News & Insights

SFC announces thematic review of prime services activities

The Securities and Futures Commission (SFC) announced on 30 October 2017 that it has commenced a thematic review of prime services and related equity derivatives activities in Hong Kong. The SFC stated that the key objectives of the review are to identify potential conduct issues arising from the practices adopted by prime brokers, to assess the internal controls in place, and to provide guidance on how the risks are managed. The findings of the review are expected to form the basis for the SFC to issue further guidance to the market.

The SFC indicated the thematic review will focus on the following areas:

  • Industry landscape, needs and concerns;
  • Business structures of prime brokers;
  • Interaction between prime services and related equity derivatives activities; and
  • Key risks and controls for prime services and related equity derivatives activities.

The review will be conducted, in conjunction with an external consultant, through a combination of industry survey, meetings with both buy-side firms and prime brokers and on-site inspections. As part of the review, the SFC will also compare its existing regulatory requirements surrounding prime services activities with those of other major financial market regulators.

There is no timeline indicated for completion of the review or the issuance of further guidance to the market.

The SFC announcement is available here.

Key Contacts

Scott Carnachan

Consultant | Financial Services

Email or call +852 2825 9265

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Investment Funds, Regulatory

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