APAC Monthly Private Wealth Legal Developments – January 2025
APRA Deputy Chair Margaret Cole – Remarks to the Conexus Chair Forum Sorrento
The Australian Prudential Regulation Authority (APRA) has published the speech of APRA Deputy Chair Margaret Cole from the Conexus Chair Forum. In this speech, she discussed APRA’s 2025 priorities with a focus on governance, an area she said is of heightened interest to APRA. Ms Cole flagged that:
- The 2024 fund-level expenditure data, which was released on the same day, will be published annually and will be reviewed closely by APRA for any outliers that may appear to not be in the best financial interests of members. This forms part of APRA’s intensified scrutiny of trustee expenditure.
- Entities must ensure, as part of their oversight, that they are receiving appropriate valuation data and insights and can stand behind what is required to be fair valuations on their super fund’s books. In addition, there must be controls in place to ensure that investment decision-makers are not involved in approval of valuation decisions and that there is sufficient challenge of asset valuations.
- Entities should have a strong focus on operational risk management given the implementation of Prudential Standard, CPS 230 Operational Risk Management in 2025.
- APRA will be undertaking a review of the banking, insurance and superannuation core governance Prudential Standards, including SPS 510 Governance and SPS 520 Fit and Proper. A governance discussion paper is expected to be released 'soon'. Ms Cole stated that APRA’s 'intention is to clarify, simplify and consolidate the standards, drive improvements and ensure the standards align with contemporary practice'.
- Based on APRA’s observations, poor governance practices tend to occur in three broad areas. Firstly, in instances where there has been material prudential concerns regarding an entity’s operational risk and risk culture, a lack of good governance is often the root cause. Secondly, a lack of robustness in board governance processes, including in relation to the nomination and appointment of directors has been found to manifest in the inconsistent use of board skills matrices and performance reviews to drive continuous improvement in board capability – this has been particularly prevalent in fit and proper processes. Thirdly, is the persistence of poor governance in processes such as board renewal and tenure.
- It was acknowledged that between the five prudential standards and the guidance for governance across the banking, insurance and superannuation sectors, there are slightly different expectations and requirements and a lack of clarity about the consistency of APRA’s expectations. However, APRA is aiming to bring all these policy settings together into a single cross-industry standard on board governance, fit and proper and conflicts.
- APRA is also exploring opportunities to streamline and simply the reporting burdens and duplications relating to 'accountable persons' under the Financial Accountability Regime and 'responsible persons' under the Fit and Proper standard. [30 Jan 2025]
APRA increases transparency with enhancements to annual superannuation publications
APRA has published its annual superannuation statistics publication for 2024. For the first time, the publication includes fund-level expenditure and detailed insurance data which will also be included in the future publications. Regarding expenditure, the data showed that total industry expenditure was $12.7bn for the year ending June 2024, an increase of 15 per cent from the previous financial year. APRA has said that it will use the data to review and scrutinise expenditure across the industry where member benefits may not be evident and will provide updates on this workstream in the coming months.
In regard to the insurance data, this includes fund-level insurance information, covering claims, coverage, premiums, and member engagement metrics. This additional transparency is expected to help increase the value insurance brings to superannuation and support timely claims processing. [30 Jan 2025]
ASIC calls out superannuation trustees for weak scam and fraud practices
ASIC has announced that it wrote to superannuation trustees urging them to strengthen anti-scam practices, or risk exposing members to harm. The letter outlined ASIC’s guidance for superannuation trustees in preventing, detecting and responding to scams and fraud activity; it stated that 'disrupting investment scams is a priority for ASIC'. ASIC stressed that given scammers are employing increasingly sophisticated tactics to manipulate members, it is vital that entities take prompt and proactive steps to monitor and address scam activity, and capture and record scam attempts accurately. Trustees are not permitted to outsource their obligations to third parties when it comes to protecting their members from scams, with an ASIC review of 15 superannuation trustees finding that none of them had:
- a scams strategy;
- dedicated reporting on scams – though some did include references to scams within broader fraud reporting regimes; or
- reviewed their scam prevention, detection and response capabilities.
The review also found that trustees were overly reliant on anti-fraud measures with limited focus on the specific risks and harms associated with scams, and did not have sufficient oversight of their external administrators’ anti-scam and anti-fraud practices. The letter contains a list of next steps for Trustees in relation to their anti-scam and anti-fraud capabilities. [30 Jan 2025]
Delivering a step-change in superannuation
ASIC has published a speech by ASIC Commissioner Simone Constant at the Conexus Financial Super Chair Forum in Sorrento on 30 January 2025. In the speech, titled Delivering a step-change in superannuation, the Commissioner reiterated that ASIC’s priorities in superannuation remain unchanged from 2024 and outlined high-level priorities and target areas. Commissioner Constant stated that, in regard to high-level priorities, the public can 'expect more of the same from ASIC' in ensuring that trustees are transparent, accountable and consistently meet their members’ expectations and that enforcement action will target member service failures and superannuation misconduct. As to specific focus areas, three were outlined by Commissioner Constant as follows:
- Member services: ASIC’s significant sector-wide project on death benefit claims handling is coming to a head. ASIC expects to release a public report in the coming months, sharing its observations and signaling areas for improvement. 'This is not going away – expect to keep hearing form us about this', said the Commissioner.
