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Financial Services Risk and Regulation
Regulatory updates newsletter
May 2019
Regulatory Updates Newsletter — May 2019 PwC · 2
Executive
Summary
SFC Circular on
Recent Inspection
Findings Related to
Client Facilitation
FATF Private
Sector
Consultative
Forum
HKMA Consultation
on Guidelines on a
Sound Remuneration
System
MRF between the
Netherlands and
Hong Kong
Consultation
Conclusions on Draft
Insurance (Maximum
Number of Authorised
Insurers) Rule
Consultation Conclusions on
Draft Insurance (Financial
and Other Requirements for
Licensed Insurance Broker
Companies) Rules
Commencement
Date for New
Regulatory Regime
for Insurance
Intermediaries
Other
Regulatory
Updates
Glossary
Contents
Executive Summary 3
SFC Circular on Recent inspection Findings Related to Client Facilitation 4
FATF Private Sector Consultative Forum 5
HKMA Consultation on Guidelines on a Sound Remuneration System 6
Mutual Recognition of Funds (MRF) between the Netherlands and Hong Kong 7
Consultation Conclusions on Draft Insurance (Maximum Number of Authorised Insurers) Rule 8
Consultation Conclusions on Draft Insurance (Financial and Other Requirements for Licensed Insurance Broker
Companies) Rules
9
Commencement Date for New Regulatory Regime for Insurance Intermediaries 10
Other Regulatory Updates 11-12
Glossary 13
Emily Lam
Partner
+852 2289 1247
PwC HK FS Risk and
Regulation
“The regulators continued the 2019 trend of
issuing diverse set of regulations ranging from
guidelines on client facilitation to a sound
remuneration system, amongst others. With
this newsletter, we will continue to keep you
up to speed with significant regulatory
developments across the financial services
industry.”
Regulatory Updates Newsletter — May 2019 PwC · 3
Hong Kong financial services regulators
continue to push the envelope in
creating a robust regulatory ecosystem
for all financial institutions.
For instance, the HKMA granted two
more stored value facility (SVF)
licences in May. These licences take
the total to 15 non-bank SVF licensees,
while three licensed banks are also
operating SVFs. In addition, the HKMA
also granted four more virtual banking
licences in May, taking the total to 8
virtual bank licensees. The licensees
are preparing to launch their operations
later this year. These developments are
bound to have a significant impact on
the financial services market landscape.
In this month’s newsletter, we discuss
the following developments:
• The SFC issued a circular to share
the observations it made during
thematic reviews of client facilitation
as well as its expected standards.
The SFC instructs that client consent
should never be unidirectional,
blanket, implied by the making of
disclosure or obtained after the trade.
• The FATF held its annual Private
Sector Consultative Forum on 6-7
May 2019 in Vienna, Austria. The
Forum discussed latest trends/
priorities of AML/CFT in public and
private sector. They also discussed a
range of other topics such as the
importance of AML/CFT in the
context of combating corruption and
the best practices on beneficial
ownership.
• The HKMA issued a consultation on
Guidelines on a Sound
Remuneration System on 6 May
2019. The aim of the consultation is
to set out the HKMA’s supervisory
expectations about remuneration
practices of AIs.
• Additionally, the SFC and the Dutch
Autoriteit Financiële Markten (AFM)
signed a Memorandum of
Understanding concerning Mutual
Recognition of Covered Funds and
Management Companies and related
cooperation.
• The IA published consultation
conclusions on two sets of rules for
implementation of the new statutory
regulatory regime for insurance
intermediaries - the Insurance
(Maximum Number of Authorised
Insurers) Rules, and the Insurance
(Financial and Other Requirements
for Licensed Insurance Broker
Companies) Rules.
• And finally, the IA has proposed to
take over the regulation of insurance
intermediaries from the three Self-
Regulatory Organisations on 23
September 2019.
For further details on these
developments, please refer to the
following sections in this publication.
