Under Part XV of the Securities & Futures Ordinance (SFO), where a company has an interest (or a short position) in Hong Kong listed shares, its holding company is deemed to have that interest; this attribution is carried the whole way up a corporate chain to the ultimate holding company. This imposes onerous monitoring requirements on financial services groups ...
Year-end deadline for application to the HKMA to adopt the basic approach and internal rating based approach for credit risk calculation The Hong Kong Monetary Authority ("HKMA") issued a circular ("the Circular") to all Hong Kong incorporated authorised institutions ("AIs") on 7 December 2004, requesting formal applications from AIs that plan to adopt the internal rating based ("IRB") or the basic approach ("Basic Approach") for the assessment of their capital adequacy ...
A licensed corporation, registered institution, licensed individual, substantial shareholder of a licensed corporation, corporate licence applicant or an individual licence applicant can apply to the SFC to have certain sections of the Securities and Futures Ordinance (SFO) or any provision of rules made by the SFC modified or waived under the SFO according to section 134 of the SFO ...
"Outsourcing" is defined as an event in which the regulated financial services firm (the "outsourcing entity"), contracts with a service provider to perform any aspect of the outsourcing entity's regulated or unregulated functions that could otherwise be undertaken by the entity itself. The service provider may be a related party within a corporate group, or an unrelated third party entity ...
The SFC published its conclusions on the Consultation Paper on Proposed Amendments to the Schedule 5 to the Securities and Futures Ordinance in September. The Consultation Paper had proposed amendments to the definitions of certain regulated activities as set out in the SFO. The main proposals were: • To extend the definition of "asset management" to include management of real estate investment trusts ...
The recently introduced Pension Protection Act 2006 makes two important changes to the definition of the term "plan assets" for the purposes of ERISA. The new legislation continues to provide that the assets of a fund or other entity will not constitute "plan assets" and will therefore not be subject to the fiduciary obligations under ERISA if less than 25% of the value of each class of equity in the entity is held by "benefit plan investors" ...
Under UCITS Regulations, UCITS III funds are permitted to use financial derivative instruments (FDIs) not only for hedging but also as part of their general investment policies. The Irish Financial Regulator requires that the risks involved in using FDI are properly managed, measured and monitored in an ongoing basis through designing and implementing a comprehensive risk management process (RMP) ...
On 30 June 2005, the Hong Kong Monetary Authority (“HKMA”) finalised the self-assessment framework on AML compliance. The self-assessment framework has been introduced for the purposes of facilitating the assessment by authorised institutions’ (“AIs”) of their compliance with the regulatory requirements on AML and to supplement the HKMA’s on-site examinations ...
The SFC has recently settled a number of disciplinary cases on the basis of payment by the persons under investigations without admission of liabilities. Below are some examples of the settlement cases. SFC Withdrew Decision to Suspend Licence of a Licensed Representative The licence of a licensed representative was suspended by the SFC for six months by reason of his use of placing schemes to meet the placing requirements of the Listing Rules ...
The SFC recently appointed Mr. Mark Steward from the Australian Securities and Investment Commission (ASIC) as Executive Director of Enforcement. While enforcement initiatives of the SFC under his new leadership are still evolving, reference to the past record of ASIC’s enforcement may provide some hints ...
In a speech on 20 November 2006, Mrs Alexa Lam, the SFC's Executive Director of Intermediaries and Investment Products, announced that the SFC will continue its focus on ensuring that financial products are not mis-sold in Hong Kong and that investors are provided with appropriate advice from their investment advisers (IAs) ...
The SFC and the Jersey Financial Services Commission have signed a letter of intent to enhance regulatory co-operation. The SFC has indicated that this is part of a programme being undertaken with a view to working towards mutual recognition of investment products to enable easier distribution of recognised products. The practical impact of this programme has yet to be seen ...
The SFC has adopted a split approach in dealing with UCITS III funds. For funds which will adopt enhanced use of derivatives and make changes to their investment policies or objectives in migrating to UCITS III, the SFC requires: • a notice to existing holders explaining the proposed changes and confirmation from the fund or its manager that the home regulator has approved the final version of this notice ...
In 2006, the SFC plans to conduct another investigation into licensed investment advisers. This follows a report issued in February 2005, in which the SFC noted industry practices that posed “serious regulatory concerns”. It is timely, then, for investment advisers to review their adherence to the standards of conduct expected of them by the SFC. We set out below some of the practices that investment advisers should adopt to ensure regulatory compliance ...
On 11 June 2007, the Securities and Futures Commission (SFC) issued a circular (http://www.sfc.hk/sfcRegulatoryHandbook/EN/displayFileServlet?docno=H461) outlining a set of initiatives to streamline and simplify its licensing processes. The circular, which provides practical guidance to fund managers intending to apply to the SFC for a licence, is principally directed at overseas hedge fund managers from the US and the UK ...
The SFC has recently published a guide to the information required to be submitted to the SFC in relation to risk management and control processes by fund managers seeking approval to use the expanded investment powers under UCITS III (Guide). The Guide sets out the items and areas relating to the risk management and control process that the SFC normally expects to be provided in order to give the SFC an understanding of the risk management processes of the relevant UCITS III funds ...
The Securities and Futures Commission ("SFC") have just released their consultation paper ("Paper") on the review of the disclosure of interests regime under Part XV of the Securities and Futures Ordinance (Cap. 571) ("Part XV"). The Paper contains the SFC's proposals for changes to the law on disclosure of interests in shares. Most of the provisions of the Securities and Futures Ordinance was gazetted on 28 March 2002 and came into effect (including Part XV) on 1 April 2003 ...
The SFC's feedback on their recent round of inspections of Investment Advisers (IAs) was shared with members of the Institute of Financial Planners of Hong Kong on 8 May 2007. The SFC reported that the main issues they identified were: insufficient knowledge of clients and lack of justification to illustrate suitability of advice ...
In May 2021, we published an article, Milestone in Hong Kong-Mainland China cross border insolvency: Mutual recognition of and assistance to Insolvency Proceedings between Hong Kong and Mainland China, which highlighted the key features of the cooperation mechanism in relation to Hong Kong-Mainland China cross border insolvency set out in the Record of Meeting of the Supreme People’s Court and the Government of the Hong Kong Special Administrative Region and Mutual Recognition of a
