Statutory Obligations during SFC Inspection (February 2026)
On 29 January 2026, the Securities and Futures Commission (“SFC”) issued a circular stating the observed unsatisfactory practices and behaviours of Licensed Corporations (“LCs”) and reminding the LCs on their statutory obligations and expected standards of conduct throughout the inspection process.
LCs Unsatisfactory Practices and Behaviours
Key Implications for Senior Management
1. Personal Liability and Discipline – Under Part IX of the SFO, the SFC can sanction any person involved in the management for misconduct or being “not fit and proper”. This applies to all senior managers, even if they are not licensed.
2. Attributed Misconduct – If an LC commits misconduct due to a manager’s consent, connivance, or neglect, that individual is also personally guilty of misconduct.
3. Fitness & Properness Assessment – The SFC will look into a manager’s past and present conduct. Failure to ensure LC compliance rules can directly undermine an individual's deemed fitness and properness to hold their position.
4. Designated Oversight Duty – The MIC of the Overall Management Oversight function, supported by the MIC of Compliance is now explicitly called upon to exercise proactive leadership to ensure full LC compliance during SFC inspections.
Actions and Recommendations
1. Senior Management Must Take Ownership – Recognize that accountability for inspection outcomes extends beyond the firm to you personally.
2. Ensure Readiness & Cooperation – Proactively ensure all records are accessible, ROs must be available, and the firm is prepared to comply fully and promptly with SFC information requests under Section 180 of the SFO.
3. Clarify Roles – The MICs for Overall Management Oversight and Compliance should explicitly confirm and align their roles and process for overseeing and guiding the firm’s response to regulatory inspections.
[End of ComplianceOne's Impact Analysis – Statutory Obligations during SFC Inspection (February 2026)]
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