Emily Lam
FS Risk and Regulation
+852 2289 1247
Executive Summary
Executive
Summary
SFC Circular on
Recent inspection
findings related to
client facilitation
FATF Private
Sector
Consultative
Forum
HKMA Consultation
on Guidelines on a
Sound Remuneration
System
MRF between the
Netherlands and
Hong Kong
Consultation
Conclusions on Draft
Insurance (Maximum
Number of Authorised
Insurers) Rule
Consultation Conclusions on
Draft Insurance (Financial
and Other Requirements for
Licensed Insurance Broker
Companies) Rules
Commencement
Date for New
Regulatory Regime
for Insurance
Intermediaries
Other
Regulatory
Updates
Glossary
Regulatory Updates Newsletter — May 2019 PwC · 4
The SFC has identified a number of
conduct issues associated with
client facilitation
The SFC issued this circular on 14 May
to share the observations it made during
thematic reviews of client facilitation as
well as its expected standards.
The standards of conduct and internal
controls the SFC expects of LCs
providing client facilitation services
include:
• Controls, monitoring and
management supervision: Policies
and procedures should be established
which cover the key areas relating to
client facilitation such as client
consent, order visibility, system
access, the accuracy of indications of
interest and position limits.
• Segregation of agency and
facilitation activities: For client
facilitation orders, communications
between agency and client facilitation
traders should be recorded and
monitored on a timely basis.
• Consent and disclosure: As LCs
assume a risk-taking principal position
against clients in client facilitation
activities, the nature of the trades
should be disclosed to clients and
their prior consent obtained so that
they are fully aware of the inherent
conflicts of interest.
• Indications of interest (IOIs): IOIs
should only be disseminated when
they are based on a genuine client or
proprietary intent to trade. IOIs should
provide sufficient details, and controls
and monitoring should be
implemented to ensure they are
accurate and updated in a timely
manner.
From mid-2018, the SFC has reviewed
compliance with the expected standards
in its inspections of selected brokers and
found the following:
• Some traders misrepresented a house
or client facilitation trade as an agency
trade;
• Some traders were silent or not
transparent about whether facilitation
would be involved in a trade;
• Some traders failed to obtain explicit
pre-trade consent from clients when
effecting client facilitation trades;
• Some IOIs were described as natural
although they were not based on a
genuine client intent to trade; and
• Some firms’ policies and procedures
were not clear and could not ensure
compliance with the expected
standards, although they reported that
their client facilitation policies were
reviewed and enhanced in light of the
February 2018 circular. For example,
some of the prescribed in-house
language and written notifications to
clients described the nature of trades
in an ambiguous manner.
Conflicts of interest have long been a
recurring regulatory concern. According
to the SFC, client consent should never
be unidirectional, blanket, implied by the
making of disclosure or obtained after the
trade. More importantly, licensed
individuals, when dealing with clients,
should always act honestly and fairly.
SFC Circular on Recent inspection findings related to client facilitation
Executive
Summary
SFC Circular on
Recent inspection
findings related to
client facilitation
FATF Private
Sector
Consultative
Forum
HKMA Consultation
on Guidelines on a
Sound Remuneration
System
MRF between the
Netherlands and
Hong Kong
Consultation
Conclusions on Draft
Insurance (Maximum
Number of Authorised
Insurers) Rule
Consultation Conclusions on
Draft Insurance (Financial
and Other Requirements for
Licensed Insurance Broker
Companies) Rules
Commencement
Date for New
Regulatory Regime
for Insurance
Intermediaries
Other
Regulatory
Updates
Glossary
Michael Footman
Partner
+852 2289 2747
com
Regulatory Updates Newsletter — May 2019 PwC · 5
FATF Private Sector Consultative Forum
The FATF held its annual Private
Sector Consultative Forum on 6-7
May 2019 in Vienna, Austria
Over 300 private sector representatives,
from the financial sector, civil society, and
FATF members and observers,
participated in this year’s Forum.
The topics discussed at the Forum were:
• Importance of AML/CFT in the
Context of Combating Corruption:
The session shared the experience of
The Sentry and the US Department of
the Treasury in using a range of
economic tools and sanctions against
corrupt officials with specific emphasis
on the networks they use to launder
the proceeds of corruption.
