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.

Hong Kong

SFC issues warning statement regarding improper practices by unlicensed VATPs

The SFC has issued a statement regarding improper practices by unlicensed virtual asset trading platforms (VATPs), warning VATPs of the potential legal and regulatory consequences of such practices and reminding investors to be wary of the risks.

  • Some unlicensed VATPs claim to have submitted licence applications to the SFC when they have not in fact done so.  It is an offence under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance for any person to make a fraudulent or reckless misrepresentation such as this for the purpose of inducing another person to trade in virtual assets. The SFC will take into account any such misrepresentation should the relevant VATP eventually submit a licence application.
  • Some unlicensed VATPs, anticipating the transitional arrangements under the new VATP licensing regime, set up new entities to provide virtual asset services in Hong Kong. They have also publicly announced their intention to apply for licences for these new entities. However, the services and products offered by some of these new entities may not be in compliance with the legal and regulatory requirements under the new regime.
  • Some unlicensed VATPs continue to launch new services under existing entities that may not comply with the applicable legal and regulatory requirements, such as trading services in virtual asset derivatives, or arrangements involving virtual assets such as virtual asset “deposits”, “savings” or “earnings”.

Established entities providing virtual asset services that are subject to the new VATP licensing regime should apply for SFC licences or they should proceed to close their business in Hong Kong.  Conducting unlicensed activities in Hong Kong is a criminal offence.

The SFC, in considering a VATP licence application, will take into account any past non-compliant activities and whether they could have reasonably been avoided.  It will also consider whether licence applicants can demonstrate a genuine intention to rectify non-compliant activities, including gradually unwinding impermissible transactions in an orderly manner.

Separately, the SFC reminds investors to take account of the risks of trading virtual assets on unregulated VATPs.  When the SFC approves a VATP to provide services to retail investors, it will update the list of virtual asset trading platforms on its website.

HKMA fines authorised institution HK$16 million for contraventions of AMLO

The HKMA has fined an authorised institution HK$16 million for contraventions of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).  This follows an on-site examination and further investigation by the HKMA on the institution’s systems and controls for compliance with the AMLO.

The investigation identified:

  • Control deficiencies in respect of conducting customer due diligence (CDD) on customers transferred from another financial institution during the period from 21 February 2016 to 16 January 2018, as well as on-boarding CDD and on-going CDD measures on some other customers during the period from 1 April 2012 to 31 October 2018; and
  • A failure to establish and maintain effective procedures for carrying out its duties under the AMLO in relation to CDD and on-going monitoring of business relationships with customers during the period from 1 April 2012 to 31 October 2018.

The above constituted breaches of various requirements under the AMLO.  The HKMA acknowledges that the institution has taken remedial and enhancement measures to address the deficiencies, and had cooperated with the HKMA during the investigation and enforcement proceedings.

HKMA launches phase 1 (core level) of enhanced competency framework on green and sustainable finance 

The HKMA has issued a circular to announce the launch of the Core Level of its Enhanced Competency Framework on Green and Sustainable Finance (ECF-GSF), a collaborative effort of the HKMA, the Hong Kong Institute of Bankers (HKIB) and the banking industry in establishing a set of common competency standards for GSF-related job roles in the banking sector.

The ECG-GSF will be launched in two phases:

  • Phase 1 (core level) – which will lay a solid foundation on the knowledge and application of GSF; and
  • Phase 2 (professional level) – which will focus on specialised domain areas covering upcoming market developments and regulatory trends.

The ECF-GSF is administered by the HKIB. Details on the scope of application, competency standards, qualification structure, modular exemption, certification and grandfathering arrangements, and continuing professional development (CPD) requirements are set out in the guide attached to the circular.

Authorised institutions (AIs) are strongly encouraged to adopt the ECF-GSF as part of their overall staff recruitment and development efforts.  The HKMA expects AIs to adopt appropriate measures to monitor and maintain the competence levels of their staff, support their staff in attending training and examinations to meet ECF certification, keep proper records of the relevant training and qualification of their staff, and provide them with necessary assistance in their applications for grandfathering, certification and fulfilment of CPD training under the ESG-GSF.