- Scams: Following ASIC’s reporting on anti-scam practices of banks over the last two years, superannuation scams were identified as an emerging area of risk. While reported losses remain low, significant sums were identified for those who have been affected, sometimes amounting to 'life-changing' losses. Australians aged over 65 have been the only age group to lose more to scammers since the National Anti-Scam Centre commenced operation; the age group typically has larger account balanced with fewer barriers to access it which renders such individuals at risk to scammers. Every part of the financial system should pull its weight, including superannuation trustees who should have strategies to prevent, detect and respond to scam risks.
- Private markets: More than $400bn is now invested in private markets, with companies staying private for longer and some leaving the Australian Securities Exchange Ltd (ASX). ASIC intends to publish a discussion paper in the first half of 2025, asking whether current settings are right to support the Australian economy and retirees. ASIC will be conducting surveillance of the financial reporting and auditing of certain target super funds, particularly focusing on expenses and valuations. 'This is the first time super funds will be subject to scrutiny of this kind' said Commissioner Constant. [30 Jan 2025]
Key issues outlook 2025
ASIC has announced that it has identified the most significant current, ongoing and emerging issues within its regulatory remit in 2025:
- Changing dynamics between public and private markets: ASIC intends to increase its focus on private markets through surveillance work, including by reviewing governance processes and practices of a sample, target group of entities of retail private credit funds with a focus on their valuation and liquidity management practices. In addition, ASIC will be leading discussion on issues key to the ongoing and future success of Australia’s capital markets and seeking feedback on whether its regulatory settings and supervision approach needs to adapt.
- Superannuation member services: With around 3 million Australians becoming eligible to draw down at least $750bn from superannuation in the next decade, ASIC expects more frequent and complex interactions between superannuation funds and members. ASIC will be publishing its findings from a review of member services this year and reiterated that it will not hesitate to take enforcement action were appropriate.
- Scams and fraud with increasing technological sophistication: Financial frauds and scams continue to evolve, with cryptocurrency and celebrity endorsement impersonations being prevalent. ASIC continues to support the National Anti-Scam Centre by sharing scam intelligence. ASIC has had over 7,300 phishing and investment scam websites taken down since July 2023 and maintains an Investor Alert List.
- Unsuitable superannuation advice: ASIC has observed considerable fund inflows into high-risk investments including property investments and significant payments to businesses generating leads. The use of high-pressure sales tactics and social media targeting to receptive audiences has enabled rapid growth in such business models. ASIC has said that it will continue to warn Australians about this conduct and will take enforcement action in instances of misconduct exploiting superannuation savings.
- Cyber-attacks, data breaches and internal system failures: The digitisation of the financial sector, reliance on third-party service providers and legacy systems are driving continuing risk in this area. ASIC has said that it 'expects directors to ensure their organisation’s risk management framework adequately addresses cyber security threats and that controls are in place to protect assets and information and enhance cyber resilience'. ASIC has a variety of active investigations underway in the cyber security space and will be reviewing cyber and operational resilience in various sectors.
- Deficient claims handling by general insurers following natural disasters: Persistent issues in claims handling services following natural disasters (which are expected in increase) have been identified by recent reviews. ASIC will be focusing on delays in assessment, decision making and repairs as well as poor communications and settlement arrangements that do not meet community or customer needs.
- Impact of ASX’s CHESS replacement: ASIC will focus the ASX maintaining the resilience and reliability of its clearing and settlement operations as the replacement of the Clearing House Electronic Subregister System progresses.
- Climate-related financial disclosures and misinformed investment decisions: ASIC intends to provide support through guidance as new climate related financial reporting obligations are rolled out. Reporting entities will need to ensure they have appropriate governance and reporting processes in place to provide greater transparency in relation to climate-related risks and opportunities in order to ensure that high quality and consistent, comparable information is provided. ASIC has also said that it will continue to scrutinise disclosures where entities mispresent financial products or investment strategies as environmentally friendly, sustainable or ethical when they are not.
- Poor audit quality and declining market confidence: ASIC has a particular concern regarding auditor independence and conflicts of interest in 2025. It intends to scrutinise form compliance with relevant legislative requirements.
- Banks and lenders exacerbating consumer financial hardship: ASIC is monitoring banks and lenders (particularly those who have improvement plans agreed to with ASIC) to improve the procedures surrounding the way in which they provide support to customers experiencing financial hardship.
ASIC has said that 'increased market volatility, geopolitical changes, the global accumulation of debt to drive growth, perceived and real inequality of wealth, shifts in the way capital is invested, and advances in artificial intelligence, data and cyber risk, are all key factors influencing the way ASIC views the issues facing Australia’s financial system'. [24 Jan 2025]
Federal Court orders Firstmac Limited to pay $8m for failure to meet its design and distribution obligations
The Australian Securities and Investments Commission (ASIC) has announced that the Federal Court has ordered Firstmac Limited to pay $8m in penalties for breach of section 994E(3) of the Corporations Act. This breach was in relation to Firstmac’s failure to meet its design and distribution obligations (DDO) in relation to a 'cross-selling strategy' of marketing investments in a registered managed investment scheme (High Livez) to 780 customers who held existing term deposits with Firstmac, between October 2021 and September 2022. The Court found that Firstmac breached its DDO when it sent product disclosure statements (PDS) for High Livez to existing term deposit holders without first taking reasonable steps to ensure they were part of the target market for this product. Justice Downes found that: 'Firstmac "courted the risk" that the High Livez PDS would be distributed to a person who fell outside the target market for High Livez and that its conduct was "objectively reckless"'. The Court found this failure to take reasonable steps was a contravention of section 994E(3) of the Corporations Act, as there was a risk of harm to persons outside the target market for High Livez who had been provided the PDS.
The Court has also ordered Firstmac to pay for ASIC's costs for the proceeding.