• Latest Trends/ Priorities of
AML/CFT in Public and Private
Sector: The session discussed the
importance of measuring
“effectiveness” in the context of
implementation of AML/CFT measures
and looked into areas to improve.
• Virtual Assets: The discussions
focused on the mapping of virtual
asset services and business models,
on the measures applicable to virtual
asset transfers (Recommendation 16),
as a follow-up to the public
consultation opened in February 2019,
and on the implementation of specific
FATF Recommendations in a virtual
asset context.
• Digital ID: Participants discussed how
the requirement to use ‘reliable and
independent’ sources for identification
and verification could be interpreted in
the context of digital identity provided
by governments or by the private
sector, including the intersect with
technical digital identity standards and
how these could be interpreted in the
context of a AML/CFT risk
management framework.
• Application of Technologies in the
Context of AML/CFT (Machine
Learning, Data Mining, Artificial
Intelligence): Participants exchanged
views on how public authorities and
private sector firms could make
greater use of technology to manage
financial crime risk, how technology
facilitated customer due diligence,
sanctions screening and transaction
monitoring, and how government
authorities harnessed new
technologies to increase efficiency and
effectiveness in detecting ML/TF.
• Opportunities and Challenges in
Conducting Due Diligence
(Information Sharing, Data
Protection and Privacy): The
session discussed the key factors
related to information sharing that are
critical to effective risk management.
• FATF TF Risk Assessment
Guidance - Non-Profit Sector
Consultation: The Forum discussed
the importance of ongoing
engagement with the sector, including
through the use of multi-stakeholder
working groups to facilitate information
exchange.
• Risk Based Approach on Legal
Profession, Accountants and Trust
and Corporate Service Providers:
The session discussed the draft
Guidance to assist competent
authorities and professionals in the
legal, accountancy and trust and
company service providers sectors in
the application of a RBA to AML/CFT.
• Best Practices on Beneficial
Ownership: The FATF has started a
project to identify the best practices on
beneficial ownership, which aims to
facilitate jurisdictions to implement
effective measures in order to ensure
that legal persons are prevented from
being misused for ML/TF.
HoKee Fu
Partner
+852 2289 2721
Executive
Summary
SFC Circular on
Recent inspection
findings related to
client facilitation
FATF Private
Sector
Consultative
Forum
HKMA Consultation
on Guidelines on a
Sound Remuneration
System
MRF between the
Netherlands and
Hong Kong
Consultation
Conclusions on Draft
Insurance (Maximum
Number of Authorised
Insurers) Rule
Consultation Conclusions on
Draft Insurance (Financial
and Other Requirements for
Licensed Insurance Broker
Companies) Rules
Commencement
Date for New
Regulatory Regime
for Insurance
Intermediaries
Other
Regulatory
Updates
Glossary
Regulatory Updates Newsletter — May 2019 PwC · 6
HKMA Consultation on Guidelines on a Sound Remuneration System
This module sets out the HKMA’s
supervisory expectations about
remuneration practices of AIs
The HKMA issued a consultation on
Guidelines on a Sound Remuneration
System on 6 May 2019. The aim of the
consultation is:
• to provide guidance to AIs on the key
elements of a sound remuneration
system,
• to set out the approach which the
HKMA will adopt in the supervision of
AIs’ remuneration systems, and
• to outline the level and type of
disclosure in relation to remuneration
expected to be made by AIs.
The key elements of a sound
remuneration system stated in the
guidelines are:
Governance
• The Board of an AI should establish
and maintain a written remuneration
policy covering all employees.
• The Board of an AI is ultimately
responsible for overseeing the
formulation and implementation of the
AI’s remuneration policy, systems and
related control process.
• Risk control personnel, independent
of an AI’s business units, should have
appropriate authority and be actively
involved in the process of design and
implementation of the AI’s
remuneration policy.
• In the event of misconduct, the
amount of remuneration to be
adjusted should be proportionate with
the misconduct outcome, and should
take into account all relevant
indicators of the severity of the impact.
Structure of remuneration
• In determining an appropriate balance
between fixed and variable incentive-
based remuneration, AIs should have
regard to the seniority, role,
responsibilities and activities of their
employees.
