening of (among other things) any material non-compliance with any law, rules, regulations and codes administered by the SFC or any such suspected non-compliance.
The SFC has recently observed that some intermediaries have not promptly reported to the SFC non-compliance with various legal or regulatory requirements, such as suspected unlicensed dealing activities, non-compliance with the suitability requirements and order recording requirements under the above code of conduct, and breaches of record keeping rules.
The SFC reminds intermediaries that:
- registered institutions (although primarily regulated by the HKMA) are required to fulfil their reporting obligation by making the report directly to the SFC, in addition to reporting to the HKMA;
- all material non-compliance referred to under paragraph 12.5 should be reported as soon as practicable upon identification, ie, not after the intermediary has completed its investigation, obtained legal advice or taken remedial action;
- failure to comply with the reporting obligation may result in disciplinary action against intermediaries and their management.
The SFC also reminds intermediaries of:
- its circular dated 11 May 2015 regarding reporting obligations more broadly (see our e-bulletin of May 2015 for further details); and
- its circular dated 1 June 2018 regarding the obligation to notify the SFC of any significant changes in the nature of business and types of services provided.