The HKMA’s Supervisory Policy Manual module CG-6 “Competence and Ethical Behaviour” emphasises the importance of ensuring continuing competence of staff members.

HKMA invites selected licensed banks to participate in interbank account data sharing initiative pilot programme

The HKMA has issued a circular to invite selected licensed banks to participate in the pilot programme for the Interbank Account Data Sharing (IADS) initiative, which allows customers to securely and efficiently share their bank account data with other banks subject to their consent.

The HKMA’s Fintech Facilitation Office (FFO) recently completed a preliminary study of the IADS initiative in collaboration with the Hong Kong Association of Banks and the selected licensed banks.  The findings suggest that sharing customer bank account data between banks may help digitalise banking operations, strengthen risk management, and enhance the customer experience. The rules and standards facilitating interbank customer-consented data sharing were developed through the study, paving the way for operationalising the IADS initiative.  In the IADS pilot programme, select use cases and implementation issues will be examined to help formulate a possible implementation approach.

The HKMA’s Banking Supervision Department has been consulted and is supportive of the IADS initiative.  Licensed banks who have received the HKMA’s circular are expected to participate in the pilot programme, and complete all necessary preparations by the end of 2023. The FFO will provide further details to facilitate the banks’ participation in the pilot programme.

CSRC and SFC reach consensus on introduction of block trading (manual trades) under Stock Connect

The China Securities Regulatory Commission (CSRC) and the SFC have jointly announced that they have reached a consensus on the introduction of block trading (manual trades, ie, trades conducted outside the Hong Kong Stock Exchange Limited (SEHK)’s trading system and reported to the SEHK) under Stock Connect.  The initiative is intended to further enhance Stock Connect arrangements, make more trading mechanisms available, enhance trading efficiency, and promote the mutual development of capital markets in both Hong Kong and the Mainland.  The SEHK has issued a press release as well as circulars (SEHK / Hong Kong Securities Clearing Company Limited) regarding the joint announcement.

Block trading provides an alternative trading mechanism to enable market participants to execute large-sized transactions. The introduction of block trading under Stock Connect will enable southbound and northbound investors to participate in the block trading facilities currently available in the Hong Kong and Mainland markets respectively. Offshore investors will be able to conduct block trades on the Shanghai Stock Exchange and the Shenzhen Stock Exchange through the northbound trading link, while Mainland investors will be able to conduct manual trades on the SEHK through the southbound trading link.  Both northbound and southbound block trading will be introduced at the same time.

The CRC and the SFC will supervise the relevant exchanges and clearing houses in the introduction of block trading (manual trades). The block trading arrangements will be developed based on the existing operational models and regulations in each market.  Market consultation will be carried out as appropriate, and an implementation proposal will be developed.

The respective stock exchanges will announce the official launch date in due course.

SFC concludes consultation on proposed SFO enforcement-related amendments, proceeding only on enhancements to insider dealing provisions

The SFC has published the conclusions to its consultation on proposed amendments to enforcement-related provisions of the Securities and Futures Ordinance (SFO).  Our previous update discusses the consultation paper.

The SFC will proceed with the proposal to broaden the scope of the SFO’s insider dealing provisions to cover both (i) insider dealing perpetrated in Hong Kong relating to securities listed on overseas stock markets (or their derivatives); and (ii) insider dealing perpetrated outside Hong Kong, if it involves securities listed on a recognised stock market, ie, The Stock Exchange of Hong Kong Limited (or their derivatives).

The industry will be given the opportunity to review the draft amendments to the insider dealing provisions during the legislative process.