• Variable remuneration should be paid
in such a manner as to align an
employee’s incentive awards with
long-term value creation and the time
horizons of risk and should reflect the
employee’s seniority, role,
responsibilities and activities within
the AI.
Measurement of performance for
variable remuneration
• To better align remuneration with
sustainable performance, the overall
amount of an AI’s variable
remuneration should take into
account the AI’s performance over
the longer term.
Alignment of remuneration payouts to
the time horizon of risks
• Deferral of the payment of a portion of
variable remuneration will allow
employees’ performance, including
the associated risks, to be observed
and validated over a period of time
before payment is actually made.
• In principle, the deferral period should
not be less than 3 years.
An AI should make the remuneration
disclosures at least annually covering its
remuneration policy, the fixed and
variable remuneration awarded during
the financial year.
Michael Footman
Partner
+852 2289 2747
com
Executive
Summary
SFC Circular on
Recent inspection
findings related to
client facilitation
FATF Private
Sector
Consultative
Forum
HKMA Consultation
on Guidelines on a
Sound Remuneration
System
MRF between the
Netherlands and
Hong Kong
Consultation
Conclusions on Draft
Insurance (Maximum
Number of Authorised
Insurers) Rule
Consultation Conclusions on
Draft Insurance (Financial
and Other Requirements for
Licensed Insurance Broker
Companies) Rules
Commencement
Date for New
Regulatory Regime
for Insurance
Intermediaries
Other
Regulatory
Updates
Glossary
Regulatory Updates Newsletter — May 2019 PwC · 7
The Memorandum of Understanding
(MoU) was signed on 15 May
The SFC and the Autoriteit Financiële
Markten (AFM) signed a MoU concerning
Mutual Recognition of Covered Funds
and Management Companies and related
cooperation (Memorandum).
The Memorandum provides a recognition
of asset managers as well as a
framework for mutual recognition of
recognised funds to be offered to the
public in both markets.
Recognised Dutch Funds applying for
SFC authorisation must fall within one or
more than one of the following eligible
fund types:
• general equity funds, bond funds and
mixed funds; and
• index funds (other than exchange-
traded funds)
Key requirements applicable to all
Recognised Dutch Funds are:
Representatives in Hong Kong
• Each Recognised Dutch Fund must
appoint a firm in Hong Kong as its
representative, in compliance with
Chapter 9 and 11.1(b) of the UT Code.
Operational and ongoing
requirements
• The Recognised Dutch Fund must, on
an ongoing basis, remain approved by
AFM for offering to the public in the
Netherlands.
• The Dutch Management Company
shall ensure and procure its
distributors to ensure that Hong Kong
investors are able to bring actions
concerning the Recognised Dutch
Fund and the Dutch Management
Company in the courts of Hong Kong.
• Changes to a Recognised Dutch Fund
shall be made in accordance with the
applicable Dutch and Hong Kong laws
and regulations.
• Following SFC authorisation of a
Recognised Dutch Fund under section
104 of the SFO, if a Recognised
Dutch Fund ceases to meet the
requirements as set out in this
Circular, its Dutch Management
Company shall notify the SFC as soon
as reasonably practicable.
• In case of such breach, units or
shares of the Recognised Dutch Fund
shall not continue to be offered to the
public in Hong Kong and shall not
accept subscriptions from investors in
Hong Kong, without SFC’s prior
approval.
• Termination of a Recognised Dutch
Fund shall require the approval of the
AFM with immediate notice from the
AFM to the SFC. A termination notice
should be submitted to the SFC for
approval.
Sale/distribution and offering
documents
• The sale and distribution of a
Recognised Dutch Fund in Hong Kong
must be conducted by intermediaries
properly licensed by or registered with
the SFC.
• The offering documents and notices to
investors in Hong Kong of a
Recognised Dutch Fund must be
provided in both English and Chinese.
• For offering to the public in Hong
Kong, the Recognised Dutch Fund will
be subject to the applicable
application, authorisation and annual
fees.
Hong Kong has previously signed MoUs
for MRFs with Mainland China,
Switzerland, France, UK and
Luxembourg.
