Hong Kong
Legislative and Regulatory Amendments
- Securities and Futures Commission (SFC)
This circular outlines the Securities and Futures Commission’s (SFC) expectations for licensed corporations (LCs) regarding governance and internal control standards for monitoring financial resources and compliance with the Securities and Futures (Financial Resources) Rules (FRR).
The SFC has observed undesirable practices leading to declines in excess liquid capital or breaches of requirements. Key deficiencies include inadequate monitoring controls, improper accruals, and incorrect asset treatments. LCs must ensure competent oversight and timely reporting to maintain compliance with the FRR and safeguard their operations effectively.
Date of Release: 3 July 2024
Implementation Date: 3 July 2024
Applicable to: Licensed Corporations (LCs) regulated by the Securities and Futures Commission (SFC).
Circular on launch of e-IP application/submission system on WINGS
The Securities and Futures Commission (SFC) launched the e-IP online application system on 29 July 2024 to streamline new product applications and submissions to the Investment Products Division (IPD). Users were advised to activate their e-IP administrator accounts and prepare for a three-month parallel run until 29 October 2024, during which applications were still accepted via existing channels.
Date of Release: 8 July 2024
Implementation Date: 8 July 2024
Applicable to: Licensed Corporations (LCs) regulated by the Securities and Futures Commission (SFC).
The Financial Action Task Force (FATF) issued updated guidance regarding jurisdictions under increased monitoring and countermeasures. Notably, the Democratic People's Republic of Korea (DPRK) remains under intense scrutiny for AML/CFT deficiencies, while Iran is urged to implement effective countermeasures against terrorist financing risks. Additionally, Monaco and Venezuela have been added to the increased monitoring list.
Date of Release: 8 July 2024 Implementation Date: Immediate Applicable to: All FATF member jurisdictions and regulated entities.
Circular to intermediaries - HKEX’s annual rehearsal for trading system recovery
Hong Kong Exchanges and Clearing Limited (HKEX) conducted its annual rehearsal for emergency trading system recovery in the securities market on 7 September 2024, from 11:00 am to 3:10 pm. The rehearsal focused on the submission of the BCAN-CID Mapping File and Reporting Forms to the Stock Exchange of Hong Kong's data repository, which applied to all Relevant Regulated Intermediaries (RRIs). It also included BCAN tagging for order submission to SEHK’s trading system, applicable to RRIs who were Exchange Participants. All RRIs were encouraged to participate to familiarise themselves with the contingency procedures.
Date of Release: 13 August 2024 Implementation Date: 7 September 2024 Applicable to: Relevant Regulated Intermediaries (RRIs) and Exchange Participants (EPs).
Circular to Licensed Corporations - Revised financial return form
On 23 August 2024, the Securities and Futures Commission (SFC) published a revised financial return form for licensed corporations under section 56 of the Securities and Futures (Financial Resources) Rules. Effective from 1 November 2024, the new electronic form will be used for submissions regarding any period ending on or after 24 October 2024, superseding the version from 25 May 2023.
Date of Release: 23 August 2024 Implementation Date: 1 November 2024 Applicable to: Licensed Corporations under the SFC.
OTC derivatives regulatory regime | Securities & Futures Commission of Hong Kong (sfc.hk)
The Securities and Futures Commission (SFC) implemented the OTC derivatives regulatory regime to address structural deficiencies highlighted by the 2008 financial crisis. The Securities and Futures (Amendment) Ordinance 2014 was enacted on 26 March 2014, establishing a comprehensive regulatory framework.
Mandatory reporting began on 10 July 2015, expanding to all key asset classes by 1 July 2017. Mandatory clearing for standardised IRS took effect on 1 September 2016, with further amendments effective from 1 July 2024.
