APAC Monthly Private Wealth Legal Developments – November 2023

Hong Kong

HKSCC reminds market participants about launch of FINI platform on 22 November 2023 and related rules and procedures

The Hong Kong Securities Clearing Company Limited (HKSCC) has issued a circular to remind market participants of the launch of the Fast Interface for New Issuance (FINI) platform on 22 November 2023.

• The cutover and migration of EIPO functions from the Central Clearing and Settlement System (CCASS) to FINI became effective after close of business on 21 November 2023.
• All new listings with a listing document issuance date on or after 22 November 2023 are processed on FINI and the first permissible listing date will be 5 December 2023.  For new listings launched on 22, 23 or 24 November 2023, a special arrangement on a slightly extended public offer subscription period may be applied.
• New listings with a listing document issuance date on or before 21 November 2023 were allowed to complete their processing on CCASS using the pre-FINI operational arrangements.

The HKEX reminds all market participants that the FINI-related rules, procedures and terms (including the following) have been in effect since 22 November 2023 (further information can be found on the FINI webpage):

• Amendments to the Listing Rules;
• Amendments to the General Rules of HKSCC(renamed from 'General Rules of CCASS');
• Amendments to the HKSCC Operational Procedures(renamed from 'CCASS Operational Procedures');
• Terms and Conditions of FINI;
• Amendments to the Terms and Conditions for Investor Participants; and
• Template for the 'How to Apply for Hong Kong Public Offer Shares' section in Prospectus.  [21 Nov 2023]

Stamp duty on stock transactions reduced from 0.13% to 0.1% with effect from 17 November 2023

The Stock Exchange of Hong Kong Limited has issued a circular to inform exchange participants (EPs) that the amendments to the Stamp Duty Ordinance to reduce stamp duty on certain stock transactions was passed by the Legislative Council and implemented on 17 November 2023.

The amendments are to give effect to the proposal in the Chief Executive's 2023 Policy Address to reduce rate of stamp duty chargeable on a contract note for the sale or purchase of any Hong Kong stock (not being jobbing business) from 0.13% to 0.1% (see our previous update).  [15 – 17 Nov 2023]

SFC updates AML/CFT Self-Assessment Checklist

The SFC has issued a circular to inform licensed corporations (LCs), licensed virtual asset service providers (VASPs) and associate entities (AEs) that it has updated the AML/CFT Self-Assessment Checklist to reflect the recently amended Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licenced Corporations and SFC-licensed Virtual Asset Service Providers) (see our previous update).

The checklist aims to provide a structured and comprehensive framework for LCs, SFC-licensed VASPs and AEs to assess their compliance with the key anti-money laundering and counter-financing of terrorism (AML/CFT) requirements.  They are advised to use this checklist as part of their regular reviews to monitor compliance.

Senior management of LCs, SFC-licensed VASPs and AEs should ensure that any compliance deficiencies identified during the regular reviews are rectified in a timely manner.  As part of the SFC's supervision, they may be required to provide documentary evidence of the performance of such reviews (and the results).  [14 Nov 2023] 

SFC publishes circular on prudent risk management in providing IPO subscription services

The SFC has published a circular to remind licensed corporations (LCs) to prudently manage risks when providing initial public offering (IPO) subscription services and financing to clients.  This reminder is issued ahead of the launch of the Fast Interface for New Issuance (FINI) by the HKEX on 22 November 2023 to streamline and digitalise the IPO settlement process (see our previous update).

Although the pre-funding mechanism for public offer tranches will be modified under FINI, LCs are advised to exercise prudent risk management and controls when providing IPO subscription and financing services to clients.  Senior management of LCs bear primary responsibility to ensure proper risk management for their firms.

Effective measures to guard against improper risk-taking activities should be implemented, in particular in the following areas:

Prudent credit-risk management

• Ensure clients have sufficient financial resources to fulfil their IPO subscription-related obligations in full before accepting orders;
• Formulate a prudent credit policy for IPO financing and set appropriate credit limits for clients; and
• Properly justify deviation from the credit policy and credit limits with a written risk assessment (and obtain approval from senior management for any deviation).

Liquidity risk management and safeguarding client subscription deposits

• Prepare adequate cash or credit facilities with banks for IPO money settlement;
• Ensure house money or credit facilities are sufficient to finance clients where the value of shares allotted to them exceeds the amount of subscription deposits provided by them; and
• Adequately safeguard clients’ subscription deposits.

