APAC Monthly Private Wealth Legal Developments – October 2023

Hong Kong

HKMA issues circular to AIs on customer disclosure in relation to premium financing activities for insurance policies

The HKMA has issued a circular to authorised institutions (AIs) to remind AIs and their subsidiaries, as premium financing facility providers, of the importance of proper disclosure in relation to interest rates when providing premium financing facilities to customers.  It notes that some AIs have relied on clauses embedded in the terms and conditions in loan agreements to change the basis of interest rate under premium financing facilities.

• Following the receipt of customer applications for premium financing facilities, AIs should bring the customers’ attention to all building blocks for determining the applicable interest rate under the facilities, including, for example, all benchmark interest rates and the AIs' cost of fund, where applicable.  If an AI has the discretion to adopt its cost of fund to determine the applicable interest rate, this should be drawn to the customers’ attention.
• All building blocks for determining the applicable interest rate under the premium financing facilities should be disclosed in adequate and equal prominence under the same part of the facility letters.
• AIs should provide adequate training to all relevant staff members to ensure that they fully understand and comply with the requirements mentioned above.

The HKMA requires AIs to ensure that the above clarified disclosure requirements are applied to new premium financing facilities as soon as practicable, and in any case within 3 months of the date of this circular (ie, by 16 January 2024).  As for existing premium financing facilities, the HKMA reminds AIs to properly handle any customer enquiries.  Where deficiencies in disclosure are found, AIs are reminded to follow up and remediate with customers as appropriate.  [16 Oct 2023]

HKMA issues circular to retail banks on enhanced approaches to combat digital fraud

The HKMA has issued a circular to retail banks to provide an update on the enhancements being made to combat digital fraud.

In the first nine months of 2023, the HKMA received 954 fraud-related banking complaints, exceeding the total of 555 cases for the whole of 2022.  The HKMA has therefore worked with the industry to provide regulatory support, improve collaboration and promote innovation.  The measures, including the five initiatives announced by the HKMA and the Hong Kong Police Force (HKPF) in April 2023, will enhance anti-fraud efforts in the areas of information sharing, transaction monitoring and customer alerts.

Information sharing via the Fraud and Money Laundering Intelligence Taskforce (FMLIT) and the Financial Intelligence Evaluation Sharing tool (FINEST)

• Participation in the FMLIT has been expanded to include 28 retail banks, and 6 stored value facility (SVF) licensees will join later this year.  The HKMA will continue to monitor how authorised institutions (AIs) use FMLIT data and apply analytics and other regtech capabilities to contribute to FMLIT intelligence and analysis.  AIs are expected to allocate adequate resources to support this effort.
• FINEST will be expanded to cover more banks and a wider scope of financial crimes and accounts.  The HKMA will soon consult the industry and the public on legal provisions to facilitate personal account information sharing for preventing and detecting crime.

Transaction monitoring

• The 28 retails banks have all implemented real-time fraud monitoring and detection capabilities in line with HKMA requirements.  AIs should further explore the inclusion of more data and the application of network analytics in real-time fraud monitoring systems to strengthen their ability to identify high-risk accounts and networks and alert customers of high-risk transactions.

Customer alerts

The HKMA is now working with AIs, SVF licensees, the HKPF and the Hong Kong Interbank Clearing Limited to introduce a pre-transaction alert mechanism for Faster Payment System (FPS) transactions, based on information from Scameter (an anti-fraud search engine launched in September 2022).  This mechanism will alert customers where the FPS proxy ID of the payee is listed as 'High Risk' on Scameter, giving them an opportunity to further verify, and where necessary, stop the payment.  In order to effectively implement the mechanism across all FPS participating AIs and SVF licensees in the coming two months, AIs are required to make appropriate system enhancements and communicate these changes to customers in good time.