Date of Release: 26 March 2014 Implementation Dates: 10 July 2015, 1 July 2017, 1 September 2016, 1 July 2024 Applicable to: OTC derivatives market participants in Hong Kong
The Securities and Futures Commission (SFC) issued a circular outlining the conditions for distributing research reports related to eligible Mainland exchange-traded funds (ETFs) under Stock Connect in Hong Kong. These conditions align with existing practices for research reports on eligible Mainland stocks.
The SFC collaborates with the China Securities Regulatory Commission (CSRC) to enhance mutual capital market access. The circular details requirements for intermediaries distributing these reports, ensuring they are factual, fair, and balanced.
Date of Release: 9 September 2024 Implementation Date: Immediate Applicable to: Intermediaries licensed for Type 1 and Type 4 regulated activities.
On 26 September 2024, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) published a joint consultation conclusions paper on the mandatory use of Unique Transaction Identifiers, Unique Product Identifiers, reporting of Critical Data Elements, and the adoption of the ISO 20022 standard. The Hong Kong Trade Repository (HKTR) system will launch on 29 September 2025. A testing environment will be available from June 2025 for reporting entities to simulate changes.
Date of Release: 26 September 2024 Implementation Date: 29 September 2025 Applicable to: Reporting entities in the OTC derivatives market.
Circular to licensed corporations engaged in asset management business
On 9 October 2024, the Securities and Futures Commission (SFC) identified various deficiencies in licensed corporations managing private funds and discretionary accounts. These issues pose risks to investor assets and breach regulatory obligations, undermining market integrity.
The SFC emphasised the responsibility of senior management to ensure compliance and address conflicts of interest, risk management failures, inadequate investor information, and improper valuation methodologies. The SFC will intensify supervision and disciplinary actions against misconduct to protect investors and maintain confidence in Hong Kong’s asset management sector.
Date of Release: 9 October 2024 Implementation Date: 9 October 2024 Applicable to: Licensed asset managers in Hong Kong.
- Hong Kong Monetary Authority (HKMA)
Northbound Swap Connect margin collateral arrangement
The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) welcomed the People's Bank of China's (PBoC) new measure allowing offshore investors to use onshore bonds issued by the Ministry of Finance and policy banks as margin collateral for Northbound Swap Connect transactions. This initiative offers non-cash collateral options, reducing liquidity costs and enhancing capital efficiency. It also aims to stimulate offshore investors' holdings in onshore bonds and foster synergies between the Bond Connect and Swap Connect schemes. Further implementation details will be announced soon.
Date of Release: 9 July 2024 Implementation Date: 9 July 2024 Applicable to: Offshore investors using Northbound Swap Connect.
the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) released consultation conclusions on a legislative proposal for regulating fiat-referenced stablecoin (FRS) issuers in Hong Kong. The two-month public consultation, which ended in February, received 108 submissions, with a strong consensus on the need for a regulatory framework to address monetary and financial stability risks.
The proposed licensing regime aims to align with international standards and enhance the existing regulatory framework for virtual assets. The FSTB and HKMA will incorporate feedback from stakeholders and aim to introduce a bill to the Legislative Council soon.
Date of Release: 17 July 2024. Applicable to: Stablecoin issuers in Hong Kong.
the Hong Kong Monetary Authority (HKMA) and the Dubai Financial Services Authority (DFSA) hosted their inaugural Joint Climate Finance Conference in Hong Kong, attracting over 240 participants from various financial institutions and organisations. Under the theme “Building a Net-Zero Asia – Middle East Corridor,” the conference addressed the demand for transition finance and collaboration opportunities. An MOU was signed to enhance the partnership in sustainable finance, fostering cross-border dialogue and joint research. Both authorities aim to mobilise capital for sustainable growth and reinforce their commitment to climate finance initiatives.
Date of Release: 16 September 2024. Applicable to: Financial institutions and stakeholders in sustainable finance.