Financial risk management

• Avoid excessive bank borrowings and granting of IPO financing beyond the firm’s financial capability;
• Properly account for all assets and liabilities arising in the IPO subscription and settlement cycle; and
• Critically assess the potential impact of IPO financing on the firm’s liquid capital position computed in accordance with the Securities and Futures (Financial Resources) Rules.  [8 Nov 2023]

FSTB publishes further details of three initiatives previously announced at Hong Kong Fintech Week 2023 

The Financial Services and the Treasury Bureau (FSTB) has published further details to the three initiatives previously announced at the Hong Kong FinTech Week 2023 (see our previous update).  These initiatives are aimed at fostering the co-development of fintech and the real economy, reinforcing Hong Kong's position as a global asset and wealth management centre, and enhancing connectivity within the Greater Bay Area (GBA).

• Launch of a new integrated fund platform to be developed and operated by the HKEX:  The platform will target the retail fund sector with a view to better serve investors, fund managers, distributors and other stakeholders.  Subject to industry engagement, system development and testing, the first phase of the platform will be ready for launch by the end of 2024.  The platform will comprise of a communication hub, business platform and an information portal.  One of the key objectives is to facilitate fund managers and intermediaries (including small to medium sized market participants) to join the Hong Kong retail fund market.
• Cross-boundary e-CNY applications to benefit inbound and outbound visitors between the Mainland and Hong Kong: Octopus Cards Limited (OCL) and Bank of China (Hong Kong) (BOCHK) will seek to explore new e-CNY application scenarios.  BOCHK has launched e-CNY services facilitating inbound Mainland visitors to use e-CNY wallets in Hong Kong.  These innovations facilitate cross-border consumption and interconnectivity within the GBA.  Subject to regulatory approval and technical readiness, OCL will provide an inbound solution to facilitate Mainland tourists’ use of e-CNY in Hong Kong.
• Promoting real economy related applications and innovations by the virtual assets (VAs) and Web3.0 sector and further development of the regulatory framework:  The Government is committed to establishing an environment for the development of the VA and Web3.0 sector, with guardrails to mitigate actual and potential risks.  Market participants are encouraged to explore the potential of underlying technologies of Web3.0 to empower and enable real economy related applications and innovations.  On the regulatory front, among other things, the Government intends to expand the regulatory remit to cover the buying and selling of VAs beyond trades taking place on VA trading platforms.  The FSTB and the HKMA will also issue a joint consultation on the legislative proposal for implementing a regulatory regime for stablecoins in due course.  Furthermore, the HKMA will continue to consult the industry on its guidance on banks’ provision of digital asset custodial services, to ensure client assets are adequately safeguarded and that the risks involved are properly managed.  [6 Nov 2023]

SEHK to postpone implementation of enhanced climate-related disclosures to 1 January 2025

Following its consultation launched in April 2023 seeking market feedback on proposals to enhance climate-related disclosures under its environmental, social and governance (ESG) framework (with a proposed implementation date of 1 January 2024) (see our previous update), The Stock Exchange of Hong Kong Limited (SEHK) has provided an update on the proposed reform.

The consultation proposals took into account the IFRS S2 Climate-related Disclosures (ISSB Climate Standard) exposure draft published by the International Sustainability Standards Board (ISSB) and their subsequent deliberations.  The SEHK had stated that it would incorporate the final ISSB Climate Standard (which was subsequently published in June 2023) when finalising the Listing Rule amendments.

The ISSB has indicated that an adoption guide will be published to support jurisdictional regulators to help them in their implementation considerations and to advise on scalability and phasing-in measures for the application of the ISSB standards.  This guide is expected to be available before the end of 2023.  The SEHK intends to also take into account this guide when finalising the Listing Rule amendments.

In light of the above, the implementation date of the Listing Rule amendments will be postponed to 1 January 2025 (from the initial proposed date of 1 January 2024), to allow issuers more time to familiarise themselves with the new climate-related disclosure requirements.

The government will work with relevant financial regulators and stakeholders to develop a roadmap on the appropriate adoption of the ISSB standards in Hong Kong.  The SEHK will continue to work closely with the government and fellow members of the Green and Sustainable Finance Cross-Agency Steering Group on the development of the roadmap.  [3 Nov 2023] 

SFC issues circular on tokenised securities-related activities by intermediaries

The SFC has issued a circular on tokenised securities-related activities to provide guidance to intermediaries in addressing and managing the new risks arising from the use of the new tokenisation technology.  For SFC-authorised investment products, the circular should be read in conjunction with the other circular issued on the same day (see "SFC issues circular on tokenisation of SFC-authorised investment products" below).

For the purpose of this circular, tokenised securities are traditional financial instruments (such as bonds or funds) that are “securities” as defined under the Securities and Futures Ordinance (SFO) which utilise distributed ledger technology (DLT) (such as blockchain technology) or similar technology in their security lifecycle (Tokenised Securities).

Tokenised Securities are a subset of a broader set of digital securities, the latter of which in this circular are “securities” as defined under the SFO that utilise DLT or similar technology in their security lifecycle (Digital Securities).  Digital Securities which are not Tokenised Securities may be structured in more bespoke, novel or complicated forms, with some existing exclusively on a DLT-based network with no links to extrinsic rights or underlying assets and with no controls to mitigate the risks that ownership rights may not be accurately recorded.  Some of them may fall under the definition of an interest in a collective investment scheme under the SFO.