AIs are expected to establish adequate systems and controls with senior management oversight to enable effective implementation of the measures and initiatives.  The objectives and requirements should be clearly communicated to staff and key performance indicators should be developed to track performance.  The HKMA will collect related data from AIs and review the effectiveness at implementation and as part of ongoing supervision.  [12 Oct 2023]

PWMA report finds Hong Kong's advantages as private wealth management hub remain intact despite challenges posed by Covid-19 restrictions and external headwinds

In a new report, the Private Wealth Management Association (PWMA) has found that opportunities in the Mainland Chinese market, growing family office segment, government and regulatory reforms provide reason for optimism despite global uncertainties. The report provides an industry overview and discusses areas including growing the market, regulation, technology, talent and ways of working.

With regard to regulation:

• Know-your client and suitability requirements remain key regulatory pain points;
• Guidelines for sophisticated professional investors (SPI) are expected to ease suitability and disclosure challenges; and
• There is a significant increase in regtech adoption.

The report suggests that following the introduction of the SPI guidelines, the industry should build on this success and continue its engagement with regulators to improve the regulatory landscape, and member firms should make use of the new SPI guidelines to offer more flexibility to their clients on trading.  More private wealth management firms should consider using regtech to help them deal with the regulatory compliance burden.  [6 Oct 2023]

HKEX to launch Synapse, a settlement acceleration platform for Stock Connect, on 9 October 2023

The HKEX has announced the upcoming launch of HKEX Synapse on 9 October 2023, in collaboration with The Depository Trust & Clearing Corporation (DTCC).

Synapse is a new integrated settlement acceleration platform and is part of the HKEX’s ongoing commitment to the development of Stock Connect – the efficient, accessible and cost-effective channel for investors participating in capital markets in Mainland China and Hong Kong.  It will eliminate sequential processes, offering real-time visibility and insights into the settlement process for all market participants.  Market participants will benefit from the platform which utilizes the latest technology to deliver greater market efficiency and transparency.

Available as an optional service, Synapse will support institutional investors participating in Northbound Stock Connect to better manage their post-trade operations across different time zones, in particular with regard to adhering to the Mainland securities market’s T+0 settlement cycle.  It will be linked with the DTCC through its institutional trade processing service.  This integration will enable global investors and HKEX participants to benefit from the central matching of cross-border transactions using the DTCC’s CTM service, which will automatically generate and send settlement instructions to the Synapse platform, streamlining the trade confirmation and settlement notification process.

Other details of HKEX Synapses are available on the designated Synapse webpage on the HKEX website. [4 Oct 2023]

Enhancements to the Cross-boundary Wealth Management Connect Pilot Scheme Strengthening Financial Market Connectivity in the GBA

The SFC and the HKMA have announced enhancements to the Cross-boundary Wealth Management Connect Pilot Scheme (Scheme) in the Greater Bay Area (GBA).  The Scheme was launched in 2021 and aims to strengthen the financial market connectivity between the Mainland, Hong Kong, and Macao.

Enhancements have been made to:

• expand the investors’ eligibility criteria to increase the number of GBA residents that can participate in the Scheme;
• include eligible securities firms in the scope of participating institutions to allow such institutions to distribute investment products and offer services to Southbound and Northbound individual investors;
• expand the scope of eligible products to address the increased demand for diversified investments;
• increase the quota of individual investors; and
• promotion and sales arrangements to improve on the quality of financial services provided by financial institutions.

Financial regulators in the Mainland, Hong Kong and Macao seek to implement the enhanced measures as soon as practicable following revision of the relevant implementation plans. The Financial Services and the Treasury Bureau welcomes these enhancements as they are conductive to new business opportunities in the GBA.  [28 Sep 2023]

Virtual Asset News

SFC and HKMA issue updated joint circular on intermediaries' VA-related activities

The SFC and the HKMA have issued an updated joint circular (with appendices) on intermediaries' virtual asset (VA)-related activities.

When the SFC formulated its regulatory approach for VAs in 2018, it imposed an overarching “professional investors (PIs) only” restriction on various types of activity, including the distribution of VA funds.  Since then, the VA landscape has evolved rapidly and begun to expand into mainstream finance.  The SFC has also allowed SFC-licensed VA trading platforms to serve retail investors since 1 June 2023 (see our briefings of February and May 2023), and has authorised VA futures exchange traded funds for public offering in Hong Kong.

