CFTC LAW | Forex, Futures and Derivatives Regulatory News » Hong Kong SFC

Hong Kong SFC and MA sidestep G-20 deadline

Elan Mendel — Tue, 18 Oct 2011 14:22:57 +0000

Hong Kong SFC and MA sidestep G-20 deadline

Hong Kong’s twin financial regulators, the Securities and Futures Commission (“SFC”) and the Monetary Authority (“MA”) , have refused to commit to finalizing over-the-counter derivatives reform by the G-20 deadline at the end of next year. In a joint consultation regarding the OTC market, the regulators announced that they might wait for other countries to finish their G-20 reforms before finalizing their own.

“The HKMA and SFC are working towards meeting the G20 implementation deadline of end-2012,” explained the regulators in a press conference yesterday. ”However, much depends on external factors, including the progress of reform initiatives in other major markets, due completion of the legislative process, and the readiness of relevant market infrastructure and participants.”

This wait-and-see attitude contravenes a recent statement by the Financial Stability Board (“FSB”), an international working group focused on financial regulation. The FSB encouraged all nations to write regulation to the best of their abilities, rather than wait for the US and the EU to complete their reforms. The 2012 deadline set by the G-20 already is in danger, as countries look at the slow pace of Dodd-Frank implementation (in the United States) and EMIR/MiFID reform (in Europe) and delay their own revisions.

However, SFC executive Ashley Alder notes that “Hong Kong cannot drive the reform initiatives but will continue to coordinate with overseas jurisdictions to address some of the key aspects of the reform, the cross-border nature of the OTC derivatives market necessitates international standards.” Regulators and politicians from across the globe have made similar statements, calling for harmonization at the expense of rapid reform in order to avoid significant regulatory arbitrage.

The SFC-MA consultation, which runs through the end of November, will discuss a number of reforms, including central clearing, exchange trading, data capture, and record-keeping requirements.

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Transition in turmoil at the Hong Kong SFC

Elan Mendel — Thu, 09 Jun 2011 18:25:22 +0000

Transition in turmoil at the Hong Kong SFC

The Hong Kong Securities and Futures Commission (SFC) missed its deadline to appoint a new chief executive before its current leader, Martin Wheatley, moves on to a regulatory post in his native United Kingdom. SFC deputy chief Alexa Lam has been named interim CEO, and there has been no word from the agency on how long the search is expected to continue.

This is a particularly distressing moment for the SFC to be without clear leadership. Before relinquishing his office, Wheatley drew attention to two critical issues which will need to be confronted in the coming months. First was a challenge issued to United States Treasury Secretary Tim Geithner. Last week, Geithner publicly expressed fears that efforts at reform would backfire and ignite a regulatory “race to the bottom.” Wheatley, sensitive to veiled criticism of his institution, fired back: “We’ve been fairly clear with the US, and to use a phrase I’ve grown up with, ‘People in glass houses should not throw stones’…The US regulatory system has shown itself to be not best able to withstand the sorts of traumas we have been through over the past three years, whereas the Hong Kong system in many respects has.” He called upon his successor to move forward in OTC derivative regulation, with an eye to merging and streamlining new Asian trading and clearing platforms.

He also turned his bully pulpit to the Chinese stock bubble. In an interview with the Wall Street Journal, he compared the current craze for all Chinese IPOs to the 90s dot-com goldrush: “Everybody wants a piece of China…therefore, there has been a rush to [invest in] Chinese companies.” Investors, blinded by the glory of Chinese potential, have begun snapping up new stocks after little or no company research. Though he believes yuan-based trading has a bright future, Wheatley cautioned that “I’m thinking in three to five years is when we really see that market develop.”

The troubling period begins now. With no clear leader with a strong vision, the may SFC will have difficulty wrangling the headstrong market in its jurisdiction. Hopefully, the government of Hong Kong will not drag out the search much longer.

Read more about the SFC’s troubles here, here, and here.

photo credit: Dennis Wong

Hong Kong SFC shows deficiencies in work of IPO sponsors

Elan Mendel — Tue, 05 Apr 2011 16:07:03 +0000

Hong Kong SFC shows deficiencies in work of IPO sponsors

In its Report on Sponsor Theme Inspection Findings released this week, the Hong Kong Securities and Futures Commission (SFC) notes shortcomings in the work of some licensed corporations sponsoring initial public offerings (IPOs). The SFC has conducted an inspection on sponsors so as to assess the level of their compliance with the existing regulatory requirements. Reviewing 17 sponsors of different sizes, the SFC has identified certain deficiencies in the work performed by some sponsors as well as some inadequacies in their internal systems and controls. These include unsatisfactory due diligence on listing applicant’s business, questionable disclosure to The Stock Exchange of Hong Kong during the listing application process, and inadequate internal systems and controls over sponsor work.