Mutual Recognition of Funds (MRF) between the Netherlands and
Hong Kong
Carlyon Knight-EvansPartner
+852 2289 2711
carlyon.knight-
Helen LiPartner
+852 2289 2741
Executive
Summary
SFC Circular on
Recent inspection
findings related to
client facilitation
FATF Private
Sector
Consultative
Forum
HKMA Consultation
on Guidelines on a
Sound Remuneration
System
MRF between the
Netherlands and
Hong Kong
Consultation
Conclusions on Draft
Insurance (Maximum
Number of Authorised
Insurers) Rule
Consultation Conclusions on
Draft Insurance (Financial
and Other Requirements for
Licensed Insurance Broker
Companies) Rules
Commencement
Date for New
Regulatory Regime
for Insurance
Intermediaries
Other
Regulatory
Updates
Glossary
Regulatory Updates Newsletter — May 2019 PwC · 8
The rules will take effect upon the commencement of
the new regulatory regime
On 31 October 2018, the IA published for consultation a draft
of the Insurance (Maximum Number of Authorised Insurers)
Rules (“Rules”). The draft Rules prescribe the maximum
number of authorised insurers by which a licensed individual
insurance agent or a licensed insurance agency may be
appointed under the new section 64I(1) of the Insurance
Ordinance (Cap. 41) (“IO”) and the related rules for counting
the number of insurers.
Under the draft Rules, the IA has proposed to raise the
maximum number of insurers from four to five.
The key highlights of the consultation conclusion are:
• The IA considers it appropriate to maintain the existing
framework, which reflects the role of insurance agents as
representatives of insurers and insurers’ responsibilities
for their appointed insurance agents.
• The responsibilities, which insurers bear in this respect,
make it necessary for them to have in place effective
controls and procedures for the oversight of their
appointed insurance agents.
• IA concluded that there is not enough reason for
increasing the cap to five and far greater justification
(particularly from a policy holder protection perspective)
for maintaining the cap at four.
• The current sub-cap of two long term insurers is
considered appropriate.
In conclusion, the IA has decided to adopt the proposals set
out in the draft Rules except for dropping the proposal to raise
the maximum number of insurers from four to five.
The IA expects the Rules to come into operation immediately
upon the commencement of the new regulatory regime for
insurance intermediaries, i.e. the day on which the new
section 74 of the Insurance Companies (Amendment)
Ordinance 2015 comes into operation.
Consultation Conclusions on Draft Insurance (Maximum Number of
Authorised Insurers) Rules
Billy WongPartner
+852 2289 1259
Executive
Summary
SFC Circular on
Recent inspection
findings related to
client facilitation
FATF Private
Sector
Consultative
Forum
HKMA Consultation
on Guidelines on a
Sound Remuneration
System
MRF between the
Netherlands and
Hong Kong
Consultation
Conclusions on Draft
Insurance (Maximum
Number of Authorised
Insurers) Rules
Consultation Conclusions on
Draft Insurance (Financial
and Other Requirements for
Licensed Insurance Broker
Companies) Rules
Commencement
Date for New
Regulatory Regime
for Insurance
Intermediaries
Other
Regulatory
Updates
Glossary
Regulatory Updates Newsletter — May 2019 PwC · 9
The rules will take effect upon the commencement of
the new regulatory regime
On 23 November 2018, the IA published for consultation a
draft of the Insurance (Financial and Other Requirements for
Licensed Insurance Broker Companies) Rules (“Rules”).
The key proposed enhancements were:
• to increase the minimum amounts of the paid-up share
capital and net assets of an insurance broker company
from $100,000 to $500,000;
• to increase the minimum limit of indemnity under a
professional indemnity insurance (PII) policy required to be
maintained by an insurance broker company from $3
million to $5 million;
• to introduce a cap on the amount of the deductible for the
aforesaid PII policy;
• to require bank reconciliation of client accounts maintained
by an insurance broker company on a monthly basis; and
• to require disclosure of specific financial information in the
audited financial statements of an insurance broker
company.
