Series
Publications
Series
Publications
HKMA Shares Good Practices on Operational Resilience: The Hong Kong Monetary Authority (HKMA) has recently issued a circular highlighting several industry best practices to strengthen the banks' operational resilience frameworks. Aimed at ensuring compliance with Supervisory Policy Manual module OR-2 by the May 2026 deadline imposed by the HKMA in 2022, the HKMA reports that all Authorised Institutions (AIs) have made good progress in developing robust frameworks. The circular does not create new expectations, instead it outlines the insights and good practices that AIs should integrate for mapping interdependencies and scenario testing, tailored to their specific operations and risk profiles. The HKMA encourages ongoing self-assessment for tracking progress toward operational resilience by 2026, pledging continued support and guidance throughout this transformative journey.
Additional SFC Requirements for Listed Structured Funds: The Securities & Futures Commission of Hong Kong (SFC) has released a circular enhancing the framework for authorising listed structured funds in Hong Kong, responding to growing market appetite. This update, which supersedes the 2020 circulars on Leveraged and Inverse products (L&I), expands the focus to include innovative fund types such as single-stock L&I and defined outcome funds. These financial products must now meet the additional requirements set out in the circular and the accompanying Appendix as the SFC emphasises this is to protect the interests of the investing public and maintain the integrity of the Hong Kong market. The provisions include ensuring that funds are distinctly named compared to traditional ETFs and CIS, with mandatory risk and cost disclosures in the Product Key Facts Statement and a reminder that fund distribution must comply with relevant Code of Conduct requirements, such as know your client rules on derivative products and complex products. Further fortifying market integrity, the SFC mandates at least one market maker per fund and the provision of performance simulators for complex products.
Quicker VATP Application Process Launched: The SFC has unveiled a more agile licensing regime alongside a revamped external assessment process for new applicant virtual asset trading platforms (VATPs), effective from 18 December 2024. The SFC will continue to scrutinise the applicant's business structure and the suitability of both the VATP and its appointed external assessor (EA), with potential regulatory interventions where issues are identified. However, once the licence application is accepted by the SFC, the VATP applicant will need to deploy its systems and controls and enter into a tripartite agreement with the EA and the SFC, under which the EA will perform the external assessment of relevant design, systems and controls. The SFC believes this tripartite agreement will ensure robust regulatory compliance. These changes were previously announced by the SFC for speeding up the review of deemed licensed VATPs, but now they will apply to new applicants as well.
SFC Expectations on VATP Conduct: The SFC has published its findings from inspections on deemed-to-be-licensed VATP applicants and clarified its expected standards of conduct for VATP operators. A major focus is on cybersecurity where a recurrent theme is the need for robust privileged access management, with senior management overseeing and approving privileged account usage to mitigate risks. The SFC also stresses enhanced cybersecurity measures, including deploying up-to-date encryption technologies and continuous security operations monitoring. Platform Operators must ensure client assets are safeguarded against fraud, necessitating segregation and secure storage of virtual asset keys. Inspections revealed gaps, such as excessive reliance on single external service providers for infrastructure, and the need for comprehensive contingency plans. Overall, the SFC underscores the importance of stringent security measures, effective governance, and operational resilience in the management of virtual assets and VATPs should be critically reviewing their policies, procedures, systems and controls in light of the guidance.
HKMA Launches Distributed Ledger Technology (DLT) Incubator: The HKMA has launched the supervisory incubator in early January which will provide banks with access to a platform and resources to obtain supervisory feedback on their DLT-related proposals. The incubator also allows banks to conduct live trials to validate and refine specific aspects of their risk management implementation, and the HKMA has said it is prepared to provide a certain amount of supervisory flexibility to banks that access the Incubator. Tokenised deposits are likely to be one of the key focus areas for the Incubator, as it will be looking at addressing risks that arise in relation to products that use both legacy banking infrastructure and DLT. The HKMA requires banks to contact the Incubator directly for information on how to apply.
