On 5 December 2019, the SFC published its quarterly report covering the three-month period from 1 July to 30 September 2019. In this article, we highlight the key messages included in the report (although we do not discuss any financial performance details). The report provides a good summary of what kept the SFC busy over Q3 2019 including all 14 circulars, and communication between the industry/industry associations and SFC senior management. The usual statistics are particularly useful for gaining insight to the SFC’s approach to regulation and regulatory priorities. The report also highlights the SFC’s regulatory engagement both in terms of international policy making through IOSCO and the FSB and regulator-to-regulator interaction.
SFC busy with inspections … and breaches and complaints
The SFC conducted 106 on-site inspections during the period (which is up 28.8% year-on-year). These are the top four areas of breach identified by the SFC during these inspections (note that the greatest year-on-year increase was with AML non-compliance – 153.5%!):
The SFC only received 969 complaints over the quarter which means that year-on-year the figure was down by a significant 36%.
Combating financial crime
Following the SFC’s joint operation with the Independent Commission Against Corruption (ICAC) in December 2017 involving an independent financial advisor, the ICAC charged five individuals with conspiracy to defraud during this period (after the ICAC first charged a former executive director of entity, with conspiracy to defraud in May 2019). The SFC entered into a memorandum of understanding with the ICAC in August 2019 to formalize and strengthen cooperation between the two organizations in combating financial crimes.
Proposed new Type 13 regulated activity
On 27 September 2019, the SFC launched a public consultation on its proposal to introduce a new type of regulated activity for trustees and custodians of SFC-authorized funds. It was proposed that depositaries operating in Hong Kong would need to be licensed and supervised by the SFC (or registered with and supervised by the HKMA). The consultation closed on 31 December 2019 and the SFC is expected to issue its conclusions as soon as practicable. This change is designed to better protect assets and retail investors generally.
Key figures for the quarter
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