The circular address the following areas:

• Nature of tokenised securities;
• New risks arising from tokenisation;
• Considerations for engaging in Tokenised Securities-related activities, including issuing, dealing in, advising on, or managing portfolios investing in Tokenised Securities (see appendixto the circular);
• Information for clients;
• Clarifications regarding the SFC's previous statement of 29 March 2019 on security token offerings (see our previous update), which will be superseded by this circular (clarifications include those on complex product categorisation and the professional investors-only restriction);
• Clarification of other requirements (including those on fund managers managing portfolios which may invest in Tokenised Securities, and on virtual asset trading platform operators licensed by the SFC and the applicable insurance/compensation arrangements);
• Digital Securities-related activities; and
• Notification and provision of information to the SFC.  [2 Nov 2023]

SFC issues circular on tokenisation of SFC-authorised investment products 

The SFC has issued a circular setting out the requirements under which it will consider allowing tokenisation of SFC-authorised investment products for offering to the public in Hong Kong.

Tokenisation of investment products refers to the creation of blockchain-based tokens that represent or aim to represent ownership in an investment product.  The tokenised product can then be recorded digitally on the blockchain, offered directly to end-investors, distributed by SFC-licensed intermediaries, or traded among the blockchain participants where allowed.

The SFC considers that it is appropriate to allow primary dealing of tokenised SFC-authorised investment products, as long as the underlying product can meet all the applicable product authorisation requirements and the additional safeguards set out in this circular to address the new risks associated with the tokenisation arrangement.

However, secondary trading of tokenised SFC-authorised investment products would warrant more caution and careful consideration in order to provide a substantially similar level of investor protection to those investing in a non-tokenised product.  The considerations include (among others) maintaining proper and instant token ownership record, readiness of the trading infrastructure and market participants to support liquidity, and fair pricing of the tokenised products.  The SFC will therefore keep in view and continue to engage with market participants on proper measures to address the risks relating to secondary trading of tokenised SFC-authorised investment products.

With respect to primary dealing, product providers should ensure that the underlying products meet the applicable requirements in the relevant rules and regulations and product codes (including eligibility of product providers, product structure, investment and operational requirements, disclosure and ongoing compliance obligations).  This circular sets out additional requirements, including on the tokenisation arrangement, offering documents, distributors, and staff competence.  These additional requirements, as well as relevant requirements in the other circular issued on the same day (with appendix) (see "SFC issues circular on tokenised securities-related activities by intermediaries" above) should be complied with.

Prior consultation with the SFC is required for new investment products that have tokenisation features intending to seek the SFC’s authorisation, as well as tokenisation of existing SFC-authorised investment products.

Given the rapidly evolving nature of the subject, the SFC may provide further guidance or impose additional requirements for tokenised SFC-authorised investment products where appropriate.  [2 Nov 2023]

HKMA announces various initiatives at Hong Kong Fintech Week 2023 to strengthen Hong Kong's fintech capabilities

The HKMA has announced a number of initiatives at the Hong Kong Fintech Week 2023 to strengthen Hong Kong's fintech capabilities, including the following (among others):

• FPS x PromptPay QR payment – The HKMA is working closely with the Bank of Thailand to link Hong Kong’s Faster Payment System (FPS) and Thailand’s PromptPay, in a new service called “FPS x PromptPay QR Payment”, scheduled for launch on 4 December.
• Tokenisation in the bond market – The HKMA is in discussions with market participants to explore further use cases for distributed ledger technology (DLT) in capital markets, including a second tokenised government green bond.
• e-HKD Pilot Programme – The HKMA has completed Phase 1 of the e-HKD Pilot Programme and published an overall assessment of the pilots and the way forward.

There has also been some positive progress in the initiatives under the "Fintech 2025" strategy announced by the HKMA in June 2021 (see our previous update):

• All banks go fintech– The HKMA has implemented a number of initiatives to proactively encourage fintech adoption in the banking industry, including in relation to Wealthtech, Insurtech, Greentech, Artificial Intelligence and DLT.
• Central Bank Digital Currencies (CBDC)– The HKMA has achieved a number of milestones in the phased development of wholesale CBDCs.  Project mBridge is now at the minimum viable product (MVP) development phase and the HKMA aims to launch the MVP next year to pave the way for a production-ready system.
• Commercial Data Interchange (CDI)– This was launched in October 2022 and the utilisation rate has increased significantly.  The HKMA is exploring how it can be used to further digitalise and streamline various banking processes such as "know your customer" and is working closely with the Insurance Authority to enable cross-sectoral data sharing.  By the end of 2023, the Companies Registry will become the first government data source to be connected to CDI via the government’s Consented Data Exchange Gateway.
• Expanding the fintech-savvy workforce– The HKMA is working to foster fintech talent in Hong Kong through initiatives including the Fintech Career Accelerator Scheme and the Industry Project Masters Network.
• Nurturing the fintech ecosystem with funding and policies– This includes the Fintech Supervisory Sandbox (FSS) 3.0 and FSS 3.1 Pilot to provide funding support to fintech projects, as well as ongoing reforms relating to virtual assets and stablecoins.

