SFC routine inspection update – inspection readiness

According to the SFC’s latest Quarterly Report, more than 50% of the issues identified during routine inspections conducted in Q3 of 2013 were breaches of the SFC Code of Conduct or internal control weaknesses. The SFC continues to take enforcement action against licensed corporations for internal control failures. The highest fine imposed on a licensed corporation over the past year for internal control failures was HK$24 million. In addition, the licences of some ROs were revoked or suspended for failing to fulfil their own RO obligations.

Key tips for a successful inspection:

1. Keep the SFC updated about business activities
2. Communicate with the SFC about their expectations
3. Appoint an inspection coordinator
4. Plan the opening meeting and use it to assist the inspection team to understand the business and internal controls
5. Plan the inspection logistics
6. Follow up with additional documents, information and other requests promptly
7. Handle interviews professionally
8. Try and schedule a closing meeting

Licensed corporations should regularly re-evaluate their internal control systems to keep pace with changing rules and regulations.