This was ASIC's first civil penalty action against a distributor involving DDO breaches. ASIC Chair Joe Longo has said: 'We pursued this matter following concerns customers were exposed to the risk they might obtain financial products that were not appropriately suited to them. Compliance with the DDO is essential to protect customers. Today’s judgment should act as a deterrent to anyone engaged in cross-selling financial products who fails to consider their design and distribution obligations before sending product disclosure statements.' [24 Jan 2025]
ASIC proposes to remake relief for offers of CHESS Depository Interests
ASIC has announced that it is seeking feedback for its proposal to remake Class Order [CO 14/827] Offers of CHESS Depository Interests, which is due to expire on 1 April 2025. ASIC has assessed that the current class orders form a necessary and useful part of the legislative framework, and therefore proposes to remake the class orders on largely the same terms, for a period of five years.
ASIC notes that changes would include minor revisions (for clarity) to the definition of 'depository interests' and the wording of Australian financial services licence exemption.
ASIC notes that the three main purposes to remake the orders are so that it continues to:
- remove uncertainty as to how offers of CHESS Depository Interests (CDI) over foreign shares and options are regulated under the Corporations Act 2001 (Cth);
- facilitate offers of CDIs over foreign shares and options, and to assist foreign companies to make such offers in an efficient market; and
- Promote retail investor understanding about CDIs to assist them in making confident and informed investment decisions.
Feedback is requested by 28 February 2025. [24 Jan 2025]
FSC publishes its Federal Election Policy Priorities
The Financial Services Council (FSC) has published its Federal Election Policy Priorities. The CEO of the FSC Blake Briggs said: 'The upcoming federal election is an opportunity to refocus on economic growth and allow the private sector to lead Australia out of its economic malaise. The FSC has recommended policy proposals that would increase financial services exports by almost $2 billion a year and lift the sector’s productivity by $800m a year through a combination of reducing regulatory costs and lowering fees and investing in new markets.'
Notable policies recommended by the FSC include:
- Committing to form a 'red tape razor gang' which will be responsible for addressing inefficient regulation and simplifying the breach reporting regime, which will provide a level playing field under the foreign investment framework.
- Undertaking a holistic and evidence-based review of the tax system, as opposed to 'piecemeal tinkering with superannuation taxes'.
- Boosting productivity and growth through implementation of simple tax and funds management regulatory changes. [22 Jan 2025]
ASIC and APRA publish notes from Superannuation CEO roundtables - November and December 2024
ASIC and APRA have released the notes from two joint Superannuation CEO roundtables held on 25 November 2025 and 5 December 2024. The notes confirm that climate risk remains a key focus for both ASIC and APRA given potential impacts on the financial stability and sustainability of superannuation funds, and both regulators are committed to supporting the superannuation industry in this respect through clear guidance, practical support and collaboration.
APRA suggested that industry bodies could develop a code to facilitate collaboration with trustees to ensure consistent and effective climate risk disclosure and reporting. ASIC similarly noted the importance which industry bodies play in providing practical and user-friendly guidance for useful and compliant reporting. [20 Jan 2025]
HKMA draws registered institutions' attention to SFC circular of 9 October 2024 on deficiencies and substandard conducted noted in management of private funds and discretionary accounts
The HKMA has issued a circular to registered institutions to draw their attention to the SFC's circular of 9 October 2024 (and appendix) (see our previous update), which shared deficiencies and substandard conduct identified in the SFC’s supervision of licensed corporations engaged in managing private funds and discretionary accounts.
The SFC circular sets out its concerns due to breaches of regulatory requirements and provides case examples, covering the following areas:
- conflicts of interest;
- risk management and investment within mandate;
- information for investors; and
- valuation methodologies.
Registered institutions that engage in asset management should have due regard to the SFC circular. The HKMA will monitor their asset management activities in the course of its supervision. [28 Jan 2025]
SFC reprimands and fines registered institution HK$66.4 million for regulatory misconduct in investment product sales practices
The SFC has reprimanded and fined a registered institution HK$66.4 million for serious regulatory failures relating to the sale of collective investment schemes (CIS) and derivative products, overcharging its clients and making inadequate disclosures of monetary benefits to them over the course of nine years.
- The SFC’s disciplinary action stemmed from a referral by the HKMA, whose investigation revealed a range of concerns regarding the registered institution's sale of CIS products from 1 June 2016 to 30 November 2017. The SFC found that 111 client accounts had executed 100 or more CIS transactions during the period. 46 clients were solicited into conducting excessively frequent transactions with short holding periods (a trading pattern which contradicted both the funds’ investment objectives and the clients’ preferred investment horizons), resulting in significant transaction costs. The institution failed to keep a sufficient audit trail to ensure that transactions were genuinely initiated by clients. It also failed to put in place sufficient controls to monitor and follow up on potentially problematic transactions.
- The HKMA also referred to the SFC its investigation findings in relation to the registered institutions' sale and distribution of derivative products. From 17 February 2014 to 19 December 2018, 388 clients who were not characterised by the institution as having knowledge of the nature and risks of derivatives purchased derivative funds in 629 transactions, and 148 of these transactions involved products whose risk level was higher than the clients’ risk tolerance level.
- A joint HKMA-SFC investigation also found that during various periods between November 2014 and May 2023, the registered institution had retained monetary benefits from client transactions counter to applicable regulatory standards, charged its clients transaction fees beyond amounts previously communicated, and failed to adequately disclose trailer fee arrangements to clients trading in investment funds. The institution received at least HK$22.4 million in excess benefits or fees from these transactions.