SFC-HKMA joint survey shows strong rebound in sales of investment products in 2023
The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) announced a 14% increase in sales of non-exchange-traded investment products, totaling $4,338 billion in 2023, up from $3,799 billion in 2022. The survey revealed improved market sentiment following pandemic recovery and easing inflation. The number of firms selling investment products rose to 380, with 68% reporting increased transactions. Key sales growth came from collective investment schemes, debt securities, and structured products.
Date of Release: 20 September 2024. Applicable to: Licensed Corporations and Registered institutions
The Hong Kong Monetary Authority (HKMA) commenced Phase 2 of the e-HKD Pilot Programme, expanding Project e-HKD to explore innovative use cases for digital money, including e-HKD and tokenised deposits. This new phase involves 11 selected firms examining use cases related to the settlement of tokenised assets, programmability, and offline payments.
The HKMA will establish the e-HKD Industry Forum to facilitate collaboration among participating institutions. An e-HKD sandbox will also be available for pilot participants to accelerate development and testing of use cases, with key learnings expected to be shared by the end of 2025.
Date of Release: 23 September 2024. Applicable to: Financial institutions and stakeholders in digital finance.
GL32: Guideline on Group Supervision
The Insurance Authority (IA) published a revised Guideline on Group Supervision (GL32) under section 133 of the Insurance Ordinance (Cap. 41).
Key amendments include classifications into majority and minority shareholder controllers and a detailed explanation of the "fit and proper" criteria for these controllers. Additionally, the IA clarifies expectations for independent non-executive directors of designated insurance holding companies (DIHCs). The revised GL32 took effect on the same date.
Date of Release: 5 July 2024. Implementation date: 5 July 2024 Applicable to: Chief Executives of Designated Insurance Holding Companies.
On 5 July 2024, the Insurance Authority (IA) issued a Practice Note for licensed insurance brokers regarding Investment-Linked Assurance Scheme Policies (ILAS Policies), effective 1 October 2024. The Note outlines expectations for execution-only, advisory, and discretionary investment services, emphasising the need for enhanced governance and expertise. Competency requirements for personnel are detailed in Annex A, with grandfathering arrangements for existing policies. Annex B specifies corporate governance expectations. The IA highlights the importance of transparency for policyholders regarding service terms and fees, ensuring informed decision-making.
Date of Release: 5 July 2024. Implementation Date: 1 October 2024. Applicable to: Chief Executives of Authorized Insurers and Responsible Officers of Licensed Insurance Broker Companies.
the Insurance Authority (IA) endorsed the Reference Checking Scheme for insurance intermediaries launched by The Hong Kong Federation of Insurers (HKFI), effective 1 September 2024. The Scheme addresses the "rolling bad apples" issue, requiring Long Term Insurers (Recruiting Insurers) to conduct reference checks on agents with previous insurers within the last seven years. This mechanism promotes accountability and transparency. The IA will view participation as a critical internal control for assessing agent fitness. Non-compliance may result in increased scrutiny and follow-up actions from the IA.
Date of Release: 5 July 2024. Implementation Date: 1 September 2024. Applicable to: Chief Executives of all Authorized Insurers carrying on long-term business.
the Insurance Authority (IA) announced that, effective from 23 September 2024, it will charge fees for processing insurance intermediary licence applications and related notifications. This decision follows feedback from the insurance industry and is intended to enhance regulatory functions. Fees will apply to various applications, including new licence applications, renewals, and notifications for both individual licensees and insurance agencies/broker companies.
Date of Release: 31 July 2024. Implementation Date: 23 September 2024. Applicable to: Chief Executives of all authorized insurers, responsible officers of licensed insurance agencies, and licensed insurance broker companies.
The Insurance Authority (IA) announced the launch of the “CPD Non-Compliance Reporting” Platform on the Insurance Intermediaries Connect (IIC), featuring an e-Payment function. This platform allows authorised insurers, licensed insurance broker companies, and licensed insurance agencies (referred to as Principals) to report non-compliance with Continuing Professional Development (CPD) requirements.
