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On 11 December 2020, the Securities and Futures Commission (SFC) released its consultation paper regarding proposals to update the entry requirements for persons seeking to be licensed to engage in regulated activities, and ongoing competency standards for intermediaries and individual practitioners (e.g. responsible officers (ROs), licensed representatives (LRs), executive officers (EOs) and relevant individuals (ReIs)). Below, we have captured some of the key proposals, in particular, those that will have an effect on the asset management industry.
i. |
A broader range of industry experience will be considered relevant when considering RO applications for those seeking accreditation to private fund managers. Experience which is indirectly relevant such as sales, marketing and risk management of funds will also be considered, but such an individual will likely be imposed with the “non sole” condition on their licence. |
ii. |
In relation to discretionary account management, the SFC may consider industry experience acquired on a wholly incidental basis as relevant to asset management. For example, the discretionary account management experience acquired by an RA 1 LR/RO who conducts such management activities wholly incidental to their conduct of dealing activities may be considered as relevant industry experience when applying to carry on asset management. |
iii. |
An individual with experience such as conducting research, valuation and due diligence of companies in related industries, among other experience, will be regarded as having relevant industry experience for carrying on activities relating to private equity. |
In addition to the above, the SFC has provided guidance to corporations which engage in certain activities such as managing authorized funds. For example, when the SFC is assessing a corporation’s compliance competency, a key element the SFC will consider when addressing conflicts of interest arising from the corporation or its group of companies carrying on multiple types of RAs concurrently (e.g. advising on corporate finance, securities research and asset management activities), is whether or not there are appropriate policies and procedures on “Chinese walls” including the “wall crossing procedure” and other control procedures.
The current continuous professional training (CPT) requirements require an individual to undertake a minimum of five CPT hours per calendar year for each RA undertaken. Going forward the SFC proposes to base the CPT requirements on an individual rather than activity basis. In relation to CPT requirements, the SFC proposes a minimum of 10 CPT hours per year for LRs and ReIs and 12 hours per year for ROs and EOs. Furthermore, each individual practitioner will be required to attend at least five CPT hours on topics directly relevant to the RAs in which they engage. Ethics and compliance is also brought to the forefront with individual practitioners having to complete no less than two CPT hours on such topics per year.
The SFC has proposed to implement the revised guidelines on competence and CPT at least six months after their publication and no earlier than 31 December 2021, allowing some time for intermediaries in the industry to prepare and adjust their internal guidelines accordingly.
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