In his keynote speech at the Hong Kong Fintech Week, Mr Eddie Yue (Chief Executive of the HKMA) offered his thoughts on what the HKMA has learnt in its fintech journey over the past seven years.  [2 Nov 2023]

9. SFC supports and sponsors development of industry-led VCoC for ESG ratings and data products providers

The SFC has announced that it supports and will sponsor the development of a voluntary code of conduct (VCoC) for adoption by environmental, social and governance (ESG) ratings and data products providers in Hong Kong.  The proposed VCoC is expected to provide a streamlined and consistent basis for asset managers to conduct due diligence or on-going assessment on ESG service providers.

The VCoC will be developed via an industry-led working group – the Hong Kong ESG Ratings and Data Products Providers VCoC Working Group – which comprises of representatives from local, Mainland and other international ESG ratings and data products providers as well as key users from the local financial industry.  The International Capital Market Association (ICMA) will act as the Secretariat of the working group, and the SFC, the HKMA and the Insurance Authority will sit as observers (see participant list).

The proposed VCoC will align with international best practices as recommended by the International Organisation of Securities Commissions (IOSCO) and relevant expectations introduced in other major jurisdictions.

The initiative follows the SFC’s fact-finding exercise and industry outreach conducted since mid-2022 to understand matters related to the ESG ratings and data products providers, which are not regulated by the SFC.  The exercise found that surveyed asset managers highlighted common concerns about data quality, transparency, and conflicts of interest management of the providers, and that the IOSCO recommendations should be encouraged for adoption by ESG ratings and data product providers.  [31 Oct 2023]

Hong Kong Chief Executive discusses plans to accelerate development of GBA and to enhance Hong Kong’s status as international financial centre in 2023 policy address

The Chief Executive of Hong Kong, Mr John Lee, has delivered his 2023 Policy Address. Among other initiatives, he laid out the government’s plan to accelerate development of the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) and to enhance Hong Kong’s position as an international financial centre:

• The Task Force on Enhancing Stock Market Liquidity has provided its recommendations, which will be implemented by the government.  These include (among other things) reducing stamp duty on stock transfer, reviewing stock trading spread, reducing market data fees, reforming GEM (with a view to implementing the changes in the first quarter of 2024), promoting the listing of overseas issuers, facilitating share repurchase by issuers, and improving transaction mechanisms.  The SFCis / will be working with the HKEX on a number of such initiatives.
• The government will continue to progress with the inclusion of RMB counters under the Southbound trading of Stock Connect to facilitate the trading of Hong Kong stocks in RMB.  It will take forward the introduction of offshore Mainland government bond futures and enrich the variety of RMB investment products, with a view to strengthening Hong Kong’s position as an offshore RMB centre.
• The government will take advantage of the financial reform and innovation measures in the Qianhai Co‑operation Zone to expand the businesses of Hong Kong financial institutions in Qianhai.  These include facilitating Hong Kong’s limited partnership funds to be qualified under the Qianhai Qualified Foreign Limited Partnerships to participate in private equity investment in the Mainland, and co‑establishing the Shenzhen‑Hong Kong Financial Co‑operation Committee with the Shenzhen authorities in the first half of 2024.  The committee offer suggestions on bolstering mutual access to the financial markets, co‑operation on fintech and green finance, and exchange of financial talents.  The Insurance Authority also supportsthe initiatives for accelerating the development of the GBA.
• To expand Hong Kong’s fund distribution network, enhance market efficiency and lower transaction costs, the government will establish a new integrated fund platform with 2024.
• The government will launch a dedicated proof‑of‑concept subsidy scheme for green fintech in the first half of 2024.  The new scheme will promote the development of technological solutions and provide early‑stage funding support for pre‑commercialised green fintech, conducive to expanding the green fintech ecosystem and developing Hong Kong into a green fintech hub.
• To further develop and support SMEs and address their financing needs, the government will provide more flexible repayment options under the SME Financing Guarantee Scheme. SMEs may choose to repay only 10%, 20% or 50% of the original principal amount payable each month during the specified period, allowing them more time to gradually switch to normal repayment.  The HKMA has statedthat HKMC Insurance Limited will follow up with lending institutions on the implementation of these repayment options within November 2023.  [25 Oct 2023]

SFC issues circular on disclosure of annualised returns based on periods of less than one year for MMFs

The SFC has issued a circular to set out the requirements for the presentation of annualised returns based on periods of less than one year for money market funds authorised by the SFC under Chapter 8.2 of the Code on Unit Trusts and Mutual Funds (MMFs).