The registered institution has compensated impacted clients and has taken remediation steps and enhancement measures to rectify and strengthen its internal controls. [27 Jan 2025]
SFC and SEHK conclude consultations on abolishment of mixed media offers and expansion of paperless listing reforms
The SFC has published the conclusions to its consultation (see our previous update) on proposed amendments to cease permitting mixed media offers, to facilitate a fully electronic subscription process for public offerings.
The SFC will adopt the proposals in full, which have been supported by all respondents. Once implemented, online channels will serve as the only means to subscribe to public offers of equity securities or interests in collective investment schemes listed or to be listed on the Stock Exchange of Hong Kong Limited (SEHK). Electronic prospectuses will be issued, and printed application forms will no longer be available.
Amendments will be made to the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Exemption Notice) to remove the exemption permitting mixed media offers. The SFC will gazette the amendments to the Exemption Notice and table it in the Legislative Council for negative vetting as soon as practicable.
Consequential amendments will be made to the draft Guidelines for Electronic Public Offers to remove references to mixed media offers. The final version of the guidelines will be gazetted in 2025, together with other code and guidelines relating to the implementation of the uncertificated securities market regime.
Subscriptions for public offers of debt securities will continue to be conducted through their well-established channels.
The SEHK has also published the conclusions to its consultation (see our previous update) regarding the further expansion of the paperless listing regime. The proposals received support from the majority of the respondents. The SEHK will adopt the proposal to remove the availability of mixed media offers for listing applicants and listed issuers under the Listing Rules, which will take effect on the date when the Exemption Notice amendments take effect. Other proposals are expected to take effect on various dates within 2025. [24 Jan 2025]
SFC expands listed structured fund offering in Hong Kong
The SFC has issued a circular setting out the new regulatory requirements for product issuers, with a view to broadening the range of listed structured funds that may be offered to Hong Kong public, notably adding to their product mix single stock leveraged and inverse (L&I) products and defined outcome listed structured funds. Such products have become increasingly popular in overseas markets, and there has been a growing interest among product issuers in launching them in Hong Kong.
The circular supplements the structured fund related requirements in 8.8 of the Code on Unit Trusts and Mutual Funds. It sets out additional requirements under which the SFC would consider authorising listed structured funds for public offerings in Hong Kong under sections 104 and 105 of the Securities and Futures Ordinance. It incorporates and supersedes the SFC’s circular on L&I products and the related supplemental circular both dated 22 May 2020 (see our previous update).
The framework comprises general requirements for listed structured funds (covering product naming, product structure, offering documents disclosure, market making arrangements, performance simulators, investor education, and distribution), as well as additional safeguards for specific types of listed structured funds. One of the additional safeguards is that for single stock L&I products, the SFC will only accept those referencing a highly liquid mega-cap stock listed on a major overseas exchange (this excludes overseas listed stocks which may be dually listed in Hong Kong, and stocks listed on any Mainland exchange). Single stock L&I products should also generally be subject to a maximum leverage factor of 2x to -2x.
Intermediaries are encouraged to consult the responsible Investment Products Division case team early in relation to listed structured fund proposals, particularly those that offer structured payouts or certain defined outcome or protection. [23 Jan 2025]
HKMA publishes presentation materials for upcoming briefing to LegCo Panel on Financial Affairs on 3 February 2025
The HKMA has published presentation materials for its upcoming briefing to the Legislative Council (LegCo) Panel on Financial Affairs on 3 February 2025. Areas of the HKMA's work include (among others):
Banking Stability
- Prudential treatment of cryptoasset exposures – The HKMA is seeking industry's comments on the initial proposals for amending the rules for the local implementation of the Basel standard. It plans to consult on the draft rules in around March 2025, with a target implementation date of 1 January 2026 (slide 55).
- Proposed enhancements to Banking Ordinance – Consultations are underway, including on the extension of the HKMA's inspection and enforcement powers, the engagement of skilled persons for assisting the HKMA in the performance of its functions, and amendment to one of the conditions for initiating resolution under the Financial Institutions (Resolution) Ordinance (slides 55 and 57).
- Green and sustainable banking – The HKMA plans to publish the second phase prototype of the taxonomy for sustainable finance for consultation in the first half of 2025. It also plans to consult the market on its approach for implementation of the ISSB sustainability disclosure standards for the banking sector within 2025 (slide 58).
- Banking consumer protection – The HKMA issued guidance on 3 December 2024 on introduction of Money Safe to provide an extra layer of security to customers' bank deposits (see our previous update). Banks will launch the initiative for retail banking individual customers in phases, with full implementation by end-2025. Following the launch of the Mandatory Reference Checking Scheme in May 2023 (see our previous update), the HKMA launched an industry consultation in December 2024 to gather feedback on the implementation of Phase 1 of the scheme. The HKMA will undertake a post-implementation review in 2025, which will form the basis for further refinements of the scheme in Phase 2 (slide 61).
Financial Infrastructure
- Fintech initiatives – The HKMA is progressing with various central bank digital currency projects, including Project mBridge, Project Ensemble, and Project e-HKD+ (slide 70).
- Regulatory development of the over-the-counter (OTC) derivatives market – Following the publication of the consultation conclusion paper on enhancements to the Hong Kong OTC derivatives reporting regime, the HKMA and SFC published the updated supplementary instructions for the enhanced reporting requirements in December 2024. The proposed enhancements will be gazetted in the first quarter of 2025 for implementation on 29 September 2025 (see our previous update) (slide 73).
