Global Regulation, Local Solutions Emerging Themes 2020 - Page 39



GOVERNANCE
EMERGING THEMES 2020
The regime is intended to
quickly identify individuals to
whom supervisory concerns
can be communicated, and
of course to make them
accountable
SFC licensed companies should identify an
individual as the manager-in-charge to be
responsible for each of eight designated
core functions:
(1) Overall Management Oversight
(2) Key Business Line
(3) Operational Control and Review
(4) Risk Management
(5) Finance and Accounting
(6) Information Technology
(7) Compliance
(8)Anti-Money Laundering and
Counter-Terrorist Financing.
DON’T DROP
THE M-I-C
At the Hong Kong SFC Compliance Forum
2019, the SFC stated the regime is intended to
quickly identify individuals to whom supervisory
concerns can be communicated, and of course
to make them accountable for control failures
or conduct issues within the firm. Detailed risk
assessments and clear understanding of
your area of responsibility reduce the chance
of personal sanctions in the event that
breaches occur.
From the firm’s perspective, care should be
taken to define responsibilities clearly, especially
where an individual is responsible for more
than one core function. Consideration will
need to be given to the rise of responsibilities
falling between the gaps of core functions, for
example outsourced services.
NOTIFYING THE HONG KONG SFC OF
MANAGER-IN-CHARGE CHANGES
It is now over two years since the “Manager-in-charge
of Core Functions” regime was implemented in Hong
Kong by the Securities and Futures Commission (“SFC”).
By raising the accountability of senior management,
including directors, responsible officers and now the
manager-in-charge, the regime aims to strengthen
regulatory oversight of all SFC licensed corporations.
It shares similarities with the Senior Managers and
Certification Regime in the UK and the proposed
guidelines on Individual Accountability and Conduct
in Singapore.
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The firm should also ensure it creates an
internal system to notify the SFC of any
changes to manager-in-charge appointments
or organisational charts within the specified
time limits.
The regime’s reach extends beyond Hong Kong
and to companies that are not regulated by
the SFC. For SFC licensed companies who
are part of a wider group, information about
individuals from other group companies
(both within or outside Hong Kong) that are
not regulated by the SFC may need to be
submitted. As a starting point, firms need to
map their governance and reporting structure
to determine which businesses operate in which
legal entities.
The regime’s reach extends beyond
Hong Kong and to companies that
are not regulated by the SFC
The Hong Kong SFC has been actively
revamping its licensing processes to strengthen
its gatekeeping function, and therefore
compliance with the regime should not be
taken lightly. However, the scale of any penalty
remains fairly light – if a SFC licensed firm does
not fulfil its duties under the manager-incharge regime, a maximum fine of HK$50,000
may be imposed.
In the coming year, the SFC will be publishing
more information on its enforcement actions,
such as the types of firms targeted and the
types of deficiencies. Firms need to stay alert
to get a better idea of the SFC’s focus within
the regime.
GLENN HALEY
Partner,
Hong Kong
IAN CHENG
Associate,
Hong Kong
VIVICA FU
Trainee Solicitor,
Hong Kong
/39

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