HONG KONG SFC CONTINUES TO IDENTIFY DEFICIENCIES IN SPONSOR WORK IN SECOND THEMATIC REVIEW

On 26 March 2018, the Securities and Futures Commission (SFC) published a circular and a report following its second thematic review of sponsors. As with its first thematic review, the SFC found deficiencies in standards of conduct, due diligence practices, and internal systems and controls. Particularly serious deficiencies and instances of non-compliance were found to be prevalent in the sponsor work done for Growth Enterprise Market (GEM) listings. Continue reading

Increased focus on board and senior management in Hong Kong as HKMA issues enhanced guidance on corporate governance

On 6 October 2017, the Hong Kong Monetary Authority (HKMA) issued a circular to announce the publication of two revised Supervisory Policy Manual (SPM) modules, namely CG-1 “Corporate Governance of Locally Incorporated Authorised Institutions” and IC-1 “Risk Management Framework”. Revisions were made to the modules to incorporate guidelines issued by the Basel Committee on Banking Supervision and the Financial Stability Board on corporate governance and risk management principles, thereby bringing Hong Kong more in line with international standards. Continue reading

New corporate governance standards for Hong Kong authorised insurers came into effect on 1 January 2017

In October 2016, the Office of the Commissioner of Insurance (OCI) revised the Guidance Note on the Corporate Governance of Authorised Insurers (Revised GN10).  Under Revised GN10, the OCI not only enhanced the minimum standards of corporate governance that are expected of authorised insurers, but also widened the scope of application of such standards.

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EU: First appeal decision of the joint Board of Appeal of EBA, ESMA and EIOPS

Last month, the joint Board of Appeal of the European Supervisory Authorities (the Appeal Board) published its first decision allowing an appeal brought by an Estonian company, SV Capital OU (“the customer”) against the European Banking Authority (EBA).  The case arose following litigation brought by a customer against its bank, from the EBA’s decision not to investigate the alleged failure of national competent authorities to take regulatory action, at the customer’s request.  The case is of interest because it effectively holds that the assessment of suitability of the management of a credit institution does not simply apply to management at the level of the credit institution, but can also apply to key function holders who have a crucial role in the day-to-day management of its business. Continue reading

UK: FCA provisional decision to fine and ban former NED of financial firm for failing to disclose conflicts of interest

The FCA has published a notice of its decision to fine a former non-executive director (NED) of two mutual societies £154,800, and to ban her from performing any role in regulated financial services.   The FCA considers that she breached the requirement to act with integrity by recklessly, and in breach of her fiduciary position as a NED, failing to recognise and disclose conflicts of interest.   The findings are contested, and have been referred to the Upper Tribunal (the Tribunal), but an application for orders to prevent publication of the Decision Notice and of particulars of the reference in the Tribunal’s register was unsuccessful.

Boards of financial firms should take note that the case squarely raises conflicts identification and management and basic corporate governance as priority issues:

“The position of NEDs is critical to the effective functioning of a board and to maintaining the confidence of customers. Because of the nature of their role, NEDs are more likely to have a portfolio of appointments and are likely to find themselves having to manage conflicts of interest more frequently than their fellow directors. NEDs need to manage scrupulously their conflicts of interest and to observe basic corporate governance principles.” Continue reading

UK: Non-executive directors – new ICSA guidance on care, skill and diligence

The Institute of Chartered Secretaries and Administrators has issued new guidance on the liability of non-executive directors in the context of the statutory duty to exercise care, skill and diligence.  The guidance suggests ways in which non-executive directors can approach their work to allow them to demonstrate to a regulator or court, if necessary, that they had taken appropriate steps to exercise care, skill and diligence in their role.  Continue reading