SFC urges licensees to comply with foreign laws

On 28 January 2014, the Securities and Futures Commission (SFC) issued a circular to remind licensed corporations of their obligation to comply with the regulatory requirements of foreign jurisdictions where they conduct cross-border business activities.

Paragraph 12.1 of the Code of Conduct for Persons Licensed by or Registered with the SFC (Code) imposes an obligation on SFC licensees and registrants to comply with legal and regulatory requirements. The requirements cover those of any relevant regulatory authority. In the circular, the SFC highlights the following:

• A licensed corporation is responsible for business activities conducted by employees or agents on its behalf in other jurisdictions, irrespective of whether the employees or agents are licensed with the SFC.
• Failure by a licensed person or its employees and agents to comply with applicable foreign laws may constitute a breach of the Code and thus affect the perceived fitness and properness of the licensed person.
• Activities such as solicitation of opening of client accounts, signing of account agreements or mandates, marketing or selling of investment products, entering into investment transactions and giving investment advice, are likely to be regulated in other jurisdictions, and licensed persons should inform themselves of the relevant regulations.
• Licensed corporations should always comply with the know-your-client and anti-money laundering requirements of HK regardless of the location of their clients.

What steps are required? Licensed corporations should conduct enquiries into relevant local laws before conducting cross-border activities and should keep abreast of changes in relevant local laws.