Date of Release: 12 August 2024. Implementation Date: 12 August 2024. Applicable to: Chief Executives of all authorized insurers, responsible officers of licensed insurance agencies, and licensed insurance broker companies.
"Conduct in Focus" – August 2024
the Insurance Authority (IA) announced the release of the summer edition of its periodical, "Conduct in Focus," available on the IA's website. This edition explores the role of insurance brokers in the life insurance market, focusing on standards and controls to prevent unlicensed selling, particularly for Mainland China visitors.
Date of Release: 16 August 2024. Implementation Date: 16 August 2024. Applicable to: Chief Executives of all authorized insurers, responsible officers of licensed insurance agencies, and licensed insurance broker companies.
- Hong Kong Exchanges and Clearing Limited (HKEX)
HKEX to Introduce Gold Standard Carbon Credits on Core Climate
This circular announces the inclusion of Gold Standard's Verified Emission Reductions (GS-VERs) on the Core Climate platform, effective 1 August 2024. This addition enhances HKEX's carbon market by providing diverse, internationally certified climate projects, supporting investors and corporates in their net zero transition. Core Climate will facilitate the trading, settlement, custody, and retirement of GS-VERs, ensuring a seamless user experience.
Date of Release: 01 August 2024 Implementation Date: 1 August 2024 Applicable to: Participants on the Core Climate platform.
HKEX Announces Establishment of Integrated Fund Platform Task Force
This circular announces the formation of the Integrated Fund Platform (IFP) Task Force by HKEX to enhance fund distribution in Hong Kong. Supported by the HKSAR Government and the SFC, the Task Force will gather industry insights to finalise the platform's design. It aims to improve product access and efficiency, featuring a repository of SFC-authorised products and a centralised network for fund distribution.
Date of Release: 20 September 2024 Implementation Date: To be announced in Q4 2024 Applicable to: Fund distribution stakeholders in Hong Kong.
This circular announces temporary modifications to listing requirements for Specialist Technology Companies and De-SPAC Transactions by the SFC and the Exchange, effective 1 September 2024. Key changes include reduced initial market capitalisation thresholds for Specialist Technology Companies and lowered independent third-party investment requirements for De-SPAC Transactions. Additionally, the independence criteria for third-party investors will align with those for Specialist Technology Companies. These modifications will be in place from 1 September 2024 to 31 August 2027, with a review planned before the end of the period.
Date of Release: 23 August 2024 Implementation Date: 1 September 2024 Applicable to: Specialist Technology Companies and SPACs.
HKEX Adds Abu Dhabi Securities Exchange and Dubai Financial Market as Recognised Stock Exchanges
This circular announces the inclusion of the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) as Recognised Stock Exchanges (RSEs) by the Stock Exchange of Hong Kong Limited (HKEX), effective immediately. This allows public joint stock companies listed on ADX and DFM to apply for a secondary listing in Hong Kong.
Date of Release: 19 July 2024 Implementation Date: 15 October 2024 Applicable to: Public joint stock companies listed on ADX and DFM.
Exchange Publishes Consultation Paper on a New Phase of Paperless Listing Reforms
This circular announces a consultation on proposals to expand the paperless listing regime by the Stock Exchange of Hong Kong Limited, aimed at modernising market infrastructure and enhancing operational efficiency. Key proposals include electronic securities holders' instructions, real-time electronic payment of corporate action proceeds, electronic subscription payments, hybrid general meetings with e-voting, and web accessibility for corporate communications. Market feedback is invited until 18 October 2024.
Date of Release: 16 August 2024 Implementation Date: Consultation period ends 18 October 2024 Applicable to: All market participants and issuers.
Consultations
No consultations in Hong Kong for Q3
This document is provided for information purposes only and does not constitute legal, tax, investment, regulatory, accounting or other professional advice. For more information on the legal and regulatory status of IQ-EQ companies please visit www.iqeq.com/legal-and-compliance.