Having considered the feedback provided, the IA has decided
to adopt the proposals set out in the draft Rules with the
following main modifications:
• The transitional period for the increase in paid-up share
capital and net assets by existing insurance broker
companies will be extended from slightly more than three
years to slightly more than four years.
• The minimum limit of indemnity under the PII policy
maintained by an insurance broker company will remain at
$3 million.
• The requirements for disclosure of insurance premiums
receivable, referral income and referral expenses in the
audited financial statements of insurance broker
companies will be set aside.
The IA expects the Rules to come into operation immediately
upon the commencement of the new regulatory regime for
insurance intermediaries.
Consultation Conclusions on Draft Insurance (Financial and Other
Requirements for Licensed Insurance Broker Companies) Rules
Billy WongPartner
+852 2289 1259
Executive
Summary
SFC Circular on
Recent inspection
findings related to
client facilitation
FATF Private
Sector
Consultative
Forum
HKMA Consultation
on Guidelines on a
Sound Remuneration
System
MRF between the
Netherlands and
Hong Kong
Consultation
Conclusions on Draft
Insurance (Maximum
Number of Authorised
Insurers) Rule
Consultation Conclusions on
Draft Insurance (Financial
and Other Requirements for
Licensed Insurance Broker
Companies) Rules
Commencement
Date for New
Regulatory Regime
for Insurance
Intermediaries
Other
Regulatory
Updates
Glossary
Regulatory Updates Newsletter — May 2019 PwC · 10
The IA proposed to take over the regulation of
insurance intermediaries on 23 September 2019
The IA proposes to take over the regulation of insurance
intermediaries from the three Self-Regulatory Organisations
(“SROs”) on 23 September 2019 (Commencement Date),
with the Insurance Companies (Amendment) Ordinance 2015
(Commencement) Notice 2019.
The takeover will mark a major milestone and a reformatory
change for the insurance industry as the IA will become the
sole regulator of all insurance intermediaries in Hong Kong.
On the Commencement Date, the remaining provisions of the
Insurance Companies (Amendment) Ordinance 2015 will
come into operation, together with an array of regulatory
requirements for implementation of the new regulatory regime.
The IA, so far, has formulated the following two set of rules,
which are subsidiary legislation, and is finalising other codes
and guidelines in phases.
• Insurance (Maximum Number of Authorised Insurers)
Rules
• Insurance (Financial and Other Requirements for Licensed
Insurance Broker Companies) Rules
Following are the key transitional matters:
• Insurance intermediaries who are validly registered with
the SROs immediately before the Commencement Date
will be deemed as licensees under the new regime.
• Those who are validly registered as responsible officers of
insurance agencies or chief executives of insurance
brokers will also be deemed as responsible officers of
licensed insurance agencies or licensed insurance broker
companies as appropriate under the new regime.
• Arrangements for online application for formal licences to
be made by deemed licensees will be announced by the IA
after the Commencement Date.
• Complaint and disciplinary cases that are unresolved by
the SROs before the Commencement Date will be handled
by the IA but with reference to the relevant codes,
guidance notes and guidelines issued by the SROs.
• The new conduct requirements will not be retrospectively
applied against insurance intermediaries.
• Matters concerning registration, complaints and
disciplinary actions in relation to insurance intermediaries
will continue to be handled by the SROs before the
Commencement Date.
• To ensure a smooth transition, there will be cut-off
arrangements for different matters and the relevant details
will be announced by the respective SROs in due course.
.
Commencement Date for New Regulatory Regime for Insurance
Intermediaries
Billy WongPartner
+852 2289 1259
Executive
Summary
SFC Circular on
Recent inspection
findings related to
client facilitation
FATF Private
Sector
Consultative
Forum
HKMA Consultation
on Guidelines on a
Sound Remuneration
System
MRF between the
Netherlands and
Hong Kong
Consultation
Conclusions on Draft
Insurance (Maximum
Number of Authorised
Insurers) Rule
Consultation Conclusions on
Draft Insurance (Financial
and Other Requirements for
Licensed Insurance Broker
Companies) Rules
Commencement
Date for New
Regulatory Regime
for Insurance
Intermediaries
Other
Regulatory
Updates
Glossary
PwC · 11
SFC Circular to intermediaries: Online submission
of Paragraph 12.5 Notifications
The SFC has introduced a new online service for
licensed and registered persons to submit Paragraph
12.5 Notifications to the SFC electronically.
As stipulated in paragraph 12.5 of the Code of Conduct
for Persons Licensed by or Registered with the
Securities and Futures Commission, intermediaries
must immediately notify the SFC upon the occurrence
of any material or suspected breach, infringement of or
non-compliance with any law, rules, regulations or
codes administered by the SFC. A circular dated 14
September 2018 reminded intermediaries of the
importance of compliance with this requirement.
