SFC issues quarterly report

12 Aug 2019



The Securities and Futures Commission (SFC) today published its Quarterly Report summarising key developments from April to June 2019.

During the quarter, the SFC concluded a consultation on proposed guidelines for securities margin financing activities to ensure brokers’ financial stability and consistent risk management practices (Note 1). In addition, a new approach for the onboarding of overseas individual clients online took effect and rule amendments were made to cater for intermediaries’ need to adapt their practices as business is increasingly conducted online. Changes to the SFC’s licensing processes and forms were fully implemented in April, bringing its gatekeeping function in line with its front-loaded regulatory approach.

A report and an accompanying circular issued in June highlighted the regulatory obligations of Hong Kong prime brokers and set out the SFC’s expected standards of conduct and internal controls. Other circulars issued during the quarter provided guidance on the conduct and internal controls expected of licensed brokers providing client facilitation services, third-party payments, credit rating model risk management and disclosure requirements for green funds.

The SFC entered into a tri-partite memorandum of understanding with the Ministry of Finance of the People’s Republic of China and the China Securities Regulatory Commission on access to audit working papers for Hong Kong-listed Mainland companies.

In enforcement, the SFC disciplined five licensed corporations and four representatives during the quarter, resulting in fines totalling $39.5 million. Amongst them, China Merchants Securities (HK) Co., Limited was reprimanded and fined $27 million for failings in its sponsor work in the listing application of China Metal Recycling (Holdings) Limited.

Key figures from the report include the following:

  • The number of licensees and registrants totalled 47,239, up 4.7% year-on-year, and the total number of licensed corporations increased 8.7% to a record high of 3,017.
  • The SFC conducted 82 on-site inspections of licensed corporations to review their compliance with regulatory requirements.
  • 2,799 collective investment schemes were authorised by the SFC as of 30 June.
  • The SFC reviewed 105 new listing applications, up 25% from the previous quarter.
  • The SFC issued section 179 directions to gather additional information in 40 cases and wrote to detail its concerns in seven transactions (Note 2).

The report is available on the SFC website.

End

Notes:

  1. The guidelines, including qualitative requirements and quantitative benchmarks for margin lending policies and key risk controls, will take effect on 4 October 2019.
  2. Section 179 of the Securities and Futures Ordinance gives the SFC the power to compel the production of records and documents from persons related to a listed company.

 



Page last updated : 12 Aug 2019