Paragraph 16 of the Advertising Guidelines Applicable to Collective Investment Schemes Authorised under the Product Codes (Advertising Guidelines) provides that annualised returns are only acceptable for presentation of performance figures for periods of more than one year.  The SFC has recently received enquiries from the industry regarding the presentation of annualised returns based on periods of less than one year for MMFs (such as a 7-day period), due to increasing demand for such information from investors.

In light of the fact that the performance of MMFs is more stable and predictable than other types of funds, and that various other major jurisdictions allow annualised returns based on periods of less than one year for MMFs subject to proper safeguards and requirements, the SFC is issuing guidance in this circular on the presentation of such returns in factsheets, marketing materials and other documents.

The circular first sets out some general principles.  Among other things, to ensure the consistency of information provided to investors, where an intermediary intends to present annualised returns in materials, it should reach an agreement with the fund manager on the computation basis to ensure the annualised returns are calculated on a consistent basis and in compliance with the relevant requirements, before such figures are published.

The circular then sets out detailed requirements relating to the period covered and computation basis, existing requirements under the Advertising Guidelines, and further requirements (including on presentation, additional warning statements and disclosure of updated figures).  Illustrative examples are set out in the appendix to the circular.  [25 Oct 2023]

SFC issues circular to highlight concerns over distributors providing additional returns or arrangements when marketing SFC-authorised funds 

The SFC has issued a circular noting its recent observations of licensed corporations’ practices in offering and promoting SFC-authorised funds.  Distributors of such funds have been offering additional returns or other incentives (beyond the product features in the fund offering documents) that may divert the client’s focus from properly considering the risks and features of the funds.

Guaranteed returns 

• The SFC reminds distributors that certain "guaranteed return" arrangements may constitute a “structured product” under the Securities and Futures Ordinance (SFO).  It is an offence under section 103 of the SFO for a person to issue an advertisement, invitation or document which is (or contains) an invitation to the Hong Kong public to enter into or offer to enter into any structured products, unless the SFC has authorised the issue or an exemption applies.
• Even where the guaranteed returns offered do not constitute a “structured product” under the SFO, distributors should have regard to paragraph 3.11 of the SFC's main code of conduct in offering such returns or other incentives in promoting SFC-authorised funds, as they may be considered a gift that should not be offered to investors.

Lock-up period and dealing frequency

• When distributing SFC-authorised funds, some distributors impose a lock-up period on their clients’ investments or lower the funds’ dealing frequency.  Distributors should act fairly and in the best interests of their clients in providing services in accordance with General Principle 1 the SFC's main code of conduct.  They should not restrict a client’s right to redeem his/her investment in a fund pursuant to the dealing frequency specified in the fund’s offering documents.

The circular also highlights further marketing issues which are of potential concern.  The SFC has indicated that it will closely monitor market practices concerning the promotion of SFC-authorised funds and may take regulatory action and issue further guidance where appropriate.  [24 Oct 2023]

Singapore

MAS: Regulatory measures for DPT services

MAS has published its final tranche of responses to feedback received on its proposed regulations for digital payment token (DPT) service providers in Singapore.  The consulted proposals detail business conduct and consumer access measures to limit potential consumer harm. It also stipulates minimum technology and cyber risk management requirements for DPT service providers.

With regard to business conduct, MAS will issue guidance for DPT service providers to implement these measures:

• identify, mitigate and clearly disclose potential and actual conflicts of interest;
• publish policies, procedures and criteria that govern the listing of a DPT; and
• establish effective policies and procedures to handle customer complaints and resolve disputes.

With regard to consumer access measures, DPT service providers should discourage speculation by retail customers by:

• determining a customer’s risk awareness to access DPT services;
• not offering any incentives to trade in cryptocurrencies;
• not providing financing, margin or leverage transactions;
• not accepting locally issued credit card payments; and
• limiting the value of cryptocurrencies in determining a customer’s net worth.

In the area of technology and cyber risk, MAS will require DPT service providers to maintain high availability and recoverability of their critical systems, in line with current requirements imposed on financial institutions.