The online service features standardised reporting
templates and makes it easier for intermediaries to
submit a notification to the SFC. It also facilitates the
SFC’s assessment of the impact of reported incidents
on the fitness and properness of intermediaries,
licensed representatives and responsible officers.
HKMA Circular on Use of Personal Data in Fintech
Development
The HKMA issued the circular on 3 May 2019 to
encourage AIs to adopt and implement the Ethical
Accountability Framework for the collection and use of
personal data (the Framework) issued by the Office of
the Privacy Commissioner for Personal Data (PCPD).
The HKMA, in collaboration with the Hong Kong
Association of Banks (HKAB), has been engaging with
the PCPD to provide more guidance to AIs on the
proper use of personal data in the online environment.
At a seminar jointly organised by the HKMA and HKAB
in April 2019, Mr. Stephen Kai-yi Wong, the Privacy
Commissioner for Personal Data, outlined the
Framework to the industry.
The adoption of “privacy by design” and “privacy by
default” when developing fintech initiatives are some of
the good practices shared.
Moreover, the concept of data ethics and stewardship
was introduced, and the “Data Stewardship
Accountability, Data Impact Assessments and
Oversight Models” (the Models) supporting the
Framework were explained.
The Models can assist AIs in addressing privacy
concerns of customers and enhance their trust in using
fintech services.
The HKMA supports the concept of data ethics and
stewardship in the context of collecting and using
personal data. It encourages AIs to adopt the
Framework and implement the Models in the
development of fintech products and services.
Further details about the Framework and the Models,
as well as training programmes tailored for the banking
sector, can be found on the website of the PCPD.
SFC Circular to licensed corporations: List of
comparable OTCD jurisdictions
The SFC published in a Gazette Notice the jurisdictions
which are determined by the SFC to be comparable
OTCD jurisdictions under paragraph 20.5 of the Code of
Conduct for Persons Licensed by or Registered with the
SFC, effective 14 June 2019.
Comparable OTCD jurisdictions
Australia, Canada, Mainland China, France, Germany,
Ireland, Italy, Japan, Netherlands, Republic of Korea,
Singapore, Spain, South Africa, Switzerland, United
Kingdom, and United States of America
Regulatory Updates Newsletter — May 2019
Other Regulatory Updates
Executive
Summary
SFC Circular on
Recent inspection
findings related to
client facilitation
FATF Private
Sector
Consultative
Forum
HKMA Consultation
on Guidelines on a
Sound Remuneration
System
MRF between the
Netherlands and
Hong Kong
Consultation
Conclusions on Draft
Insurance (Maximum
Number of Authorised
Insurers) Rule
Consultation Conclusions on
Draft Insurance (Financial
and Other Requirements for
Licensed Insurance Broker
Companies) Rules
Commencement
Date for New
Regulatory Regime
for Insurance
Intermediaries
Other
Regulatory
Updates
Glossary
PwC · 12
HKMA introduces key measures on sustainable
banking and green finance
The HKMA unveiled three sets of measures to support
and promote Hong Kong’s green finance development.
These measures include:
1) Green and Sustainable Banking
• Phase I: developing a common framework to assess
the “Greenness Baseline” of individual banks;
• Phase II: engaging the industry and other relevant
stakeholders in a consultation on the supervisory
expectation or requirement on Green and
Sustainable Banking; and
• Phase III: after setting the targets, implement,
monitor and evaluate banks’ progress.