The SFC and the HKMA have therefore updated its guidance in light of the latest market developments and enquiries from the industry seeking to further expand retail access through intermediaries and to allow investors to directly deposit and withdraw virtual assets to/from intermediaries with appropriate safeguards.  This updated joint circular will replace the joint circular of 28 January 2022 (with appendices) (see our previous update).  As with the previous circular, the updated joint circular provides guidance relating to:

• Distribution of VA-related products;
• Provision of VA dealing services;
• Provision of asset management services in respect of VAs; and
• Provision of VA advisory services.

Intermediaries which are already providing VA dealing services to non-qualified corporate PIs and individual PIs and wish to continue providing such services to them should revise their systems and controls to align with the updated requirements.  Accordingly, there will be a three-month transition period for intermediaries serving existing clients of its VA dealing services before the full implementation of the expected requirements in this joint circular.

Intermediaries which do not currently engage in VA-related activities or which plan to extend their VA dealing services to non-qualified corporate PIs, individual PIs, or retail investors should ensure that they are able to comply with the requirements in this circular before introducing such services.

Intermediaries are reminded to notify the SFC (and the HKMA, where applicable) in advance if they intend to engage in any activities involving tokenised securities and VAs, or intend to make any changes to these activities conducted.  [20 Oct 2023]

SFC and Police establish joint working group on VATPs

The SFC has announced the establishment of a dedicated working group with the Hong Kong Police Force (Police) to strengthen joint efforts to monitor and investigate illegal activities relating to virtual asset trading platforms (VATPs).  The working group was established after a high-level meeting of the two parties on 28 September 2023.

The working group allows the SFC and the Police to:

• facilitate the sharing of information on suspicious activities and breaches of VATPs;
• implement a mechanism to assess the risks of suspicious VATPs; and
• enhance coordination and collaboration in related investigations.  [4 Oct 2023]

SFC publishes lists of virtual asset trading platforms

As part of the SFC’s efforts to disseminate information on virtual asset trading platforms (VATPs) in a clear, transparent, and timely manner, the SFC has published several lists of VATPs. The lists include:

• 'List of licensed virtual asset trading platforms', which sets out VATP operators formally licensed by the SFC;
• 'List of virtual asset trading platform applicants', which sets out VATP operator applicants whose licence applications have not yet been approved by the SFC, accompanied by a 'List of applicants whose licence applications have been returned, refused or withdrawn', which sets out VATP operator applicants removed from the List of virtual asset trading platform applicants as their licence applications have been returned, refused and withdrawn;
• 'List of closing-down virtual asset trading platforms', which sets out VATP operators required by law to close down within a specified period; and
• 'List of virtual asset trading platforms which are deemed to be licensed', which sets out VATP operators deemed to be licensed as of 1 June 2024.

The above lists will be updated regularly, although they may not contain the most updated information as changes may take place between updates.

The SFC has also issued a dedicated list of suspicious VATPS to assist investors more easily identify suspicious VATPs who may have misrepresented their licence application status. The SFC reminds investors of the risks of trading virtual assets on unregulated VATPs, including the risk of losing their entire investment in the event the VATP ceases operations, is hacked, or suffers from any misappropriation of assets.  [29 Sep 2023]

Singapore

MAS issues prohibition orders in respect of unlicensed financial advisory services

MAS has issued prohibition orders against five persons for engaging in unlawful sub-agency activities, where appointed representatives had arrangements with unlicensed individuals to perform financial advisory services on their behalf. [19 Oct 2023]

Singapore prosecutors establish technology and crypto crime task forces

Singapore’s Attorney General’s Chambers has established two task forces, namely Technology Crime Task Force and Cryptocurrency Task Force to better understand how individuals utilize technology to conduct criminal proceedings.

In a recent interview, Deputy Chief Prosecutor Christopher Ong said legal enforcement departments must learn the necessary knowledge and skills to resolve new types of cybercrimes.