MAS’ regulatory measures on DPT services will be implemented through regulations and guidelines, which will take effect in phases from mid-2024.  [23 Nov 2023]

MAS launches initiatives to ensure the safe and innovative use of digital money

MAS has unveiled three initiatives to ensure the safe and innovative use of digital money in Singapore:

• the Orchid Blueprint, which sets out the infrastructure required for a digital Singapore dollar;
• four new digital money trials which will be undertaken with industry players to examine relevant infrastructure components and commercial models; and
• a plan to issue a 'live' wholesale central bank digital currency (CBDC) for interbank settlement in 2024.  [16 Nov 2023]

MAS announces partnership with financial industry to expand asset tokenisation initiatives

MAS has announced that it is working with the financial industry to expand asset tokenisation initiatives and develop foundational capabilities to scale tokenised markets. These developments under Project Guardian aim at catalysing the institutional adoption of digital assets, in order to free up liquidity, unlock investment opportunities, and increase the efficiency of financial markets.  [15 Nov 2023]

MAS partners with policymakers in Japan, Switzerland and the UK to foster responsible digital asset innovation

MAS has announced that it is partnering with the Financial Services Agency of Japan, the Swiss Financial Market Supervisory Authority and the UK's Financial Conduct Authority to advance digital asset pilots in fixed income, foreign exchange and asset management products. These agencies comprise a policymaker group for Project Guardian, which sees MAS collaborate with 15 financial institutions to carry out industry pilots on asset tokenisation in fixed income, foreign exchange, and asset management products. The policymaker group aims to:

• advance discussions on legal, policy and accounting treatment of digital assets;
• identify potential risks and possible gaps in existing policies and legislation relevant to tokenised solutions;
• explore the development of common standards for the design of digital asset networks and market best practices across various jurisdictions;
• promote high standards of interoperability to support cross-border digital assets development;
• facilitate industry pilots for digital assets through regulatory sandboxes, where applicable; and
• promote knowledge sharing among regulators and industry. [30 Oct 2023]

MAS and IMDA consult on shared responsibility framework for phishing scams

 The Monetary Authority of Singapore (MAS) and the Infocomm Media Development Authority (IMDA) have published a joint consultation on a proposed shared responsibility framework (SRF) for phishing scams.

The SRF assigns financial institutions and telecommunication companies relevant duties to mitigate phishing scams, and requires payouts to affected scam victims where these duties are breached. The SRF will not cover malware-enabled scams.

Responses to the consultation are requested by 20 December 2023.  [25 Oct 2023]

MAS consults on repeal of regulatory regime for RFMCs

MAS has published a consultation on proposed transitional arrangements for existing registered fund management companies (RFMCs) that intend to continue operating fund management businesses following the repeal of the regulatory regime for RFMCs.

Responses to the consultation are requested by 31 December 2023.  [24 Oct 2023]

China

AMAC revises rules to enhance regulation of funds industry

The Asset Management Association of China (AMAC) has issued revised rules to strengthen the regulation of the funds industry and enhance standards of conduct and investor protection.  The revised rules came into effect on 24 November 2023:

• Revised rules for management of fund practitioners (and implementation rules) – The revisions concern areas including strengthening the management responsibilities of fund practitioners, specifying categories of prohibited conduct by practitioners, strengthening ethical standards and social responsibility and disciplining those who do not meet such standards, specifying education and experience requirements, and enhancing ongoing professional training and development.
• Revised rules for registration of securities and futures investment managers – The revisions concern areas including expanding the scope of the rules to persons such as private equity investment managers and annuity, pension and social security investment managers, consolidating the registration criteria and requirements for various types of investment managers, specifying the experience and performance requirements for investment management staff and requirement on firms to supervise the conduct of their staff, as well as simplifying and digitalising registration procedures. [24 Nov 2023]

NAFR issues temporary regulatory rating and categorisation framework for trust companies

 The National Administration of Financial Regulation (NAFR) has issued a temporary regulatory framework for trust companies.

Under the new framework, trust companies will be rated based on the following key considerations (among others):

• Factors for evaluation include corporate governance (20%), capital requirement (20%), risk management (20%), conduct management (30%), and business transition (10%).
• Examples of factors that will negatively impact the ratings of trust companies include:
• Carrying out multiple or large-scale channel businesses to provide regulatory arbitrage for other financial institutions;
• Selling trust products to unqualified investors on multiple occasions;
• Issuing a large number of full commitment letters to trust product investors;
• Launching new capital pool businesses that do not comply with industry standards;
• Violating the new asset management regulations by imposing rigid redemption policies;
• Engaging in unauthorised businesses in violation of regulations.

Companies that receive good ratings are given priority to engage in innovative business activities. The framework came into effect on 7 November 2023. [7 Nov 2023]

PBOC and SAFE launch public consultation on reforms for QFII/RQFII

The People's Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) have issued a notice for public consultation to reform the existing regime for the Qualified Foreign Institutional Investor (QFII) and RMB Qualified Foreign Institutional Investor (RQFII) schemes.

