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Hong Kong SFC 2022 Q2 Report: 48,533 Licensees, 2,852 Funds, $4.55 Trillion AUM, 837 Complaints, 74 Market Misconduct, 53 AML Breaches, 47 Criminal Charges
27th August 2022 | Hong Kong
The Hong Kong Securities & Futures Commission (SFC) has released the 2022 Quarterly Report (April – June 2022), providing key insights into Hong Kong financial industry, investment products, financial markets, corporates and enforcement actions & complaints. In Q2 2022, Hong Kong SFC reported 48,533 licensees including 3,261 corporations, a total of 2,852 Collective Investment Schemes, $4.55 trillion AUM (Asset & Wealth Mgmt Survey 2021), and key enforcement & complaint data including a total of 837 complaints on financial intermediaries & market activities, 74 market misconduct (Manipulation, Insider Trading), 53 anti-money laundering breaches, 33 fund manager conduct breaches, 47 criminal charges laid and more. View key highlights & summary below. View full report
” 48,533 Licensees, 2,852 Funds, $4.55 Trillion AUM, 837 Complaints, 74 Market Misconduct, 53 AML Breaches, 47 Criminal Charges “
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2022 Hong Kong SFC Quarterly Report Summary
Key Industry Highlights (April – June 2022):
- Total licensees & registrants: 48,533 including 3,261 corporations (30/6/22)
- 1,517 new license applications (43 corporate)
- Total Collective Investment Schemes: 2,852
- Unit trusts & mutual funds – HK-domiciled: 868
- Unit trusts & mutual funds – non-HK-domiciled: 1,382
- Asset & Wealth Management AUM 2021: $4.55 trillion (HKD 35.54 trillion)
- 69 new listing applications
- 2 overseas listed companies achieved dual listings on Hong Kong Mainboard
Enforcement Actions, Complaints Highlights (April – June 2022):
- Total Complaints against intermediaries & market activities: 837
- Cases with search warrants executed: 11
- Individuals & corporations subject to ongoing civil proceedings: 169
- Criminal charges laid: 47
- Individuals & corporations charged in criminal proceedings: 3
- Listed companies and disclosure of interests: 188
- Market misconduct (Manipulation, Insider Trading): 74
- Total Breaches during on-site inspections: 310
- Internal control weaknesses: 108
- Non-compliance with anti-money laundering guidelines: 53
- Fund Manager Code of Conduct: 33
- Code of Conduct for Persons Licensed / Registered with the Securities and Futures Commission: 44
- Safekeep client securities: 4
- Safekeep client money: 7
What’s New:
- May 2022: Published FAQ on Conduct standards in capital market transactions (book-building & placing activities). New requirement started on 5/8/22.
- Corporate license applications e-submissions via WINGS (Mandatory on 1/4/22)
- ETF Connect launched on 4th July 2022
- Mutual recognition of Funds (MRF) under Mainland-Hong Kong MRF scheme
- April 2022: Concluded consolation on the addition of 8 new calculation periods under the Clearing Rules for the over-the-counter (OTC) derivatives regulatory regime
- April 2022: Consultation on proposed changes to the position limit regime for listed futures & options contracts
- May 2022: Holiday trading on the derivatives market commenced
- June 2022: New risk models for the cash market (Sizing initial margin & default fund requirements for HKEX clearing participants)
- Late 2022: Launch of the investor identification regime at the trading level for the securities market in Hong Kong.
A) Intermediaries, Investment Products, Financial Markets, Corporates, Virtual Assets
1) Financial Intermediaries:
- Total licensees & registrants: 48,533 including 3,261 corporations (30/6/22)
- 1,517 new license applications (43 corporate)
- 60 on-site inspections of licensed corporations to review their compliance with regulatory requirement
- Corporate license applications e-submissions via WINGS (Mandatory on 1/4/22)
- May 2022: Published FAQ on Conduct standards in capital market transactions (book-building & placing activities). New requirement started on 5/8/22.
2) Investment Products
- Total Collective Investment Schemes: 2,852
- Approved 35 new Unit Trusts & Mutual Funds, 47 Unlisted Structured Investment, 16 open-ended fund companies (OFCs)
- Total open-ended fund companies (OFCs): 78
- Total Unlisted Structured Investment: 228
- Hong Kong-domiciled funds AUM: $169.6 billion (30/6/22)
Asset & Wealth Management AUM 2021: $4.55 trillion (HKD 35.54 trillion) - ETF Connect launched on 4th July 2022
- Mutual recognition of Funds (MRF) under Mainland-Hong Kong MRF scheme
3) Authorised collective investment schemes
- Unit trusts & mutual funds – HK-domiciled: 868
- Unit trusts & mutual funds – non-HK-domiciled: 1,382
- ILAS: 300
- Pooled retirement funds: 32
- Mandatory provident fund (MPF) schemes: 26
- MPF pooled investment funds: 219
- Others: 25
- Total: 2,852
4) Non-Hong Kong-domiciled authorised funds Origin: 1,382
- Luxembourg: 1,034
- Ireland: 242
- United Kingdom: 29
- Mainland China: 49
- Bermuda: 1
- Cayman Islands: 22
- Others: 5
5) Financial Markets
- In April 2022: Concluded consolation on the addition of 8 new calculation periods under the Clearing Rules for the over-the-counter (OTC) derivatives regulatory regime
- In April 2022: Consultation on proposed changes to the position limit regime for listed futures & options contracts
- In May 2022: Holiday trading on the derivatives market commenced
- In June 2022: New risk models for the cash market (Sizing initial margin & default fund requirements for HKEX clearing participants)
- Late 2022: Launch of the investor identification regime at the trading level for the securities market in Hong Kong.
