Welcome to the latest edition of Protiviti’s Asia-Pacific Risk and Compliance Insights. In this quarterly newsletter, we provide a summary of important risk and compliance developments across the Asia-Pacific financial services sector.
Recent developments include Hong Kong’s Securities & Futures Commission (SFC) issuing the first in a series of bulletins relating to its intervention in the pre-IPO market, Singapore’s regulatory clarification on digital token offerings and Australia’s recent civil lawsuit, related to anti-money laundering (AML), against a major domestic bank. Further afield, the U.S. Office of the Comptroller of the Currency (OCC) has published a guidance document for financial services firms on industry trends and emerging issues.
Round-up of Regional Updates in Asia
SFC consults on proposals to introduce open-ended fund company structure in Hong Kong
(Published June 28, 2017)
Hong Kong’s Securities and Future Commissions (SFC) has consulted on proposals to introduce new company structure rules covering open-ended fund companies (OFC).
SFC issues the first edition of SFC Regulatory Bulletin: Listed Corporations
(Published July 2017)
In response to changing market conditions and risks, the SFC has increased its supervisory intensity to more actively protect the investing public and to suppress illegal, dishonorable and improper market practices.
The SFC has issued a Regulatory Bulletin highlighting over 10 real case studies covering IPOs and post-IPOs investigations and the associated regulatory actions taken by the SFC.
Hong Kong’s SFC issued a circular highlighting some irregularities and deficiencies identified during the course of its supervision of licensed corporations engaged in managing private funds and discretionary accounts. In a number of cases, private funds and discretionary accounts with concentrated, illiquid and interconnected investments were found to have irregular features (examples include related-party acquisition or disposal of listed company shares by bought and sold notes, or asset managers having acted solely at the direction of their clients rather than the managers exercising their own investment discretion).
The SFC expects the board and other senior management (including the Managers-in-Charge of Core Functions) of all asset managers to maintain adequate oversight of their firm’s business activities. The circular is a clear warning to the market and similar to the recently published bulletin on listed corporations. No immediate enforcement action was announced.
SFC signs MOU with police to crack down on financial crime
(Published August 25, 2017)
Hong Kong’s SFC and the Hong Kong Police have signed a memorandum of understanding (MOU) to formalize and further strengthen cooperation in combating financial crime.
The memorandum covers a range of matters including referral of cases, joint investigations, exchange and use of information, and mutual provision of investigative assistance and establishes a framework for closer collaboration on policy, operational and training issues.
This signed MOU should further smooth the interaction of security firms with law enforcement agencies and provide financial crime combating activities the same level of attention they receive in the banking sector regulated by the Hong Kong Monetary Authority (HKMA).
Singapore licenses first Chinese fintech firm, heating up competition with Hong Kong
(Published July 17, 2017)
China’s second-largest peer-to-peer lending platform, the Lujiazui International Financial Asset Exchange, or Lufax, founded by the Ping An Group, has been granted a license to operate in Singapore, giving the city a leg up in its competition against Hong Kong in attracting investments to nurture financial technology and innovation.
MAS clarifies regulatory position on the offer of digital tokens in Singapore
(Published August 1, 2017)
The MAS has clarified that the offer or issue of digital tokens in Singapore will be regulated by the supervisor if the digital tokens constitute products regulated under the Securities and Futures Act (Cap. 289) (SFA). MAS’s clarification comes in the wake of a recent increase in the number of initial coin offerings (ICO) in Singapore as a means of raising funds.
This guidance provides additional clarity to the local market, especially when it comes to investors and counterparties dealing with firms raising or offering ICOs. This aligns with the U.S. SEC stance on ICOs published at the end of July – see the international news section below.
Singapore to cooperate on cybersecurity with Australia
(Published August 24, 2017)
Singapore's financial sector underwent simulated terrorist and cyberattacks as part of efforts to ensure that financial firms have good plans in place in the event of such crises.
The exercise involved 139 financial institutions, including banks, finance companies, insurers, asset management firms, securities and brokerage firms, financial market technology providers, industry associations, the Singapore Exchange, and the MAS.
QR payments are coming in Singapore
(Published August 31, 2017)
Singapore’s enthusiasm for the mobile-readable quick-response (QR) code is apparent from the formation of a task force in late August by the central bank's (MAS) payments council. The goal is to have the specifications for a common QR code for Singapore ready by the end of 2017.
The use of QR payments is quick, easy and convenient and requires only a mobile phone, which is why it grew so popular in China. With this move, Singapore appears to be trying to catch up with the fast mobile payment developments in China and tap into this emerging market.
APRA to establish independent prudential inquiry into governance, culture and accountability
(Published August 28, 2017)
Australia consults on banking executive accountability regime
(Published July 13, 2017)
The Commonwealth Treasury of Australia has proposed that APRA be granted new regulatory powers to disqualify individuals (from APRA- regulated institutions), greater authority in shaping remuneration policies of authorized deposit-taking institutions (ADIs) and the ability to levy civil penalties of up to $200 million for ADIs with total liabilities of greater than $100 billion ($50 million for smaller ADIs).
Public submissions in response to this consultation paper closed on August 3, 2017. APRA will now review these responses and determine whether it will make any changes to the regime as proposed.
New APRA powers to supervise non-ADI lenders
(Published July 17, 2017)
The Commonwealth Treasury of Australia has released a draft bill to extend APRA’s regulatory authority to supervise non-ADI lenders. This draft bill seeks to provide APRA with greater authority to address financial stability risks via rule-making for lending activities of non-ADIs.
Public consultation on the bill closed on August 14, 2017; APRA will now analyze submissions and determine what changes to the final bill, if any, are needed.
Implementing the financial benchmark regulatory regime
(Published July 17, 2017)
The Australian Securities and Investments Commission (ASIC) is seeking authority to implement financial benchmark administration rules and compelled financial benchmark rules (compelled rules). The possible introduction of new rules will allow ASIC to align with global regulatory practices aiming to protect the integrity and reliability of key financial benchmarks.
Comments on the consultation paper were due on August 21, 2017. ASIC anticipates releasing an updated draft in the fourth quarter of this year.
APRA consults on changes to authorizing new entrants to banking industry
(Published August 15, 2017)
Japan FSA considers abolishing the Inspection Bureau in 2018
(Published August 22, 2017)
The Japan Financial Service Agency (J-FSA) published its draft organization and fiscal plan on 2018. It announced a plan considering the abolishment of the Inspection Bureau, which is in charge of on-site monitoring, and the transfer of the bureau’s resources to the Supervising Bureau. The intention of the J-FSA is to shift its focus to self-governance at financial institutions and off-site monitoring.
The move by the J-FSA evidences regulatory plans to shift to more principles-based supervision, which financial institutions will need to adjust to.
Global News Update
The global news roundup focuses on coverage of developments and updates in the United States and Europe and updates from intergovernmental bodies.
(Published July 7, 2017)
SEC rules that some initial coin offerings (ICOs) are securities subject to regulation
(Published July 25, 2017)
(Published July 24, 2017)
(Published July 26, 2017)
- Encourage a culture of staff at all levels taking personal responsibility for their actions.
- Make sure firms and staff clearly understand and can demonstrate where responsibility lies.
(Published August 31, 2017)