SFC and HKMA Enforcement Collaboration: The SFC has taken action against Hang Seng Bank for failures in relation to the sale of collective investment schemes (CIS) and derivative products. The HKMA had previously carried out an investigation into the bank which revealed concerns regarding the sale of CIS products during 2016/2017, and therefore referred the findings to the SFC for further action. In its enforcement notice, the SFC has highlighted failures related to overcharging clients and making inadequate disclosure of monetary benefits to them during various periods over the course of nine years between February 2014 and May 2023. There were also instances identified where the bank sold derivative funds to clients who were not characterised as having knowledge of the nature and risks of derivatives, as well as examples of transactions involving products whose risk level was higher than the clients' risk tolerance level. The bank has been fined HK$66.4 million.
SFC Commences False Trading and Disclosure of Interest Proceedings: The SFC has commenced criminal proceedings against two individuals, Mr Lin Tai Fung and his brother-in-law, Mr Or Chun Nin, for alleged conspiracy to commit false trading in the shares of Pa Shun International Holdings Limited from 9 April 2017 to 7 March 2018. In addition, Lin was also charged for failures to notify the Stock Exchange of Hong Kong Limited (SEHK) of changes in his interest in the Pa Shun shares as required by provisions in Part XV of the Securities and Futures Ordinance (SFO) on eight occasions between 2 June 2017 and 14 March 2018. Part XV of the SFO requires persons who are interested in 5% or more of any class of voting shares in a corporation listed on SEHK to disclose their interests in voting shares of such SEHK-listed corporation by filing disclosures with the SEHK and the listed corporation. The case has been adjourned to 20 March 2025.
MAS Responds on Proposed Notice on Prevention of Money Laundering and Countering the Financing of Terrorism for Organised Market Operators Formed or Incorporated in Singapore: The Monetary Authority of Singapore (MAS) has issued their response to the Consultation Paper on the Proposed Notice on Prevention of Money Laundering and Countering the Financing of Terrorism for Organised Market Operators Formed or Incorporated in Singapore, which was published in March 2024. The Consultation sought views on the MAS' proposals to issue an AML/CFT Notice for organised market operators formed or incorporated in Singapore in the conduct of their operations and business activities.
MAS Issued AML/CFT Notice and Guidelines for Approved Exchanges and Recognised Money Operators: The MAS has published Notice SFA 02-N05 to Approved Exchanges and Recognised Market Operators on Prevention of Money Laundering and Countering the Financing of Terrorism and its accompanying Guidelines. The AML/CFT requirements for approved exchanges and recognised market operators includes (i) Risk Assessment and Risk Mitigation; (ii) Customer Due Diligence; (iii) Reliance on Third Parties; (iv) Record Keeping; (v) Suspicious Transaction Reporting; and (vi) Internal Policies, Compliance, Audit and Training. The Guidelines provide guidance to approved exchanges and recognised market operators on the requirements detailed above and should be read in conjunction with the Notice.
Revised FAQs on Licensing of Fund Management Companies: The MAS has revised its FAQs on Licensing of Fund Management Companies, particularly on the question on the procedures to acquire a regulated fund management company (FMC).
MAS revises Guidelines on Licensing and Conduct of Business for Fund Management Companies: The MAS has revised Guidelines on Licensing and Conduct of Business for Fund Management Companies [SFA04-G05], which sets out the eligibility criteria and application procedures for licensed FMCs and venture capital fund managers. The revised Guidelines has inserted additional good practices to ensure proper conflict management when the option to exchange existing interest to another fund managed by the FMC or its related parties is made available to customers.
Updated Notice on Reporting of Misconduct of Representatives by Holders of CMSL and Exempt Financial Institutions: The MAS has updated its Notice on Reporting of Misconduct of Representatives by Holder of Capital Markets Services Licence and Exempt Financial Institutions. Changes were made to the section references in paragraph 1 and the note at paragraph 16, to refer to section 101 of the SFA following the Financial Institutions (Miscellaneous Amendments) Act 2024.
Updated FAQs on Licensing and Business Conduct (Other than for Fund Management Companies): The MAS has updated the FAQs on Licensing and Business Conduct (Other than for Fund Management Companies). The FAQs contain the updated procedures to apply for the acquisition of a Capital Markets Services (CMS) licence holder and how provisional representatives and temporary representatives differ from appointed representatives.