- No. of Automated Trading Services Providers (ATS): 50 (26 Corporations, 13 Dark Pool Operators)
- Consultation to amend the Securities & Futures Ordinance (SFO) to facilitate more effective enforcement actions
6) Corporate (Listing, Take-over)
- 69 new listing applications
- 2 overseas listed companies achieved dual listings on Hong Kong Mainboard
- 2022 April, publicly criticised Gao Yunhong & Feng Xuelian for breaching the no frustrating action rules during an offer for Steering Holdings Limited (As directors of Steering, they were substantially involved in the disposal of some of the company’s listed securities which constituted a disclosable transaction under the Listing Rules and a frustrating action subject to the Takeovers Code. There was a breach of the Takeovers Code when neither the approval of Steering’s shareholders was obtained nor was a waiver of the requirement to obtain shareholders’ approval sought from the Executive)
7) Virtual Assets
- In April 2022, approval-in-principle to Hash Blockchain Limited (2nd virtual asset trading platform operator in HK)
- In June 2022, Anti-Money Laundering & Counter-Terrorist Financing (Amendment) Bill 2022 (new licensing regime for centralised virtual asset exchanges trading non-security tokens in HK to be regulated by the SFC)
- Warning Issued in June 2022: Risks associated with non-fungible tokens (NFTs) and reminded the industry that where NFTs cross the boundary between a collectible and a financial asset, they may be subject to our regulation.
B) Enforcement Actions, Complaints
1) Enforcement activities:
- Cases with search warrants executed: 11
- Compliance advice letters issued: 23
- Individuals & corporations subject to ongoing civil proceedings: 169
- Disciplinary notice issued: 6
- Criminal charges laid: 47
- Individuals & corporations charged in criminal proceedings: 3
- Investigations completed: 44
- Investigations started: 24
- Section 179 commenced: 5 (Produce records & documents by listco for fraud, misconduct)
- Section 181 commenced: 40 (Products information by intermediary on trading transaction, including end-clients)
- Section 182 Issued: 24 (Power to investigate SFO offences, market misconduct, fraud, misfeasance and disciplinary misconduct.)
2) Complaints against intermediaries and market activities: 837
- Conduct of licensees: 215
- Conduct of registered institutions: 15
- Listed companies and disclosure of interests: 188
- Market misconduct (Manipulation, Insider Trading): 74
- Product disclosure: 2
- Unlicensed activities: 19
- Breach of offers of investments: 7
- Boiler rooms & suspicious websites: 58
- Scams & frauds (Identify etc): 165
- Financial activities not regulated by the SFC (Eg. bullion trading, banking services): 94
3) Breaches during on-site inspections: 310
- Securities & Futures (Financial Resources) Rules: 2
- Safekeep client securities: 4
- Maintain proper books & records: 2
- Safekeep client money: 7
- Unlicensed dealing & other registration issues: 5
- Licensing conditions: 2
- Requirements of contract notes/statements of account/receipts: 13
- Margin requirements: 1
- Code of Conduct for Persons Licensed / Registered with the Securities and Futures Commission: 44
- Corporate Finance Adviser Code of Conduct: 2
- Fund Manager Code of Conduct: 33
- Regulation of online trading: 4
- Non-compliance with anti-money laundering guidelines: 53
- Rules & regulations of the Exchanges: 1
- Internal control weaknesses: 108
- Others: 29
4) Enforcement Highlights:
- Hong Kong Court orders fraudsters of a global pyramid and ponzi scheme to compensate their victims. The Court appointed administrators to receive and distribute to aggrieved investors the proceeds from the scheme totalling
- HKD 2.8 million in 2 bank accounts frozen by the SFC. (DFRF Enterprises LLC, DFRF Enterprises, LLC, and Daniel Fernandes Rojo Filho.)
- Hong Kong Court orders Maxim Capital Limited & Maxim Trader to pay aggrieved investors. The Court appointed administrators to receive, administer and distribute a total sum of approximately HKD 23.5 million in an account frozen by the SFC to the investors on a pro rata basis.
- China Everbright Securities (HK) ~ Reprimanded & fined HKD 3.8 million. Failed to implement adequate and effective systems and controls to guard against and mitigate the risk of money laundering and terrorist financing associated with third party deposits
- CES Capital International (HK) ~ Reprimanded and fined HKD 3.2 million. Failed to discharge its duties as an investment manager of two funds)
- Ho Pak Hay ~ Banned from re-entering the industry for life. Misappropriated and misused clients’ funds
- Poon Choi Yung ~ Banned from re-entering the industry for 20 months. Effected transactions in clients’ accounts without their authorisation and failed to take reasonable steps to establish clients’ financial situations and investment experience during account opening
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