In light of the complex implementation issues raised by the respondents to the consultation, the SFC will put on hold the following proposals: (i) Broadening the scope of section 213 of the SFO so that injunctions and remedial and other orders can be made where disciplinary powers have been exercised against regulated persons – the SFC will further assess the adequacy of the current avenues for seeking financial redress by or for aggrieved investors and study a full range of other options to meet its policy objective, including strengthening the SFC’s disciplinary regime; (ii) Amending the professional investor (PI) exemption to the issue of advertisements for investments, so that the ambit accords with original intended purposes – the SFC will not proceed with this amendment but reminds the industry that those who wish to invoke this exemption should be able to demonstrate a clear intention to dispose of the investment product only to PIs).

The SFC will continue to monitor the market and consider a range of options to ensure that investors are adequately protected.  Further details regarding the conclusions paper are provided in our briefing.

Green and Sustainable Finance Cross-Agency Steering Group announces priorities to strengthen Hong Kong’s sustainable finance ecosystem

The Green and Sustainable Finance Cross-Agency Steering Group has announced the following key priorities to enable the promotion and consolidation of Hong Kong’s role as a leading sustainable finance hub:

Establish world-class regulation through alignment with global standards: the steering group will develop a Hong Kong roadmap on adopting the International Financial Reporting Standards Sustainability Disclosure Standards.  A working group comprising the relevant authorities and stakeholders will be set up for this purpose.

Boost Hong Kong’s vibrancy and competitiveness through capacity building, data enhancement and technology innovation of the finance ecosystem to support net-zero transition across the economy: (i) the steering group will arrange workshops to support non-listed companies and small and medium-sized enterprises (SMEs) in their sustainability planning and reporting, and their broader usage of available data sources and tools; (ii) a data portal will be developed to increase the availability and accessibility of climate-related data collected through a questionnaire for non-listed companies and SMEs launched in December 2022 (see our previous update); and (iii) the steering group will also explore opportunities for public-private partnerships to aid in the development of technology-driven solutions.

Grow dynamic, trusted markets with diverse products to mobilise capital at larger scale to support the net-zero transition: (i) a dedicated workstream will explore ways to further support financial institutions and corporates in their transition planning and reporting; (ii) the steering group is extending its efforts to build Hong Kong into an international carbon market to connect opportunities across the Mainland, Asia and the rest of the world.

The steering group is co-chaired by the HKMA and the SFC, and its members include the Insurance Authority and other regulators and government bureaus.


MAS: Zero-tolerance approach to abuse of financial system

The Monetary Authority of Singapore (MAS) has announced the arrest of a number of individuals for suspected involvement in offences including forgery and/or money laundering and resistance to lawful apprehension. The arrest followed suspicious transaction reports (STRs) filed by financial institutions (FIs) in Singapore as a result of suspicious fund flows, dubious documentation of source of wealth or funds, and inconsistencies or evasiveness in information provided to the FIs. The MAS has reminded FIs to stay vigilant to money laundering and terrorist financing (ML/TF) risks, to ensure that fund flows into Singapore are and remain legitimate. MAS has conducted inspections focusing on FIs active in the wealth management space, to ensure that robust controls are in place to effectively detect and deal with ML/TF risks.

MAS consults on revised AML framework for SFO sector

MAS has published a consultation on a revised framework to strengthen surveillance and defence against money laundering risks in Singapore’s Single Family Office (SFO) sector. The revised framework will introduce a harmonised class exemption for SFOs with specific requirements to ensure that all SFOs are subject to anti-money laundering (AML) controls.

Responses to the consultation are requested by 30 September 2023.

MAS: Finalisation of  stablecoin regulatory framework

The MAS has finalised a new regulatory framework that seeks to ensure a high degree of value stability for stablecoins regulated in Singapore. The regulatory framework takes into account feedback from an October 2022 public consultation. The MAS stablecoin regulatory framework will apply to single-currency stablecoins (SCS) pegged to the Singapore Dollar or any G10 currency that are issued in Singapore. Issuers of such SCS will have to fulfil key requirements relating to value stability, capital, redemption at par; and disclosure.

Stablecoin issuers must fulfil all requirements under the framework to be able to apply to MAS for their stablecoins to be recognised and labelled as ‘MAS-regulated stablecoins’. Under the new regulatory framework, those who misrepresent a token as a ‘MAS-regulated stablecoin’, may be subject to penalties.


