SFC Issues Bulletin Warning Against Criminal License Applications

The Hong Kong regulator also provided updates on Manager-In-Charge Regulation

The Securities and Futures Commission (SFC), a Hong Kong regulator, issued a statement today addressing licensing application problems. It also provided an update on the implementation of its Manager-In-Charge (MIC) regime.

In its bulletin, the SFC noted that there had been substantial increases in the number of licensed corporations and individuals. Over the past five years, the number of licensed corporations has risen at an annual compound rate of 7 percent, with licensed individuals increasing at a 3 percent annual compound rate.

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The regulator noted that they have had to decline an increasing number of applications for licences in this period too. They detailed the application process, noting that they check individuals’ backgrounds with other regulatory bodies. In a number of cases, individuals and corporations had been denied a licence due to poor funding and, more significantly, past illicit behaviour in other jurisdictions.

Demonstrating the efficacy of their application process, the SFC also stated that, not only have they denied certain licence applications, but they have prosecuted some of them. The regulator says that individuals who provide false information in their application process may be charged for criminal behaviour.

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Julia Leung, the SFC’s Deputy Chief Executive Officer, commented on licensing developments, saying: “With the number of SFC licensees reaching record highs and the industry landscape evolving rapidly, we are reviewing our process to ensure that our gatekeeping function continues to be carried out in a fair, efficient and transparent manner”

Taking management to task

The SFC also provided further information on MIC implementation. MIC regulation was introduced at the end of 2017 and aims to ensure structures are in place that instill a level of culpability to those in management positions.

In its bulletin, the regulator detailed a number of niche scenarios to help firms better determine who is and who is not effected by MIC regulation. Specifically, it stated that employees often holding representative positions were not acting under MICs, despite managing teams of people who were.

The SFC added that it had rectified this issue by providing individuals working in those positions with licenses to act as Responsible Officers (ROs) under MIC regulation. It also noted that firms had put in place training structures, which it viewed very positively, to ensure those individuals were meeting their regulatory responsibility.

Leung also discussed developments in the MIC regulation, saying: “we are pleased to note that licensed corporations have strengthened their senior management accountability which in turn is driving proper behaviour.”

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