The task forces have noticed the trend in technology crimes since the late 1990s, and will focus on computer and technology-facilitated crimes and handling of digital evidence. The Cryptocurrency Task Force will focus on issues relating to crypto assets, including tracing and disposal of such assets.  [19 Oct 2023]

MAS consults on transition planning for net zero

MAS has issued a set of consultation papers (CPs) to banks and finance companies, insurers and asset managers. The CPs propose guidelines on transition planning to enable the global transition to a net zero economy. The proposed guidelines set out MAS’ supervisory expectations for financial institutions (FIs) to have a sound transition planning process to enable effective climate change mitigation and adaptation measures by their customers and investee companies in the global energy transition. The expectations include the following:

• engagement, rather than divestment, should be the key lever for FIs to steward their customers and investee companies to transition in an orderly manner;
• FIs should take a multi-year approach, beyond the typical financing or investment time horizons, to facilitate a more comprehensive assessment of climate related risks;
• a holistic treatment of risks enables better risk discovery;
• FIs should consider environmental risks beyond climate-related risks in their transition planning; and
• transparency supports accountability and promotes credibility.

These points were discussed further in an Opening Address by the MAS' Deputy Managing Director (Financial Supervision), Ms Ho Hern Shin at the launch of the CPs.

Responses to the CPs are requested by 18 December 2023. [18 Oct 2023]

MAS and financial industry launch financial planning guide

MAS, in conjunction with the Association of Banks in Singapore, Association of Financial Advisers (Singapore) and Life Insurance Association, has launched a Basic Financial Planning Guide to help Singaporeans take steps to enhance their financial well-being. The Guide outlines a few rules of thumb for individuals to start taking proactive steps to address their savings, insurance, and investment needs.  [7 Oct 2023]

MAS: Response to Parliamentary question on SGX measures regarding ownership movement of foreign shares

MAS has published a response to a Parliamentary question posed on whether MAS requires the SGX to have measures to detect ownership movements of foreign shares to foreigners who have securities accounts in Singapore and the encashment of the securities shortly after the shares are transferred to securities firms in Singapore. The response explains that:

• the SGX Central Depository is the depository only for shares that are traded on SGX, and does not deal with shares of foreign companies that are traded on foreign venues; and
• all customers who wish to trade in shares will need to open a trading account with a securities broker, that is required to put in place robust anti-money laundering and counter-financing of terrorism measures.  [3 Oct 2023]

MAS: Consultation response on the competency requirements for representatives conducting regulated activities

MAS has published its response to feedback received on draft notices on the competency requirements for representatives conducting regulated activities under the Financial Advisers Act and Securities and Futures Act.

MAS confirmed that, where appropriate, it has incorporated the feedback into the revised notices, which will take effect on 1 April 2024.  [28 Sep 2023]

MAS Revised Notice: Eligibility requirements for representatives of financial advisers

MAS has published a revised notice setting out the minimum entry and examination requirements for representatives of licensed financial advisers and exempt financial advisers.  [28 Sep 2023]

MAS Revised Notice: Eligibility requirements for representatives who carry out regulated activities

MAS has published a revised notice setting out how to qualify to be a representative, or appoint a representative, to conduct regulated activities under the Securities and Futures Act.  [28 Sep 2023]

MAS publishes FAQs on Financial Advisers Act regime

MAS has published answers to frequently asked questions (FAQs) which provide guidance to financial advisers about the Financial Adviser Act regime. The guidance covers topics including licensing requirements, exemptions, representative notification framework, business conduct and reporting requirements.  [25 Sep 2023]

China

IMAS Singapore and AMAOS Shanghai sign MOU to strengthen cross-border cooperation on asset management

Investment Management Association of Singapore (IMAS) and Asset Management Association of Shanghai (AMAOS) have signed a Memorandum of Understanding (MOU) to bolster cross-border collaboration.

The agreement seeks to strengthen cooperation between the Singapore and Shanghai asset management industries, focusing on five key areas:

• Events: Lend support and participate in respective asset management events
• Research: Engage in knowledge sharing of industry research findings
• Communication: Exchange of market intelligence and expertise
• Training: Development of innovative education and training materials
• Collaboration: Explore mutually beneficial collaborations

The new partnership between IMAS and AMAOS reinforces earlier relationship-building efforts by the Monetary Authority of Singapore with the establishment of a representative office in Shanghai in 2020.  [12 Oct 2023]

CSRC issues new short selling rules to bolster stock market

The China Securities Regulatory Commission (CSRC) has announced a tightening of its securities lending rules, while seeking to maintain the relative stability of the system. The proposed changes (except the margin ratio changes) have been effective from 16 October 2023.

