HK’s SFC Enforcement Activity Against Individuals Jumps by 55 Percent

Hong Kong’s Securities and Futures Commission (SFC), has substantially increased its enforcement activity against individuals in the last calendar year, shows new analysis from Freshfields Bruckhaus Deringer LLP.

The analysis, based on publicly available data, shows that in 2016 the SFC issued 55 percent more disciplinary and criminal enforcement actions against individuals than it issued during the 2015 calendar year.

The figures pre-empt the launch of a new ‘Managers-in-Charge’ regime for Licensed Corporations, which comes into force on 18 April 2017.

The regime will increase the accountability of senior management within Licensed Corporations, bringing personnel who may not have previously been considered to be at risk of SFC disciplinary action more firmly into focus, even if they do not hold a personal SFC license. This will include those in charge of risk management, compliance, finance, accounting and information technology.

“This increased enforcement focus on individuals is consistent with what we’ve been hearing from the Hong Kong regulators,” notes Georgia Dawson, a disputes partner at Freshfields.

“The regulators have been clear that unless the leadership of corporates and financial institutions steers with the right ‘tone from the top’, individual directors and executives may be held responsible for their involvement in problems that arise.

“The focus on individuals will continue over the coming year, with the introduction of the Managers-in-Charge regime for Licensed Corporations bringing the position of individuals into sharp focus.”

Following the appointment of a new head of enforcement last calendar year, the SFC has been moving towards a more focused enforcement strategy. Enforcement teams are reallocating resources to ‘high impact cases’ within priority areas that include corporate fraud, the misconduct of intermediaries, and cross-border market misconduct.

To support this strategy the SFC is focused on expanding and maturing cooperation agreements between the SFC and overseas regulators and authorities that can provide the SFC with support in supervising, investigating and enforcing cross-border market misconduct.

“Hong Kong’s role as a leading securities market and financial services center means that there is little surprise that the SFC has been strengthening its relationships with regulators around the world.

“In particular, we should expect to see greater cooperation between regulators in Hong Kong and Mainland China over the coming year, given the number of Hong Kong listed companies that have their centers of gravity in Mainland China,” comments Dawson.

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