FSC publishes Fintech Development Roadmap 2.0

The Financial Supervisory Commission R.O.C. (Taiwan) (FSC) has released its second 3-year Fintech Development Roadmap with a view to achieving an inclusive, fair, sustainable and international fintech ecological environment. Specifically, the roadmap includes four goals and four aspects of development.

Four goals

  • Inclusiveness;
  • Fairness;
  • Sustainability; and

Four aspects of development

  • Aspect 1: Optimising the fintech legal system and policies;
  • Aspect 2: Deepening counselling resources and talent cultivation;
  • Aspect 3: Promoting fintech technologies and applications, including launching the FIDO V2 program; continuing to promote open finance, promoting green (sustainable) fintech, and digitalising corporate finance; and
  • Aspect 4: Enhancing financial inclusion and digital financial penetration, including (among others) the introduction of the second phase of supervisory technology, and the promotion of a “Digital Financial Accessibility Promotion Program”.

FSC issues consultation on principles for use of AI by financial industry

The Financial Supervisory Commission R.O.C. (Taiwan) (FSC) has published for consultation the draft of the “Core Principles and Policies for Promoting the Use of Artificial Intelligence (AI) in the Financial Industry“.

The draft document comprises six core principles:

  • Establishing governance and accountability mechanisms;
  • Emphasising fairness and human-oriented values;
  • Protecting privacy and customer rights (It is emphasized that when using customer information, financial institutions must fully respect and protect the privacy of their customers, and properly manage and utilise the relevant information, so as to enhance consumer confidence and satisfaction);
  • Ensuring system robustness and security;
  • Implementing transparency and explainability; and
  • Promoting sustainable development.


BNM: Speech on green financial market development

The Bank Negara Malaysia (BNM) has published the opening remarks of its Deputy Governor, Marzunisham Omar, at the Green Financial Market Conference. Mr Omar highlighted the financial sector’s two critical roles in helping to mitigate the escalating effects of climate change: (i) greening finance – by building institutions’ resilience against climate change; and (ii) financing green – by channelling funds to decarbonise the economy.

Other topics discussed include the work of the Joint Committee on Climate Change (JC3) and the BNM in boosting financial sector readiness for transition to a greener and low-carbon economy and the opportunities available as the economy decarbonises and businesses green their operations.

SCM: Guidelines to strengthen technology risk management

The Securities Commission Malaysia (SCM) has published its guidelines on technology risk management, which aim to promote robust and sound technology risk management practices among capital market entities.

Among the requirements set out in the guidelines include the establishment and implementation of an effective technology risk framework, technology project management, technology service provider management and cyber security management by capital market entities.

The guidelines will be applicable to all capital market entities licensed, registered, approved, recognised or authorised by the SCM and are expected to come into effect in Q3 2024.


SEBI circular amends OFS for units of private listed InvITs

The Securities and Exchange Board of India (SEBI) has issued a circular regarding the offer for sale (OFS) framework for sale of units of real estate investment trusts (REITs) and Infrastructure Investment Trusts (InvITs) confirming that it has decided to modify Paragraph B of SEBI Circular dated January 10, 2023 to allow OFS for units of private listed InvITs. The provisions of the circular have immediate effect.

SEBI consults on use cases of financial information users in the Account Aggregator Framework

SEBI has published a consultation on collating and defining use cases of financial information users in the Account Aggregator Framework. The Account Aggregators would facilitate collecting and providing information of customers’ financial assets in a consolidated, organised and retrievable manner to the customer or any other person based on consent of the customer.

Responses to the consultation are requested by 31 August 2023.

SEBI: Effective regulatory framework for AIFs

SEBI has issued a master circular for Alternative Investment Funds (AIFs) which incorporates the various circulars issued by SEBI from time to time in this regard. With respect to any other directions or guidance issued by SEBI, as specifically applicable to AIFs, they will continue to remain in force in addition to the provisions of this master circular or any other law for the time being in force. The master circular has immediate effect.

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.


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