The margin ratio for securities lending has been raised from no less than 50% to 80%, and the margin ratio for private securities investment funds participating in securities lending has been raised to 100%.

Securities firms are also requested to establish and improve the allocation mechanism of securities lending sources, the verification mechanisms, and strengthen the management of securities lending transactions.

The CSRC will increase the supervision of improper arbitrage behaviours and further strengthen supervision and law enforcement (with the imposition of severe penalties).  [14 Oct 2023]

Mainland Chinese investors banned from opening new offshore trading accounts with local brokers

According to Reuters, the China Securities Regulatory Commission has for the first time issued a notice prohibiting domestic brokerages and their overseas units from taking on new mainland clients for offshore trading, in a move that will restrict capital outflows.  New investments by existing mainland clients are also to be strictly monitored to prevent investors bypassing China's foreign exchange controls. [12 Oct 2023]

Taiwan

Taiwan's new carbon exchange signs MOU with BSI

The Taiwan Carbon Solution Exchange (TCX) has signed a memorandum of understanding (MOU) with the British Standards Institution (BSI) to further strengthen and improve Taiwan's new carbon market.  The two parties will strengthen carbon market talent cultivation in the future and deepen cooperation in aligning Taiwan's carbon market talent with international standards.

The BSI is responsible for formulating ISO international standards related to carbon management. It represents the British government in promoting net-zero policies based on "standards" in ISO international organizations.

The cooperation between the TCX and the BSI will combine both sides' sustainable capacities. The starting point for cooperation will be the “Carbon Rights Talent Training Program - International Certification Series Course”.  [18 Oct 2023]

FSC issues core principles and policies on use of AI by financial industry

Taiwan’s Financial Supervisory Commission (FSC) has published six core principles and eight supporting policies on the use of artificial intelligence (AI) in the financial industry.

The six core principles are:

• Financial institutions (FIs) should establish governance and accountability mechanisms;
• FIs should abide by fairness and human-centered values while using AI technologies;
• FIs must protect consumers' privacy and rights;
• FIs should ensure stability and safety of AI systems;
• FIs should ensure the transparency and explainability of their operations;
• FIs should ensure sustainable development and adequate support for staff.

The eight supporting policies include:

• Formulating guidelines on the use of AI technology in the financial industry;
• Reviewing and adjusting relevant regulations and policies on AI technology;
• Utilising suptech to enhance the efficiency and effectiveness of regulation;
• Communicating and cooperating with international and overseas regulatory bodies;
• Continuously encouraging the usage and development of AI technology in the financial sector to improve services to customers;
• Continuously reviewing and monitoring the use of AI technology and conducting examinations when necessary;
• Formulating self-regulatory standards and best practice codes relating to the use of AI technology to strengthen information security, internal controls and fair treatment of customers of FIs; and
• Continuously supervise the implementation of fair treatment of consumers and financial-friendly best practices. [19 Oct 2023]

Taiwan issues new regulatory guidelines for VASPs

Taiwan's FSC (Financial Supervisory Commission) has published new guiding principles for virtual asset service providers (VASPs). The guiding principles aim to strengthen VASP platforms' protection of consumers in terms of trading information transparency, customer asset custody, the platform's internal controls and external expert assistance.