The proposed revisions are open for comment until 10 December 2023, and focus on the following:

• Simplifying the registration procedures;
• Enhancing account management procedures;
• Simplifying foreign exchange management;
• Further facilitating foreign exchange risk management mechanisms. [10 Nov 2023]

Taiwan

Taiwan virtual assets bill submitted to legislature for consideration

Taiwan has introduced a new bill into its Legislative Yuan to provide a regulatory framework for virtual assets. The bill aims to enhance the regulation of virtual asset industry participants, create market stability in the virtual assets market, and fulfil the full potential of the virtual assets market in Taiwan.  Key areas covered by the bill include (among others):

• Scope and definition of virtual assets and the virtual asset industry participants regulated under the new regime;
• Required qualifications for founders and responsible persons of virtual asset businesses;
• Virtual asset businesses are not permitted to operate unless they join an industry association designated by their regulator;
• Requirements relating to admission criteria and procedures for virtual asset products, marketing of virtual asset products, virtual asset custody, segregation of client assets, record keeping, internal controls and risk management, confidentiality of client data, process for resolving disputes with clients, and consequences for breach of laws and regulations. [27 Oct 2023]

Taiwan FSC promulgates digital identity verification guidelines for financial services industry

The Financial Supervisory Commission R.O.C. (Taiwan) (FSC) has promulgated guidelines for the financial services industry on digital identity verification. The guidelines will facilitate a more efficient and safe process for financial institutions to verify individual customers' identities. Among other things, the guidelines provide that financial institutions should assess and implement appropriate identity authentication methods based on risk-based principles. [24 Oct 2023]

Japan

Japan FSA revises administrative guidelines to enhance disclosure requirements on crypto exchanges with overseas parent companies

According to Regulation Asia, the Financial Services Agency (FSA) of Japan has finalised the revisions to its administrative guidelines for crypto asset exchange operators to enhance disclosure requirements on those that have overseas parent companies.  The revisions were first proposed on 6 September 2023 and require crypto exchanges with overseas parents to (among other things):

• disclose the risks facing their parent companies, such as the potential supervisory scrutiny from overseas regulators depending on the laws and regulations of that jurisdiction;
• disclose information on their trading systems and user asset management systems if they use the same systems as their parent companies (as well as the contingency measures they would take if they were no longer able to use their parent companies' systems);
• comply with additional record-keeping requirements, including ensuring data storage durability, and the ability of their systems to handle internal audits.

The FSA has issued a new version of the questionnaire crypto firms have to submit as part of their registration applications.  [17 Nov 2023]

Japan Exchange Group launches JPX ESG Link

The Japan Exchange Group (JPX) has announced that it has launched an environmental, social and governance (ESG) information platform called JPX ESG Link that "acts as a bridge linking listed companies and investors by providing ESG information". The platform contains a list of links to ESG-related information disclosed by Tokyo Stock Exchange listed companies on their websites in the previous 90 days, including ESG-related news and reports containing ESG information, such as integrated reports, corporate social responsibility reports, environmental reports and sustainability reports.

In light of feedback received from users during the beta release period, improvements have been made to certain screen specifications and the "governance" category has been added to the search criteria to enable searching of corporate governance reports and related information.  [13 Nov 2023]

Japan FSA asset management taskforce considers reforms to funds industry

According to Regulation Asia, the Financial Services Agency (FSA) has published the minutes of the first meeting of its industry taskforce on asset management held in October 2023. The taskforce discussed proposals to further develop Japan's funds industry, which aim to unlock Japan's household financial assets to contribute more to the country's sustainable growth.

The taskforce discussed proposals to increase the number and size of equity market participants in Japan, including introducing an "Emerging Managers Programme" which would see pension funds or endowments allocate a portion of their portfolios for investment in emerging managers, to encourage new entrants to the local asset management industry.

Other proposals included (among others) establishing a new platform to support middle and back-offices to lower costs for newer asset managers, developing a programme to help home-grown asset managers develop into larger global players, providing greater access to alternative investments and unlisted stocks by retail investors, and promoting the use of equity crowdfunding to help support investment in startups.  [Nov 2023]

CDP endorses Japan FSA's code of conduct for ESG evaluation and data providers

CDP, a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impact, has announced its endorsement of the Japan Financial Services Agency (FSA)'s voluntary code of conduct for ESG evaluation and data providers. The CDP's endorsement sets out how the FSA's code of conduct complies with its six principles relating to securing quality, human resources development, ensuring independence and managing conflicts of interest, ensuring transparency, confidentiality, and communication with companies.  [9 Nov 2023]

NRI partners with regional banks on joint venture to combat financial crimes

Nomura Research Institute (NRI) has announced that it is partnering with three Japanese regional banks (The Chiba Bank, Ltd, The Daishi Hokuetsu Bank, Ltd, and The Chugoku Bank, Ltd) to launch TSUBASA – AML Centre, LTD, a new joint venture to combat financial crimes.