Hong Kong as an International Financial Centre
- Developing the asset and wealth management industry – The HKMA is working with other Government agencies and financial regulators on various initiatives, including reviewing the existing tax concession measures applicable to funds, single family offices and carried interest (slide 78).
- The HKMA and the Financial Services and the Treasury Bureau introduced the Stablecoins Bill into the LegCo in December 2024 (see our previous update). The HKMA has also continued to maintain dialogue with the participants of the stablecoin issuer sandbox (slide 86). [22 Jan 2025]
Official launch of direct linkage between Hong Kong CMU and Macao CSD to promote development of bond markets
Following their joint announcement in September 2024 (see our previous update), the HKMA and the Monetary Authority of Macao (AMCM) have announced the official launch of the direct linkage between the Central Moneymarkets Unit (CMU) operated by CMU OmniClear Limited and the central securities depository (CSD) operated by Macao Central Securities Depository and Clearing Limited.
The direct linkage aims to promote the development of the bond markets in the two regions. The connection between the bond market infrastructures in Hong Kong and Macao will provide a cross-border investment and financing channel, enabling investors from both markets to participate in each other's bond market with greater ease and efficiency.
The linkage showcases Hong Kong’s role as a super-connector and represents a major step towards developing the CMU into an international CSD in Asia. It is the first connectivity of Macao’s bond market infrastructure established with a CSD located outside of Macao. This will provide international investors, including those from Portuguese-speaking countries, with a convenient channel to participate in the bond markets of Macao and Hong Kong. [21 Jan 2025]
LME to include Hong Kong as approved delivery point within its global warehousing network
The Government has welcomed the announcement by the London Metal Exchange (LME) (a subsidiary of the HKEX) that it will include Hong Kong as an approved delivery point within its global warehousing network and will accept applications from warehouse operators to become approved for the storage of LME-registered brands of metals.
The Secretary for Financial Services and the Treasury, Mr Christopher Hui, stated that approving Hong Kong as an LME delivery point will bring efficient and comprehensive services to the global metal markets, leveraging Hong Kong's institutional and legal advantages, and demonstrating the city's role as a 'super connector' and 'super value-adder' in connecting Mainland and international opportunities.
The HKEX and the LME will actively communicate with the industry and encourage applications from warehouse operators, and the Government will provide assistance as appropriate. [20 Jan 2025]
SFC extends swift licensing process to new VATP applicants and shares expected standards of conduct for VATP operators and findings from on-site inspections
The SFC has announced that all new virtual asset trading platform (VATP) applicants can seek licences under its swift licensing process. The extension of the process to new VATP applicants is made in light of the effectiveness of the SFC’s direct engagement and communication with deemed-to-be-licensed VATP applicants on the regulatory standards during its risk-based on-site inspections of such applicants (see our previous update).
In a circular, the SFC explains that under the enhanced licensing process, VATP applicants will be required to engage an external assessor to perform an external assessment after deploying all relevant systems and controls. VATPs will no longer be required to conduct the first-phase and second-phase assessments – there will only be one external assessment throughout the licensing application process. The SFC will become a party to the engagement for the external assessment to be conducted by VATP applicants and will supervise the overall external assessment process.
The SFC has also revamped the external assessment to enhance its effectiveness. It will focus on ensuring that a VATP applicant’s policies, procedures, systems and controls (P&P) are suitably designed and implemented. The VATP applicant must notify the SFC and the external assessor of any subsequent material changes to its P&P as soon as practicable. To ensure robustness, the SFC requires the assessment to be performed as a direct assurance engagement and signed off by a practising certified public accountant.
The circular sets out the application procedures and includes a flowchart in an Appendix to illustrate the process.
To provide further guidance to new VATP applicants, the SFC has issued a circular to share its findings from the inspections of deemed-to-be-licensed VATP applicants and the expected standards of conduct for VATP operators on areas including cybersecurity, protection of client virtual assets, and know your client process. [16 Jan 2025]
HKSCC issues circulars regarding enhancement to settlement arrangement for multi-counter eligible securities in CCASS, tentatively by June 2025
The Hong Kong Securities Clearing Company Limited (HKSCC) has issued a circular to investor participants regarding an enhancement to the settlement arrangement for multi-counter eligible securities in the Central Clearing and Settlement System (CCASS) by adopting a single tranche multiple counters arrangement.
The enhancement is part of the 2025 planned initiatives for the securities market announced by the HKSCC (see our previous update), and will tentatively come into effect by June 2025, subject to regulatory approval.
As part of the enhancement, all post-trade activities for multi-counter eligible securities, such as dual counter securities and multi-counter exchange traded Products, will be shown under the domain settlement counter. This refers to the HKD counter and reflects the stock code of the HKD counter, or another currency counter of a multi-counter eligible security which is from time to time designated by the HKSCC to reflect the aggregated holdings of such multi-counter eligible security.
The HKSCC will carry out the conversion of shareholdings in all multi-counter eligible securities from other currency counters to domain settlement counters automatically.
Investor participants will no longer be required to submit multi-counter transfer instructions to the HKSCC to perform an inter-counter transfer, and must use the CCASS stock code of the domain settlement counter in their instructions.
In a further circular, the HKSCC clarifies that the enhancement will streamline post-trade processing in CCASS by reflecting multiple trading counters of the same multi-counter eligible security under the domain settlement counter using a single International Securities Identification Number. [15 Jan 2025]
GCC Chapter at Asian Financial Forum marks significant milestone in collaboration between Hong Kong and GCC countries in financial services sector
The first Gulf Cooperation Council (GCC) Chapter was held at the Asian Financial Forum, marking a significant milestone in the collaboration between Hong Kong and the GCC countries in the financial services sector. The Secretary for Financial Services and the Treasury, Mr Christopher Hui, stated that the Hong Kong Government will continue to collaborate with the GCC Secretariat to co-organise events and explore concrete measures with a view to further strengthening financial market co-operation.