The guiding principles cover the following areas:

• Management of virtual asset (VA) issuance: Issuers of VAs should publish a whitepaper on their website to disclose sufficient information about the issue, and platforms should publish the link to the website.
• Review mechanism for the admission and removal of VAs: Platforms should incorporate the whitepaper and review mechanisms for admission and removal of VAs into their internal control systems.
• Segregation of platform assets and customer assets: This applies to both fiat currency and VAs.
• Fair and transparent transactions: Platforms should formulate and publish VA trading rules and establish mechanisms to ensure fair trading.
• Contract formulation, advertising and solicitation, and complaint handling: Platforms should establish rules in respect of such matters based on fairness, equality, reciprocity and good faith.
• Systems for operations, information security, and hot and cold wallets: Rules should be established on these matters.
• Announcement and disclosure of information: This includes information on VA issuances, admission and removal of VAs from the platform, segregation of assets, VA transactions and customer protection.
• Internal control and institutional review: Platforms should establish internal audit systems and agree to regulatory inspections by the FSC and other relevant authorities.
• Individual VA dealers: They must submit a statement of compliance with anti-money laundering (AML) laws.
• Overseas VA dealers: They must register in Taiwan and submit a statement of compliance with AML laws before soliciting business in Taiwan or from Taiwan citizens. [27 Sep 2023]

Lawmaker proposes Taiwan’s first dedicated VA law

According to the Economic Daily News, lawmaker Jiang Yongchang has proposed Taiwan's first dedicated law on virtual assets (VAs), which aims to protect investors, tackle fraudulent and improper activities but at the same time facilitate the development of VA industry. The draft law contains 12 aspects:

• A licensing system for the VA industry with a tiered approach to regulation;
• VA operators to join an industry association and comply with the association's disciplinary rules;
• VA operators to establish procedures for the admission and removal of VA products and the trading of such products;
• Segregation of client assets from platform assets;
• VA operators to agree contract terms, advertising and marketing arrangements with customers;
• Information security and data privacy requirements for virtual asset operators;
• Standards for anti-money laundering and internal controls for VA operators;
• VA operators to abide by and cooperate in financial supervision and regulatory inspections;
• Establishment of a VA investor fund to protect customer rights and interests;
• Prohibition against improper trading practices. [20 Sep 2023]

Japan

Japan plans to significantly increase crowdfunding investment cap for retail investors

According to AsiaTechDaily, Japan’s Financial Services Agency (FSA) plans to double the cap on the amount of money retail investors can invest in unlisted startups, with the aim of expanding the funding pool for emerging growth sectors. Currently, retail investors can invest up to JPY 500,000 annually in individual unlisted startups through crowdfunding. The FSA proposes to raise the cap to JPY 1m or more depending on annual income, a change expected to take effect in 2024. In addition, it is proposed that the maximum fundraising limit for companies will be expanded fivefold.  These adjustments are expected to provide greater flexibility for individual investors as well as startups.  [18 Oct 2023]

Fintech firm DeCurret lays out vision for DCJPY, targeting a launch in July 2024

Fintech firm DeCurret DCP Inc. has published a whitepaper which lays out its vision for a digital currency, tentatively named DCJPY.  According to Reuters, the DCJPY will be issued by GMO Aozora Net Bank, and will operate on a network launched by DeCurret and used for the trade and settlement of sustainable energy certificates.

DeCurret held an in-person seminar on the white paper in Tokyo on 18 October 2023 to explain the project. [12 Oct 2023]

Japan launches trading in new carbon credits market

The Tokyo Stock Exchange (TSE) has started trading carbon credits, according to Reuters. The Ministry of Economy, Trade and Industry has launched a growth-oriented carbon pricing concept with the aim of becoming carbon neutral by 2050 and reducing greenhouse gas emission by 20 to 30% by 2046.

Via the new carbon credit market, registered members can trade the existing carbon credit, known as J-Credit, on the TSE. The government certifies as a "credit" the amount of greenhouse gas emissions, such as CO2, reduced or removed through efforts to introduce renewable energy or energy-saving equipment or managing forests.  The new market will make it easier for companies to buy and sell credits and provide transparency in carbon pricing.  To boost trade liquidity, the TSE (with support from the government) will introduce a market maker mechanism later in 2023.  [11 Oct 2023]

FSA Japan and FSC Korea agree to strengthen cooperation

In a joint statement , Japan’s Financial Services Agency (FSA) and the Financial Services Commission (FSC) of the Republic of Korea stated that they have agreed to resume their shuttle meeting on 19 and 20 December 2023 in Seoul, the first meeting since 2016.  They have also agreed to share experiences and exchange views on issues of mutual interest, such as climate change and digitalization of financial services.