2) Responsible Investment
• As the manager of the Exchange Fund, the HKMA
will adopt a principle that priority can be given to
Green and ESG investments if the long term return
is comparable to other investments on a risk-
adjusted basis.
3) Centre for Green Finance (CGF)
• Establish the CGF under the HKMA Infrastructure
Financing Facilitation Office (IFFO).
• It will serve as a platform for technical support and
experience sharing for the green development of the
Hong Kong banking and finance industry.
• The CGF, together with the IFC, will co-organise the
next Climate Business Forum in Hong Kong in early
2020.
• The Forum is the IFC’s flagship event to discuss
trends and business opportunities relating to climate
change and sustainability.
Meanwhile, the Government of the Hong Kong Special
Administrative Region of the People’s Republic of China
announced that it expects to attend a series of investor
meetings in relation to a proposed green bond offering.
Subject to market conditions, a USD-denominated
green bond offering may follow.
Sixteenth progress report on adoption of the Basel
regulatory framework
The updated progress report provides a high-level view
of Basel Committee members' progress in adopting
Basel III standards as of end-March 2019.
It focuses on the status of adoption of all the Basel III
standards, including the finalised Basel III post-crisis
reforms published in December 2017, to ensure that
they are transformed into national law or regulation
according to the internationally agreed time frames.
The report includes the status of adoption of the Basel
III risk-based capital standards, the leverage ratio, the
standards for global and domestic systemically
important banks (SIBs) and interest rate risk in the
banking book (IRRBB), the Net Stable Funding Ratio
(NSFR), the large exposures framework and the
disclosure requirements.
Hong Kong SAR has scored well in this report, having
completed adoption or is in process of adoption with
draft regulations published for majority of the Basel
standards considered.
Regulatory Updates Newsletter — May 2019
Other Regulatory Updates
Executive
Summary
SFC Circular on
Recent inspection
findings related to
client facilitation
FATF Private
Sector
Consultative
Forum
HKMA Consultation
on Guidelines on a
Sound Remuneration
System
MRF between the
Netherlands and
Hong Kong
Consultation
Conclusions on Draft
Insurance (Maximum
Number of Authorised
Insurers) Rule
Consultation Conclusions on
Draft Insurance (Financial
and Other Requirements for
Licensed Insurance Broker
Companies) Rules
Commencement
Date for New
Regulatory Regime
for Insurance
Intermediaries
Other
Regulatory
Updates
Glossary
PwC · 13Regulatory Updates Newsletter — May 2019
Glossary
AI Authorised Institutions IC-2 Internal Audit Function
AML Anti-Money Laundering ICO Initial Coin Offering
BC Basel Committee IFRS International Financial Reporting Standard
BCBS Basel Committee on Banking Supervision IOSCO International Organization of Securities Commission
CFT Counter-Financing of Terrorism IR-1 Interest Rate Risk Management
CG-1 Corporate Governance of Locally Incorporated Authorized Institutions IRR Interest Rate Risk
FATF Financial Action Task Force IRRBB Interest Rate Risk in the Banking Book
FinTech Financial Technology LC Licensed Corporation
FMCC Fund Manager Code of Conduct MAS Monetary Authority of Singapore
FI Financial Institutions MoU Memorandum of Understanding
FSB Financial Stability Board RO Responsible Officer
HKMA The Hong Kong Monetary Authority RE-1 Recovery Planning
IA The Insurance Authority SFC The Securities and Futures Commission
IAF Internal Audit Function SFO Securities and Futures Ordinance
IC-1 Risk Management Framework SPM Supervisory Policy Manual
Executive
Summary
SFC Circular on
Recent inspection
findings related to
client facilitation
FATF Private
Sector
Consultative
Forum
HKMA Consultation
on Guidelines on a
Sound Remuneration
System
MRF between the
Netherlands and
Hong Kong
Consultation
Conclusions on Draft
Insurance (Maximum
Number of Authorised
Insurers) Rule
Consultation Conclusions on
Draft Insurance (Financial
and Other Requirements for
Licensed Insurance Broker
Companies) Rules
Commencement
Date for New
Regulatory Regime
for Insurance
Intermediaries
Other
Regulatory
Updates
Glossary