The new joint venture plans to adopt GPLEX, NRI’s anti-money laundering and countering the financing of terrorism (AML/CFT) SaaS, as a platform that provides the three banks with a centralised AML/CFT operation service, including transaction monitoring, suspicious transaction reporting, name screening and customer risk assessment.  It plans to expand the platform's services to more regional banks in Japan in the future.  [1 Nov 2023]

Malaysia

JC3 announces initiatives to support green transition

The Joint Committee on Climate Change (JC3), which brings together BNM and the Securities Commission Malaysia (SCM) with the financial services industry, has announced five key initiatives that seek to expedite the transition of businesses and farmers towards low-carbon practices. The initiatives comprise of:

• greening industrial parks;
• greening value chain programme with Bursa Malaysia;
• RM1 billion portfolio guarantee scheme for ESG financing;
• ESG jump-start portal; and
• green AgriTech.

The initiatives were announced at the JC3 Journey to Zero conference which aims to encourage dialogue and solutions in financing Malaysia’s transition and progress towards sustainable development.

BNM has published the welcoming remarks by its Governor, Abdul Rasheed Ghaffour, at the conference.  [23 Oct 2023]

India

IFSCA consults on regulatory framework for accredited investors

The International Financial Services Centres Authority (IFSCA) has published a consultation on a proposed framework for accredited investors following a review of the recommendations made by the Expert Committee on Investment Funds. Responses to the consultation are requested by 7 December 2023. [23 Nov 2023]

IFSCA consults on remote broker-dealer concept

IFSCA has published a consultation on its proposal to permit broker-dealers to operate remotely from foreign jurisdictions. This sub-category of dealer-brokers will be called remote broker-dealer (RBD). RBDs would be required to obtain a certificate of registration from IFSCA. Responses are requested by 13 December 2023. [22 Nov 2023]

IFSCA: FAQ on FME Regulations

The International Financial Services Centres Authority (IFSCA) has published a frequently asked questions (FAQ) document on the Registration of a Fund Management Entity (FME) and Authorisation of a Scheme or Fund under IFSCA (Fund Management) Regulations, 2022. [16 Nov 2023]

RBI Deputy Governor: Climate change and green initiatives in India

The RBI has published a speech by its Deputy Governor, Michael Patra, at the New York Federal Reserve Central Banking Seminar on 9 October 2023. Mr Patra stated that, while climate change is not new, the current episode is qualitatively different from the historical experience. He also discussed the impact of climate change in India as well as the green initiatives introduced by the RBI. [7 Nov 2023]

RBI consults on risk management and code of conduct in outsourcing of financial services

The Reserve Bank of India (RBI) has published a consultation on the draft Master Direction on managing risks and code of conduct in the outsourcing of financial services.

Responses to the consultation are requested by 28 November 2023.  [26 Oct 2023]

RBI: WTD requirements at banks

The RBI has instructed banks to ensure the presence of at least two whole time directors (WTDs), including the MD & CEO, on their boards. The number of WTDs shall be decided by the board of the bank by taking into account factors such as the size of operations, business complexity, and other relevant aspects.

Banks that currently do not meet this minimum requirement are advised to submit their proposals for the appointment of WTD(s) within a period of four months from the date of issuance of this circular.  [25 Oct 2023]

Thailand

SECT launches SDG Guidebook

The Securities and Exchange Commission Thailand (SECT), together with the United Nations Development Programme (UNDP), Thai Listed Companies Association (TLCA) and Global Compact Network Thailand (GCNT), has announced the launch of a Sustainable Development Goals (SDG) Guidebook and SDG Impact Standards for Thai Listed Companies. The SDG Guidebook is designed to act as a practical guideline for businesses to integrate the SDGs into their business operations and strategies. The Guidebook also incorporates globally recognised tools and frameworks on impact measurement and management, to which businesses can refer in their corporate reporting process on their positive contributions to social and environmental issues and in their SECT’s 56-1 One Report Disclosures. [30 Oct 2023]

SECT releases Thai version of TCFD recommendations

The Securities and Exchange Commission Thailand (SECT) has published the translated Thai version of the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations to enhance the understanding of climate-related financial disclosures among business sectors in the capital market.

The TCFD Recommendations assist companies worldwide in recognising climate-related risks and opportunities and providing comprehensive climate-related financial information. They also allow companies to develop strategies to manage those risks so that they are climate resilient and able to cultivate opportunities arising from the transition to a low-carbon economy.  [24 Oct 2023]

Philippines

BSP and CDA sign MoA on cooperative oversight

The Bangko Sentral ng Pilipinas (BSP) has announced that it has signed a memorandum of agreement (MoA) with the Cooperative Development Authority (CDA) on the collaborative oversight and supervision of cooperatives that are electronic-money issuers and operators of payment systems, including those that deploy ATMs.  [23 Oct 2023]