The two regulators also discussed possible areas for deepening their cooperation aimed at safeguarding financial stability and fostering the financial markets of both countries.  [3 Oct 2023]

Malaysia

SCM managing director discusses growth in the asset management industry

The Securities Commission Malaysia (SCM) has published a Keynote Speech by its Managing Director, Datuk Kamarudin Hashim. The speech focused on the growth of the asset management industry and included the following highlights:

• industry Assets Under Management rose to RM964 billion in August 2023, exceeding 2021 and 2022 levels, despite a slight fall in overall AUM in 2022 due to volatility driven by tighter global monetary conditions and geopolitical events;
• the Association of Southeast Asian Nations (ASEAN) Capital Market Forum endorsed the Handbook for ASEAN Collective Investment Schemes Sustainable and Responsible Funds (SRF) on 16 October 2023 to facilitate cross-border ASEAN SRF offerings; and
• the SCM wants to expand the definition and scope of fund products beyond unit trusts to collective investment schemes under the Capital Markets and Services Act review, giving investment managers more freedom to create investment vehicles that meet investors' demands. [18 Oct 2023]

SCM chair address 5th Islamic Sustainable Finance & Investment Asia Forum

The Securities Commission Malaysia (SCM) has published the remarks delivered by its Chair, Dato’ Seri Dr. Awang Adek Hussin at the 5th Islamic Sustainable Finance & Investment Asia Forum. The SCM highlights that the speech stressed the need to address climate change and social inequality. The SCM Chair called for efforts to capitalise on the close alignment between Shariah principles and sustainability, and to scale up the Islamic capital market (ICM).  To bridge the sustainable investments funding gap, he proposed 3 points:

1. Increased awareness on the role of finance in addressing climate issues, with ICM offering a ‘win-win’ solution.
2. Promote innovation and leverage more on social finance tools to meet the ‘S’ under the ‘ESG’, as reflected by waqf initiatives.
3. Broaden the ICM ecosystem to support the transition to net-zero for Micro, Small and Medium Enterprises (MSMEs).

Besides currently working on guiding principles focused on Maqasid al-Shariah, the SCM is also looking to establish an Islamic social exchange.  [3 Oct 2023]

India

RBI: Amendment to Master Direction on KYC

The RBI has released an amendment to the Master Direction on know-your-customer (KYC).  The amendments reflect recent legislative changes and Financial Action Task Force recommendations, and have immediate effect.  [17 Oct 2023]

IFSCA: Modifications to AML/CFT/KYC guidelines

The International Financial Services Centres Authority (IFSCA) has issued a circular on modifications under the International Financial Services Centres Authority (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022 for specifying additional anti-money laundering (AML), countering the financing of terrorism (CFT) and know your client (KYC) measures and clarifications.  [13 Oct 2023]

SEBI: Master circular on KYC norms in securities market

The Securities and Exchange Board of India (SEBI) has issued a master circular on know your client (KYC) norms to be followed by intermediaries in the securities market. The master circular has gathered all of the applicable circulars and directions issued by SEBI from time to time in one place and includes certain modifications to those provisions. The provisions of the master circular have immediate effect.  [12 Oct 2023]

SEBI: Extension in timeline for compliance with investment adviser requirements  

SEBI has issued a circular to extend the timeline for compliance with the enhanced qualification  and experience requirements for investment advisers under regulation 7(1) of SEBI (Investment Advisers) Regulations, 2013 to 30 September 2025.  [10 Oct 2023]

Thailand

SEC and TDO exchange views on developing Thai digital asset market

The Securities and Exchange Commission (SEC) has held a joint meeting with the Thai Digital Asset Operators Trade Association (TDO) to exchange ideas on the current regulatory framework for digital assets and strategies for promoting future digital asset businesses.

The key takeaway from the meeting was that SEC and the TDO will work together to support various initiatives aimed at developing the Thai digital asset market. This includes coordinating with relevant authorities on tax matters and amending legislations related to digital assets and oversight regulations in the areas such as customer-asset custody and know your customer / customer due diligence criteria, etc.  [9 Oct 2023]

Thailand to tax foreign income of residents from 2024

According to Regulation Asia, Thailand’s Revenue Department has announced a new policy under which it will subject residents who earn income from overseas sources to personal income tax, starting from 1 January 2024.