Citi Launches CitiFX Pro Trading Platform in UK

Elan Mendel — Tue, 29 Mar 2011 15:26:19 +0000

Citi Launches CitiFX Pro Trading Platform in UK

Citi has launched CitiFX Pro, its online foreign exchange trading platform for experienced individual and small institutional traders, in the United Kingdom. Following successful launches in the US, Hong Kong and elsewhere in Asia, CitiFX Pro is now available to UK traders who qualify as “professional clients,” as defined by the rules of the Financial Services Authority.

Sasha Serebrinsky, Citi’s Manager of Margin Foreign Exchange for Europe and the Middle East said, “The UK launch of CitiFX Pro offers UK-based clients all of the advantages of trading FX through a global leader, including excellent liquidity and access to its highly regarded research and market commentary. We offer experienced individuals and small institutions a flexible product with tight pricing, which could make a difference to our clients’ bottom line.”

The CitiFX Pro platform provides liquidity in over 130 currencies and research from local sources in key markets. Clients can access accounts and trade on a real-time basis on four platforms: CitiFX Pro Desktop, Web, Mobile and MetaTrader 4.

Sanjay Madgavkar, Global Head of Margin Foreign Exchange trading at Citi, said, “We look forward to launching CitiFX Pro in other markets in Europe and Asia in 2011.”

Hong Kong-based retail trader acquitted of market manipulation

Felix Shipkevich — Mon, 28 Mar 2011 14:23:18 +0000

Hong Kong-based retail trader acquitted of market manipulation

The Eastern Magistracy today acquitted a retail trader, Mr Liang Lin, of one offence for false trading following a trial. The Securities and Futures Commission alleged that Liang intended to manipulate the price of shares in Cardlink Technology Group Limited (Cardlink). The Court heard that Liang, a Chinese national, subsequently sold the shares at a higher price so as to meet the minimum investment amount in an application by his son under the Immigration Department’s Capital Investment Entrant Scheme (CIES). Under the CIES, each applicant was required to hold $6.5 million worth of Hong Kong listed securities to be kept in a “specified financial assets” account. In his short reasons for verdict, Permanent Magistrate Mr Li Kwok Wai found Liang not guilty of the offence and accordingly acquitted Liang of the charge.

SEO of the SFC pushes regulators and market participants to work together

Felix Shipkevich — Wed, 23 Mar 2011 15:51:17 +0000

SEO of the SFC pushes regulators and market participants to work together

Regulators and market participants should work together to identify appropriate solution to new regulatory issues accompanied by increasing competition in global markets, the Chief Executive Officer of the Securities and Futures Commission (SFC), Mr Martin Wheatley said.

Speaking today at TradeTech Hong Kong conference, Mr Wheatley noted secondary trading business of exchanges faces two forms of competition — the competition from alternative trading venues such as dark pools and high frequency trading, and from merged exchanges from a more macro level.

“The SFC welcomes competition as long as investors’ interest is not compromised and the market continues to be fair, efficient and has its integrity intact,” said Mr Wheatley.

While allowing other alternative trading venues to compete with exchanges does deliver some benefits to investors such as more competitive pricing, more innovative services and improvement in quality of services, Mr Wheatley said such competition will invariably result in a more fragmented market.

“Our concern is whether diverse platforms are accessible in a non-discriminative manner either directly or indirectly and whether multiple data sources can be reintegrated at the user level at a reasonable cost,” he said.

Mr Wheatley pointed out that Asian markets have the benefit of learning from US or Europe experience in adopting more sophisticated trading practice in the course of market development, adding it is important to embrace healthy competition in the trading space.

“Competition will bring in new types of market participants and trading behaviours which may challenge the status quo. Regulators, therefore, need to maintain a regular dialogue with the industry to obtain market intelligence on potential issues,” said Mr Wheatley.

SFC seeks disqualification orders against former senior executives of Sunlink International Holdings

Elan Mendel — Tue, 25 Jan 2011 18:39:12 +0000

SFC seeks disqualification orders against former senior executives of Sunlink International Holdings

The Securities and Futures Commission (SFC) has commenced proceedings in the High Court, seeking orders to disqualify Mr. Andy Wong Shu Wing, a former chairman and executive director of Sunlink International Holdings Ltd (Sunlink) and Mr. Lee Chak To, a former chief financial officer of Sunlink as company directors for alleged misconducts (Notes 1 and 2).