Mr Hui and the Secretary-General of the GCC, Mr Jasem Mohamed Albudaiwi, gave keynote remarks at the GCC-dedicated session. This was followed by a panel discussion engaging government and business leaders from both Hong Kong and GCC countries, in which the current status of financial connections between the GCC and Hong Kong, as well as emerging areas of financial cooperation and opportunities that have arisen, were discussed.
The Hong Kong Government and the GCC Secretariat will continue to stay closely connected to co-organise events that foster greater understanding of each other's markets and explore concrete measures to further strengthen financial market co-operation in various aspects, such as capital market connectivity, sustainable finance, fintech, asset and wealth management, family offices, and financial infrastructure development. [14 Jan 2025]
HKMA and PBoC announce new policy measures to deepen financial cooperation between Hong Kong and Mainland
The HKMA and the People’s Bank of China (PBoC) have announced new policy measures to deepen the financial market connectivity between Hong Kong and the Mainland, and consolidate Hong Kong’s status as the global offshore RMB business hub.
- New RMB Trade Financing Liquidity Facility – The HKMA will introduce this facility for banks in Hong Kong as a stable source of relatively lower-cost RMB funds, to support banks in providing RMB trade finance services to their corporate customers. The new facility has a total size of RMB100 billion and the HKMA will offer 1-month, 3-month and 6-month RMB funds, with interest rates referencing onshore interest rates plus a spread.
- Bond Connect (Southbound) enhancement and expansion – The HKMA and the PBoC will jointly implement various enhancement and expansion measures, including (i) extending the settlement time under the Central Securities Depositories linkage, (ii) supporting the settlement of multi-currency bonds in RMB, Hong Kong dollar, US dollar and euro through the linkage, and (iii) expanding the scope of eligible Mainland investors.
- Offshore RMB bond repurchase (repo) using Northbound Bond Connect bonds as collateral – The HKMA has announced that Northbound Bond Connect participants can use eligible onshore bonds as collateral to conduct RMB repo business in Hong Kong. The business is scheduled to commence 'soon', and the announcement sets out details on the participating institutions, eligible bonds, market maker arrangement, transaction and settlement arrangements, and data reporting.
- Inclusion of Northbound Bond Connect bonds as eligible margin collateral at OTC Clearing Hong Kong Limited (OTC Clear) – The HKMA, the PBoC, and the SFC have reached a consensus to support offshore investors to use onshore bonds issued by the Ministry of Finance and Mainland policy banks that are held under Northbound Bond Connect as eligible margin collateral for all derivative transactions cleared by the OTC Clear. OTC Clear began accepting these instruments as margin collateral for Northbound Swap Connect from 13 January 2025 (see our previous updates here and here), and will also be accepting them as margin collateral for other derivative transactions by the end of the first quarter of 2025.
- Cross-boundary payment facilitation – The HKMA and the PBoC are working to implement the linkage of the Mainland’s Internet Banking Payment System and Hong Kong’s Faster Payment System to support residents in both places in making real-time, small-value, cross-boundary remittances, with some services expected to be launched around mid-2025. The HKMA has published frequently asked questions to clarify the current policy arrangements for various cross-boundary remittance scenarios.
- GBA financial facilitation – The HKMA welcomes the inclusion of new participating banks by the PBoC to offer account opening by attestation services for Hong Kong residents.
The above policy measures were also discussed by the Governor of the PBoC, Mr Pan Gongsheng, at a recent speech delivered in Hong Kong. In addition, Mr Pan discussed (among other things) the four areas in which the PBoC will support Hong Kong as an international finance center, namely (i) supporting the development of Hong Kong's capital market and its connection with the Mainland's financial market, (ii) expanding the status of Hong Kong as an offshore RMB business hub, (iii) strengthening Hong Kong's function as an international asset management and wealth management center, and (iv) safeguarding Hong Kong's financial stability and security. [13 Jan 2025]
HKMA launches supervisory incubator to foster responsible DLT adoption
At its FiNETech4 event, the HKMA announced the launch of a supervisory incubator for distributed ledger technology (DLT) to help authorised institutions (AIs) maximise the potential benefits of DLT adoption by effectively managing associated risks. The HKMA has also issued a circular on this initiative.
The incubator will augment risk management capabilities at both the individual bank and industry levels, with a particular focus on addressing those risks that may arise as banks move to productionise relevant services (such as deposits and loans) that cut across DLT-based and legacy banking infrastructures. Tokenised deposits, which have attracted significant production interest from industry, will be a core focus upon the Incubator’s inception.
AIs will have access to a dedicated team from the HKMA to obtain supervisory feedback and may opt to conduct live trials to validate and refine specific aspects of their risk management implementation. The Incubator will also promote industry awareness and understanding of best practices in DLT risk management through a range of targeted initiatives, such as supervisory guidance, industry sharing sessions, and forward-looking research projects.
These initiatives are aimed at enhancing the industry’s ability and readiness to deploy DLT-based solutions in the long run.
The HKMA will provide a certain amount of supervisory flexibility to AIs participating in the incubator, assessed on a case-by-case basis.