According to the Revenue Department, the policy aims to close tax loopholes for residents who trade in foreign stock markets, cryptocurrencies, or keep their earnings in offshore accounts. Previously, such income was only taxed if it was brought into Thailand in the same year it was earned. The new policy will take effect on 1 January 2024, and the first tax collection will be in 2025. The Revenue Department has urged residents with foreign income to report their earnings and pay their taxes accordingly. [25 Sep 2023]

Philippines

SECP: Circular on revised sustainability reporting guidelines

The Securities and Exchange Commission Philippines (SECP) has published a draft Memorandum Circular on the Revised Sustainability Reporting Guidelines for Publicly Listed Companies and the SEC Sustainability Reporting Form. SECP is revising guidelines to reflect the latest developments in global sustainability frameworks.

Responses are requested by 16 October 2023.  [5 Oct 2023]

Indonesia

Indonesia's carbon exchange launched

PT Bursa Efek Indonesia (the Indonesian Stock Exchange, IDX) was recently granted licence by the Indonesian Financial Service Authority (OJK) to operate as a carbon exchange. On 26 September 2023, the Indonesian President, Joko Widodo, officially launched the Indonesia Carbon Exchange (IDXCarbon). On the same day, IDXCarbon had its carbon first trading day. Traders range from state-owned entities to private entities, including banks and securities companies.

In preparation of IDXCarbon's launch, IDX has issued several carbon-related rules, listed below (all in Indonesian language):

• IDX Directors' Decree No. Kep-00295/BEI/09-2023on Registration of Carbon Units. This decree details the procedure and requirements applicable to trading participants in order to register certain carbon units (including foreign carbon units). The procedure and requirements may differ depending on the type of carbon unit. Trading participants may also request the removal of carbon units from the exchange.
• IDX Directors' Decree No. Kep-00296/BEI/09-2023on Trading Rules for Exchange-facilitated Carbon Trading. This decree sets out types of market available on IDXCarbon, the types of trades that can be facilitated by each market and the trading mechanism for each market. The types of market are: auction market (pasar lelang); regular market (pasar reguler); negotiated market (pasar negosiasi); and non-regular market (pasar non-regular). Similar to regular securities market, carbon regular market is also equipped with an auto-rejection feature.
• IDX Directors' Decree No. Kep-00297/BEI/09-2023on Carbon Exchange Participant Rules. This decree sets out types of eligible participants for IDXCarbon, registration requirements, their rights and obligations as participants and sanctions for membership violation. Under this decree, IDX is authorised to supervise and investigate participants' activities, as well as revoke membership. This decree provides that foreign entities would be able to register as participants, but subject to further regulations to be issued by IDX.
• IDX Directors' Decree No. Kep-00298/BEI/09-2023on Supervision of Exchange-Facilitated Carbon Trading. This decree sets out conducts that are prohibited on IDXCarbon, including false trading, market rigging, market manipulation and misleading statements. IDX is authorised to supervise potential violations by observing various factors on the exchange, such as fluctuations in price and volume. IDX may follow up its supervision by, among others, requesting information from participants, suspending trading and reporting to OJK.
• IDX Circular Letter No. SE-00014/BEI/09-2023on Standardisation for Carbon Unit Classifications. The circular letter sets out four carbon unit classifications that are applicable to IDXCarbon, as well as the requirements applicable for each classification. The four classifications are Indonesia Nature Based Solution (IDNBS), Indonesia Nature Based Solution International Standard (IDNBSI), Indonesia Technology Based Solution (IDTBS) and Indonesia Technology Based Solution International Standard (IDTBSI).
• IDX Circular Letter No. SE-00013/BEI/09-2013on IDXCarbon Participant Fees. This circular letter sets out fees that would be imposed on various activities on IDXCarbon, including carbon unit registration fee, trading fees and fund withdrawal fee.

The above decrees and circular letters came into effect on 20 September 2023. [6 Oct 2023]