MAS Updated Guidelines on Criteria for Grant of a CMSL: The MAS has revised its Guidelines on Criteria for the Grant of a Capital Market Services Licence [SFA04-G01]. The Guidelines set out the minimum licensing requirements under the Securities and Futures Act 2001 (SFA) and the minimum licensing admission criteria for persons applying for a CMS licence. The MAS has updated the definition of the appointed representative in the Guidelines to be in line with the updated definition in the SFA.
Updated Notice on Reporting of Misconduct of Representatives by Financial Advisers: The MAS has updated the Notice on Reporting of Misconduct of Representatives by Financial Advisers [FAA-N14]. The updates were primarily made to reflect the changes to the section renumbering in the Financial Advisors Act 2001 (FAA).
Updated FAQs on FAA, FAR, Notices and Guidelines: The MAS has published the updated FAQs on Financial Advisers Act, Financial Advisers Regulations, Notices and Guidelines. The updates relate to (i) changes in section number (to reflect the previous renumbering of the FAA), (ii) update of the reference to the competency notice (from FAA-N13 to FAA-N26), and (iii) removal of the FAQ relating to registered fund management companies.
MAS Published Industry Good Practices on the Basic Financial Planning Guide: The MAS has published a set of Guidance to financial advisers on incorporating the Basic Financial Planning Guide into their financial advisory process. The MAS encourages all financial advisers to adopt these good practices.
Updated Guidelines on Licensing for Payment Service Providers: The MAS has updated the Guidelines on Licensing for Payment Service Providers [PS-G01], in particular to provide further guidance around the qualifications, credentials, track record and independence of the external auditor appointed by digital payment token services licence applicants, for purposes of performing an independent assessment of the applicant’s technology and cybersecurity risk. The independent assessment has to be performed upon the grant of an in-principal approval.
MAS Published Updated Compliance Toolkits for Banks, Trust Companies and Financial Advisers: The MAS has updated the: (i) Compliance Toolkit for Approvals, Notifications and Other Regulatory Submissions to MAS for Wholesale Banks and Full Banks; (ii) Compliance Toolkit for Approvals, Notifications and Other Regulatory Submissions to MAS for Merchant Banks; (iii) Compliance Toolkit for Approvals, Notifications and Other Regulatory Submissions to MAS for Licensed Trust Companies, Exempt Persons Providing Trust Services, and Approved CIS Trustees; and (iv) Compliance Toolkit for Approvals, Notifications and Other Regulatory Submissions to MAS for Financial Advisers. The Compliance Toolkits are meant to guide and facilitate compliance with the various MAS approval and reporting requirements and timelines.
MAS Updates Guidelines on Risk Management Practices for Outsourcing Arrangements: The MAS has updated its Guidelines on Outsourcing (Financial Institutions other than Banks), which has taken effect on 11 December 2024. The Guidelines apply to all financial institutions, with the exception of banks and merchant banks, in Singapore. It sets out the MAS' expectations of financial institutions that have entered into any outsourcing arrangement or is planning to outsource its business activities to a service provider.
MAS Published Updated Forms for Financial Institutions: The MAS has published updated forms for various financial institutions to notify the MAS or apply to the MAS in relation to various matters. These include (i) the application form for appointment of chairperson, chief executive officer, director, or key persons, (ii) the application form for potential acquirers to seek the MAS' approval for obtaining effective control of capital markets services licensees, and (iii) annual declaration for arrangements with foreign related corporations and/or foreign offices notified under the exemption regulations, among others.
MAS Issues Civil Penalty for False Trading and Unauthorised Trading: The MAS has imposed a S$350,000 civil penalty on Mr Gui Boon Sui for artificially inflating the closing prices of shares in Hiap Hoe Limited and Hotel Grand Central Limited between December 2018 and August 2022, and for using others' trading accounts without broker authorisation. Mr Gui admitted to the violations and agreed to pay the penalty, he has also accepted a two-year ban from managing or directing companies.
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