The HKMA is aware of certain aspects of DLT adoption that might not be fully compatible with existing regulatory and legal constructs. It will give due consideration to the need for regulatory adaptations or flexibility, taking into account the latest international standards and developments. Questions of this nature may also be discussed through the Incubator.
In the longer term, the incubator will run initiatives to enhance industry awareness and risk management capacity related to DLT, including issuing supervisory guidance, hosting industry sharing sessions, and conducting forward-looking research projects. The HKMA will announce further details in due course. [8 Jan 2025]
Government announces enhancement measures for new Capital Investment Entrant Scheme to enable more investors to join and to promote development of family office businesses in Hong Kong
The Financial Services and the Treasury Bureau (FSTB) and Invest Hong Kong have announced details of various enhancement measures for the new Capital Investment Entrant Scheme, which will take effect on 1 March 2025. Brief details of the enhancements were announced in the Chief Executive's 2024 Policy Address as part of the Government's efforts to strengthen Hong Kong's status as an international asset and wealth management centre (see our previous update).
The enhancement measures include the following:
- An applicant will only be required to demonstrate that he/she has net assets or net equity to which he/she is absolutely beneficially entitled with a market value of not less than HK$30 million net throughout six months (two years before the enhancement) preceding the application.
- Net assets or net equity jointly owned with the applicant's family member(s) can now be taken into consideration for the calculation of the net asset requirement for the respective portion which is absolutely beneficially entitled to the applicant.
- Investments made through an eligible private company wholly owned by an applicant will be counted towards the applicant's eligible investment. An eligible private company refers to a holding company incorporated or registered in Hong Kong which is wholly owned by an applicant in the form of a family-owned investment holding vehicle (or a family-owned special purpose entity thereunder) managed by an eligible single family office as defined in the Inland Revenue Ordinance. The enhancement will create synergy with the tax concession regime for family offices, thereby promoting the development of family office businesses in Hong Kong. [7 Jan 2025]
MAS: Written response to PQ on safeguards to prevent the misuse of bank customers' personal data
MAS has published a written response to a PQ on what safeguards and regulations it will be implementing in order to address public concerns about the potential misuse of personal data, including national registration identity card (NRIC) numbers, under the Personal Data Protection Commission’s (PDPC's) advisory guidelines. MAS also addresses what the steps will be taken to reassure banking clients that the risk of identity theft will be eliminated, particularly in light of increasing cybersecurity threats.
MAS highlights that the Association of Banks in Singapore (ABS) has recently assured banking customers that NRIC numbers alone cannot be used to effect payment and fund transfers. Banks are also conducting a thorough review of their practices on the use of NRIC numbers to confirm that their practices are in line with the prevailing PDPC's advisory guidelines.
Additionally, the PDPC will be updating its advisory guidelines on the use of NRIC numbers following consultation. [8 Jan 2025]
MAS: Written response to PQ on closure of joint account upon death of account holder
MAS has published a written response to a PQ on: how many cases of credit card fraud have been reported over the past three years; the quantum of losses; and whether the Ministry will consider a framework similar to that of the Shared Responsibility Framework (SRF) to set out the responsibilities of banks in credit card fraud.
MAS reports that an average of 790 cases of credit card fraud were reported per year from 2021 to 2023; the average total loss per year is $2.1 million, Safeguards against credit card fraud put in place by global card schemes and card issuers have strengthened over time. MAS considers that the SRF is not suitable in the context of credit card fraud, given the existence of well-established rules protecting credit card holders and limiting their liability in the event of fraud. [7 Jan 2025]
New Bank Indonesia regulation on foreign exchange traffic management
On 16 December 2024, Bank Indonesia (BI) enacted Bank Indonesia Regulation No. 9 of 2024 on Foreign Exchange Traffic Management (Regulation 9/24, in Indonesian language). It serves as an 'umbrella' regulation for BI's authority to supervise and regulate the Indonesian foreign exchange traffic.
Prior to Regulation 9/24, BI has imposed obligations to Indonesian residents to report their foreign exchange traffic activities to BI. These obligations are regulated under BI Regulation No. 21/1/PBI/2019, BI Regulation No. 21/15/PBI/2019 (for banks) and BI Regulation 21/2/PBI/2019 (for individuals and nonbank corporations) (both in Indonesian language). BI Regulation 9/24 reaffirms the reporting obligations. Notably, BI Regulation 9/24 authorises BI to impose monetary fines for violations to the reporting obligations – a type of sanction not imposed on individuals and nonbank corporations under the 2019 regulation.
Under BI Regulation 9/24, BI will assess the data obtained via the abovementioned reports to determine whether any policy response is necessary for the purpose for maintaining Indonesia's monetary stability. Any such policy response will be imposed on Indonesian residents that participate on foreign exchange traffic activities. Failure to comply with the policy will result in administrative sanctions ranging from written reprimand to monetary fines. Furthermore, BI Regulation 9/24 also authorises BI to publish information concerning foreign exchange traffic activities on its website and other media designated by BI.
BI Regulation 9/24 came into effect on 23 December 2024. [17 Jan 2025]
New OJK Regulation on the Trading Operation of Digital Financial Assets including Crypto
The Indonesian Financial Services Authority (OJK) issued OJK Regulation No. 27 of 2024 on the Trading Operation of Digital Financial Assets including Crypto (the 'Regulation 27', in Indonesian language), implementing the mandates given under Law No. 4 of 2023 on the Development and Strengthening of Financial Service Sector for the transfer of regulation and supervision authority of digital financial assets from the Commodity Futures Trading Regulatory Agency (Bappebti) to OJK by January 2025.
