SFC issues further reminder regarding paragraph 12.5 self-reporting obligation

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:

William Hallatt
William Hallatt
Head of Financial Services Regulatory, Asia, Hong Kong
+852 2101 4036
Hannah Cassidy
Hannah Cassidy
Partner, Hong Kong
+852 2101 4133

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. Continue reading