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New SFC measures to heighten senior management accountability

Mar 07, 2017


The SFC has issued a circular to all licensed corporations to introduce measures to heighten the accountability of the senior management of these firms and to promote awareness of senior management obligations under the current regulatory regime.

Specifically, the circular aims to provide more guidance on who should be regarded as the senior management of a licensed corporation. It identifies eight core functions which are instrumental to the operations of licensed corporations, namely

  1. Overall Management Oversight
  2. Key Business Line
  3. Operational Control and Review
  4. Risk Management
  5. Finance and Accounting
  6. Information Technology
  7. Compliance
  8. Anti-Money Laundering and Counter-Terrorist Financing


Licensed corporations are expected to designate fit and proper individuals to be Managers-In-Charge of each of these functions. Those who have overall management oversight of the licensed corporations and those in charge of key business line functions are also expected to seek the SFC’s approval as responsible officers.

Starting from 18 April 2017, corporate licence applicants and existing licensed corporations will have to submit up-to-date management structure information and organisational charts to the SFC. All existing licensed corporations should submit the required information by 17 July 2017. In addition, their Managers-In-Charge of the overall management oversight and key business line functions who are not already responsible officers should have applied for approval to become responsible officers by 16 October 2017.

The SFC has also published over 40 frequently asked questions to provide more guidance to the industry on these measures.

The Circular lists out the SFC’s views on:-

  1. The meaning of “Senior Management”, which includes a licensed corporation’s directors (executive and non-executive and shadow directors), its Responsible Officers (“ROs”) and “Managers-In-Charge”
  2. The scope of Senior Management’s responsibility;
  3. The standard of conduct expected of senior management;
  4. Legal liabilities of Senior Management;

The Circular also puts forth the SFC’s view that “Managers-In-Charge” (“MICs”) who head certain core functions such as Overall Management Oversight function and Key Business Line function should also be ROs because in most cases, MICs of these Core Functions actively participate in or are responsible for directly supervising the business of the regulated activities.

Lastly, the Circular also lists out the roles and responsibilities of the Boards of licensed corporations in seeking to achieve the objective of a soundly and efficiently run corporation and also provides that when applying for a licence under section 116(1) of the SFO, a corporation is required to provide information about its human resources and organisational structure showing that it is capable of carrying on regulated activities competently. This includes providing details of each of its MICs and notifying the SFC of any changes to its MICs.

With regard to implementation of the changes sought to be effected by the SFC, the SFC understands that some licensed corporations may need time to revisit their management structures and RO appointments in light of the matters outlined in the Circular. The SFC intends to commence the information collection initiative (outlined in Part H) on 18 April 2017 (“Commencement date”).

The SFC generally expects that on or before 16 October 2017 (ie, within six months from the commencement date), MICs of the Overall Management Oversight function and the Key Business Line function, who are not already ROs, will have applied for approval to become ROs.

Robertsons’ Licensing and Compliance team provide a wide array of specialist services to meet the increasingly complex requirements of our clients in one of Asia’s leading financial services centres.

In addition to representing a broad range of financial services’ clients, and advising them on all areas of the regulatory regimes in Hong Kong, we regularly assist funds and asset managers in establishing a presence in the territory and obtaining the requisite licenses for their businesses here. We have represented clients in their applications for the various types of licences issued by Securities and Futures Commission (“SFC”) as well as assisting these clients in all matters relating to the ongoing maintenance of their licences.  We also advise on licensing matters for institutions regulated by the Hong Kong Monetary Authority as well as as licensed companies under Money Lenders Ordinance.

In conjunction with our Private Equity & Commercial Department, we have acted on numerous successful applications to approve takeovers of SFC - licensed vehicles. Together with our Corporate Finance and Capital Markets Department, we act on the regulatory aspects of all types of transactions undertaken by listed companies in Hong Kong.

More generally, our Regulatory Team provides ongoing compliance advice and assistance to banks, financial institutions, regulated intermediaries and Hong Kong listed companies on all aspects of their business in the territory.

Please do not hesitate to get in touch with Chris Lambert or Charles Mok for further information.


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