Regulation 27 will take effect on 10 January 2025. The trading operation of the digital financial assets will be conducted by OJK licensed exchange, clearing agency, custodian, traders and other parties as determined by OJK. Regulation 27 sets out the criteria for digital financial assets which may be traded in the digital financial assets market and OJK has the authority to stop the trading of digital financial assets. The exchange will determine the list of crypto assets which can be traded by the traders. Regulation 27 also allows both individual and legal entity as the customers of the cryptocurrency traders. Upon the effectiveness of Regulation 27, the licence, approval for product registration, instrument, and/or activities as well as decision and/or other determination previously issued by Bappebti will remain in effect. [10 Jan 2025]
SCM/BNM: Launch of new dispute resolution service
The SCM has announced the launch, in conjunction with the Bank Negara Malaysia (BNM), of the Financial Markets Ombudsman Service (FMOS). FMOS will serve as a centralised dispute resolution service for financial consumers and investors.
FMOS has been formed by merging the Ombudsman for Financial Services (OFS) and the Securities Industry Dispute Resolution Center (SIDREC). The new body will be subject to joint oversight by BNM and SCM. [17 Jan 2025]
SCM statement on crypto policy
The Securities Commission Malaysia (SCM) has issued a statement welcoming Prime Minister Anwar Ibrahim’s announcement to explore a digital finance policy that recognises cryptocurrency and blockchain technology. [16 Jan 2025]
SECT updates ESG Product Platform
The Securities and Exchange Commission Thailand (SECT) has announced that it has updated its ESG Product Platform, adding key information on Sustainable and Responsible Investing (SRI) funds to the central hub for sustainability-themed financial products. [21 Jan 2025]
SECT amends digital asset business regulations to support greater variety of digital asset custodial wallet providers
The SECT has announced that it has amended the regulations regarding the undertaking of digital asset businesses. The amendments:
- allow digital asset custodial wallet providers from the specified business groups with expertise, experience and readiness for keeping direct custody of financial assets to provide services to digital asset business operators with the same major shareholders; and
- require these digital asset custodial wallet providers to comply with the independence rules as specified by the SECT.
The amended regulations took effect from 16 January 2025. [17 Jan 2025]
SECT amends regulations on digital asset investment of mutual funds and private funds
SECT has amended the regulations concerning investment in digital assets by mutual funds and private funds. The amendments seek to ensure fairness in the provision of foreign investment to high net worth (HNW) investors through securities companies and asset management companies and to support asset allocation by fund managers. [16 Jan 2025]
SECT consults on amendments regarding the advertising of digital asset business operators
SECT has published a consultation on proposed amendments to the regulations regarding the advertising of digital asset business operators. The proposals are aimed at building investors’ awareness of the risks associated with digital asset investments and enhancing digital asset business operators’ responsible advertising practices. Responses to the consultation are requested by 29 January 2025. [15 Jan 2025]
SEBI consults on updated investor charter for stock brokers
The Securities and Exchange Board of India (SEBI) has published a consultation paper on the review of the framework for the social stock exchange (SSE).
Responses are requested by 10 February 2025. [20 Jan 2025]
IFSCA extends timeline for implementation of complaint handling and grievance redressal circular
The International Financial Services Centres Authority (IFSCA) has announced an extension to the timeline for implementing the 2 December 2024 circular: Complaint Handling and Grievance Redressal by Regulated Entities in the IFSC. IFSCA has decided that the circular will now come into force from 1 April 2025. [13 Jan 2025]
SEBI consults on proposal to increase size criteria in additional disclosure framework
SEBI has published a consultation on a proposal to increase the threshold in relation to the requirement that certain foreign portfolio investments (FPIs) with equity assets under management (AUM) exceeding INR 25,000 crores must provide granular details of all their investors/stakeholders on a look-through basis. Given the rise in market volumes since the limit was set, SEBI proposes to increase such threshold from INR 25,000 crores to INR 50,000 crores.
Responses to the consultation are requested by 31 January 2025. [10 Jan 2025]
IFSCA consults on SPV framework under 2022 Fund Management regulations
IFSCA has published a consultation paper on the framework for Special Purpose Vehicles (SPVs) for co-investment and leverage transaction under the IFSCA (Fund Management) Regulations 2022. The aim is to facilitate business and to facilitate the growth of the alternative investment industry in the IFSC.
Responses are requested by 31 January 2025. [9 Jan 2025]
RBI: Master Directions on non-resident investment in debt instruments, credit information reporting
The Reserve Bank of India (RBI) has published the following Master Directions:
BSP: Information campaign on FX regulations
The Bangko Sentral ng Pilipinas (BSP) has announced that it has conducted six briefings on foreign exchange (FX) regulations across the country following a series of FX liberalisation reforms issued in recent years. The aim of the briefings was to proactively engage stakeholders on FX market rules and reforms, as well as promote awareness and uniform understanding on FX policy and recent developments. [17 Jan 2025]
SECP publishes guidelines on transaction reporting
The Securities and Exchange Commission Philippines (SECP) has published the Anti-Money Laundering Council (AMLC) Guidelines on Transaction Reporting and Compliance Submissions (GoTRACS). Key features of the guidelines include:
- reinstatement of some low-risk transactions as reportable cash threshold reports (CTRs);
- addition of low-risk transactions;
- introduction of new suspicious transaction report (STR) file types;
- mandatory uploading of Beneficial Owner (BO) information of account holders tagged as juridical persons for STRs;
- addition of transnational organized crime as one of the reasons for suspicion; and
- revisions to the Covered Transaction and STR format. [6 Jan 2025]
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The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.