Welcome to Herbert Smith Freehills’ monthly private wealth industry updates in Asia.
Every month we survey ten Asian jurisdictions for legal developments concerning trust and estate planning which are of interest to the private wealth industry, and provide a succinct summary in a table format. The jurisdictions covered in the update are Hong Kong, Singapore, China, Taiwan, Japan, India, Malaysia, Indonesia, Thailand and the Philippines. We hope that these updates will prove to be a useful resource to keep private clients, business people, and lawyers abreast of legal updates in the region.
SEHK and HKFE announce enhancements to stock option and stock index option market maker obligations
The enhancements announced by the Stock Exchange of Hong Kong Limited (SEHK) to the obligations of market makers in the stock option market aim to support market liquidity, with obligations refined for the characteristics of the underlying securities and relevant market conditions. The enhancements will be introduced in two phases: the first phase, comprising (1) the introduction of a new liquidity level, and (2) normalisation of obligations for exchange traded fund options, will be effective on 31 October 2022; and the second phase, concerning handling obligation adjustments in exceptional conditions and comprising the mechanisms of (1) Agile–LL3 and (2) Fast Market, will take effect tentatively in the first half of 2023, subject to market readiness.
The enhancements announced by the Hong Kong Futures Exchange Limited (HKFE) to the obligations of market makers for specified stock index options aim to support market liquidity during exceptional market conditions via a “Fast Market” mechanism. They will take effect take effect tentatively in the first half of 2023.
SFC Deputy CEO delivers speech on market resilience, virtual assets and sustainable finance at the AIMA APAC Annual Forum 2022
The Securities and Futures Commission’s (SFC) Deputy Chief Executive Officer and Executive Director, Intermediaries, Ms Julia Leung, recently delivered a keynote speech at the AIMA APAC Annual Forum 2022, discussing developments relating to market resilience, virtual assets and sustainable finance.
In terms of market resilience, the growth of non-bank financial intermediation, including the hedge fund sector, has resulted in more financial risks being held outside the banking sector. Following the Archegos incident, discussions have focused on enhancing the transparency of hedge fund positions and the ability of regulators to detect market concentration risks. For virtual assets, the SFC adopts a “same business, same risk, same rules” approach. The anti-money laundering amendment bill recently introduced to the Legislative Council would make licensing by the SFC mandatory for any entity operating a centralised virtual asset exchange in Hong Kong or targeting Hong Kong investors. On sustainable finance, the first phase of the new regulatory requirements under the amended Fund Manager Code of Conduct came into effect last month, and quantitative disclosure is expected in mid-2023.
As a next step, the SFC is reviewing fund managers’ use of environmental social governance (ESG) ratings and data product providers, beginning with a fact-finding exercise to understand the business operating model of these providers as well as current market practices of fund managers when selecting and engaging with these providers. The study will inform the SFC’s guidance to the asset management industry on using ESG service providers.
MAS on digital assets innovation
The Monetary Authority of Singapore (MAS) has published the opening address delivered by Ravi Menon, Managing Director, at the Green Shoots Seminar. Under the title of ‘Yes to Digital Asset Innovation, No to Cryptocurrency Speculation’, Mr Menon explained the complexities of the digital asset ecosystem and its difference, what MAS is actively promoting, what MAS is discouraging, and what are the risks MAS is seeking to manage. In particular, there are five areas of risk in digital assets that MAS’ regulatory approach is focused on: (1) combating money laundering and terrorist financing risks; (2) managing technology and cyber related risks; (3) safeguarding against harm to retail investors; (4) upholding the promise of stability in stable coins; and (5) mitigating potential financial stability risks. It is MAS’ view that innovation and regulation are not incapable of co-existing. As Singapore aims to be a hub for innovative and responsible digital asset activities that enhance efficiency and create economic value, MAS’ development strategy makes the country one of the most conducive and facilitative jurisdictions for digital assets. At the same time, MAS’ evolving regulatory approach makes Singapore one of the most comprehensive in managing the risks of digital assets, and among the strictest in areas like discouraging retail investments in cryptocurrencies.
RBI issues digital lending guidelines
The Reserve Bank of India (RBI) has issued a circular, Guidelines on Digital Lending, which sets out instructions applicable for ‘existing customers availing fresh loans’ and ‘new customers getting onboarded’ from the date of the circular. Regulated entities (REs) have been given time till November 30, 2022, to put in place adequate systems and processes to ensure that ‘existing digital loans’ (sanctioned as on 2 September 2022) are also in compliance with the guidelines.
SCM addresses the Islamic Finance News UK Forum
The Securities Commission, Malaysia (SCM) has published the address delivered by its Deputy Chief Executive, Datuk Zainal Izlan Zainal Abidin, at the Islamic Finance News UK Forum 2022, which was held at the Mansion House in London. Among the highlights from the address were:
- According to the Islamic Financial Services Industry Stability Report 2022, global Islamic financial assets grew 11.3% to US$3.06 trillion in 2021.
- As of August 2022, 23 corporate issuers have raised financing under the Sustainable and Responsible Investment (SRI) Sukuk Framework which includes the world’s first green sukuk and issuances for social purposes such as education and affordable housing.
- The SRI Sukuk Framework was introduced in June and aims to facilitate companies’ access to the capital market to meet transition finance needs.
BoT marks launch of TBA ESG Declaration
The Bank of Thailand (BoT) has published a press release marking the launch of the Thai Bankers’ Association’s (TBA’s) ESG Declaration. Under the ESG Declaration, all TBA members have agreed on six shared action priorities:
- Governance: Ensure good corporate governance and effective oversight at the board level, with clear accountability and responsibility at the management level regarding the ESG agenda;
- Strategy: Integrate ESG into business strategies and define frameworks for sustainable finance to support Thailand’s transition to net zero;
- ESG Risk Management: Incorporate ESG into risk management processes;
- Financial Products: Utilise digital technology to increase financial accessibility; help customers achieve net zero emissions and sustainable growth;
- Communication: Communicate and collaborate with all stakeholders in raising public awareness on ESG issues; and
- Disclosure: Develop monitoring and reporting systems in line with Thailand’s regulatory frameworks and global sustainability disclosure standards.
With the ESG Declaration, the TBA has pledged to act consistently and collectively to change, with transparency and resilience, in order to ensure interoperability and comparability among all members of the TBA, under a ‘comply or explain’ principle. A handbook specifying actions, timelines, and key performance indicators for each ESG component is to be developed.
BSP releases ESG rules on investments
The Bangko Sentral ng Pilipinas (BSP) has announced that the Monetary Board has approved the Guidelines on the Integration of Sustainability Principles in Investment Activities of Banks. The guidelines cover banking book investments or debt and equity securities portfolios that are not being traded by the bank as part of its proprietary position. Banks are expected to consider their sustainability objectives in their investment activities and ensure that such investment contributes to sectors considered to have beneficial impact to environment or society.
This is the third set of regulations issued by the BSP which aim at promoting the sustainability agenda in the financial system. The BSP issued Circular Nos. 1085 and 1128 on the Sustainable Finance Framework (April 2020) and the Environmental and Social Risk Management Framework (October 2021), respectively. The frameworks provide banks a three-year transition period from May 2020 to incorporate sustainability principles in their strategic objectives, corporate governance, and risk management system.
The contents of this document are for reference purposes only. Some of the information comes from public sources and this may not be comprehensive, accurate or up to date; where we have relied on third party information and sources, this has not been verified by us. The document does not constitute legal advice, and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication, and any facts in this document should be checked for your specific circumstances at the time you wish to use or refer to them.