The SFC alleges that Wong and Lee failed to manage Sunlink with the necessary degree of skill, care, diligence and competence as is reasonably expected of persons of their knowledge and experience and holding their offices and functions within Sunlink; and failed to ensure Sunlink complied with disclosure requirements under the Listing Rules of the Stock Exchange of Hong Kong (SEHK).

The SFC alleges that the breaches of Wong and Lee centred on a number of material events in October and November 2008 concerning the financial position of Sunlink, which the SFC alleges should have been disclosed to its members, the general investing public and the SEHK.

These included:

the mounting pressure from banks for the repayment of bank loans and the threat of legal proceedings being issued against Sunlink and its subsidiaries by the banks for repayment;
the winding up petition being presented against Sunlink by a supplier for failure to pay trade debts;
serious liquidity problem resulting from customers refusing to settle purchases as a result of product defects;
occurrence of labour strikes in Sunlink’s factory on the Mainland causing disruption to rectification of defective products; and
the appointment of an independent financial adviser for debt restructuring.

The first hearing of the petition was heard in the High Court today.

(Source: http://www.sfc.hk/sfcPressRelease/EN/sfcOpenDocServlet?docno=11PR6)

Courts Continue Support For SFC’s Enforcement of Insider Dealing Rules

Elan Mendel — Tue, 25 Jan 2011 18:26:53 +0000

Courts Continue Support For SFC’s Enforcement of Insider Dealing Rules

The latest edition of the Enforcement Reporter, the official publication of Securities and Futures Commission (SFC), reports that the agency has successfully obtained further orders from the High Court to disqualify three company directors showing that directors who breach their obligations, commit misconduct or keep bad news to themselves have no place in Hong Kong.

Recent court decisions also show their continuing support for the SFC’s enforcement action against insider dealing. The case of an insider who was jailed upon a sentence review by the SFC, is a good example.

The Court of Appeal has unanimously allowed the SFC’s appeal against a decision of the Securities and Futures Appeals Tribunal, and ruled that criminal procedures are not applicable to disciplinary proceedings.

The Enforcement Reporter is a newsletter that highlights key enforcement outcomes and issues. It is available on the SFC website under “Speeches, Publications & Consultations” – “Publications.”

(Source: http://www.sfc.hk/sfcPressRelease/EN/sfcOpenDocServlet?docno=11PR7)

Some SFC Committee Membership Ended

Felix Shipkevich — Thu, 13 Jan 2011 23:59:49 +0000

Some SFC Committee Membership Ended

The Securities and Futures Commission (SFC) would like to thank former members of SFC Committees for their valuable contribution. They are:

Disciplinary Chair Committee

* Mr Anderson Chow Ka-ming, SC

Investor Compensation Fund Committee

* Mr Kenneth Kwok Hing-wai, SC

Nominations Committee

* Mr Kenneth Kwok Hing-wai, SC

Securities Compensation Fund Committee

* Mr Kenneth Kwok Hing-wai, SC

SFC (HKEC Listing) Appeals Committee

* Mr Kenneth Kwok Hing-wai, SC

* Professor Liu Pak-wai

* Mr Zhang Shengman

Appointment of new members will be announced very soon.

(Source: http://www.sfc.hk/sfcPressRelease/EN/sfcOpenDocServlet?docno=11PR3)

Investment Fund promoter Convicted of Issuing Unauthorized Marketing Material

Elan Mendel — Thu, 06 Jan 2011 18:28:55 +0000

Investment Fund promoter Convicted of Issuing Unauthorized Marketing Material

The Eastern Magistrates Court of Hong Kong has convicted Investment fund promoter, Ms Kwok Sau Ping, for issuing documents in relation to a collective investment scheme without the authorization of the Securities and Futures Commission (SFC) and not disclosing interests in listed securities on time.

Acting Principal Magistrate Ms Amanda Jane Woodcock fined Kwok a total of $12,000 and ordered her to pay the SFC investigation costs of $ 80,000.

Kwok pleaded guilty to two summonses over the distribution of unauthorised documents concerning a collective investment scheme and two summonses over breaches of the shareholding disclosure requirements. The Court, however, found her to have Kwok held a series of public presentations to promote a collective investment scheme called Reliance China Hong Kong Opportunity Fund (Fund). Kwok conducted the presentations using Powerpoint slides, which were not authorized by the SFC. A total of 120 investors subscribed to the Fund.

The Court found that on 13 and 20 October 2007, Kwok held a series of public presentations to promote a collective investment scheme called Reliance China Hong Kong Opportunity Fund (Fund). Kwok conducted the presentations using Powerpoint slides, which were not authorized by the SFC. A total of 120 investors subscribed to the Fund.

(Source: http://www.sfc.hk/sfcPressRelease/EN/sfcOpenDocServlet?docno=11PR2)