ComplianceOne Newsletter – November 2025
The topics discussed in this monthly newsletter are as follows:
Regulatory Updates
SFC urges licensed firms to detect and prevent potential layering activities in money laundering
SFC consults on the Chinese version of financial resources rule enhancements
Market News
Enforcement News - Intermediary
SFC Reprimands and Fines Tung Tai $900,000 for Failures to Safeguard Client Assets
SFC Bans Cheung Ngai Yi for Life Following Criminal Conviction for Theft of Client Assets
SFC Commences Prosecution in Securities Fraud Case Involving Illegal Short Selling
SFC suspended Two Licensed Companies Linked to Prince Group (太子集團)
ENFORCEMENT NEWS - LISTCO
Director of Hong Kong-based LISCO FSM Holdings (01721.HK) resigns amid Cambodian crime allegations Linked to the Prince Group (太子集團)
Regulatory Updates
1. SFC urges licensed firms to detect and prevent potential layering activities in money laundering
The SFC issued a circular[1] in NOV 2025 to urge the licensed corporations and virtual asset trading platforms (the “Licensed Firms”) to stay vigilant against suspicious fund flows showing signs of layering activities in money laundering.
It is found that bad actors were exploiting Licensed Firms for layering activities by obscuring the sources and destination of their illicit proceeds. The SFC pointed out that: (i) a common red flag of layering is always with frequent and swift fund deposits in the client accounts, then followed by immediate withdrawals; (ii) Licensed Firms should have robust standards to detect and prevent layering activities.
What have been/to be done so far?
The SFC collaborated with the HK Police Force and the Joint Financial Intelligence Unit to address the risk of increasing exploitation of Licensed Firms;
The SFC hosted webinar to provide Licensed Firms with updates on supervisory observations and regulatory responses in securities and virtual assets markets;
Licensed Firms agreed to facilitate the Anti-Deception Coordination Centre ‘s (“ADCC”) 24/7 stop payment mechanism to expedite the interception of crime proceeds and recovery of the funds;
Senior management of Licensed Firms should be acquainted with the importance to safeguard the integrity of their operations and the financial system in HK.
[1] For implementation details of detection and prevention of layering activities, please refer to the Circular.
SIGNIFICANCE:
As Dr Eric Yip, the SFC’ s Executive Director of Intermediaries, said, “Watchfulness is key to detecting layering activities, which could have been prevented through effective and robust AML/CFT controls.”
The SFC further reiterated that Licensed Firms should stay alert to red flags of suspicious transactions and keep aware of the robustness and effectiveness of their internal controls to fulfil the obligation in upholding AML/CFT standards!
2. SFC issues new guidance for licensed virtual asset trading platform to tap global liquidity and diversify offerings
The SFC set out its expected standards in two new circulars[1] for SFC-licensed VATP operators (“Platform Operators”) to take a significant step in tapping global liquidity and broadening the range of their product and service offerings.
In one circular[2], Platform Operators are allowed to combine their orders with those affiliated overseas VATPs (“OVATP”) in a shared book to attract global platforms, order flows and liquidity providers. Under the arrangement, orders from different platforms will be permitted to be combined into an aggregate shared liquidity pool, enabling order matching and execution across platforms (“Shared Order Book”).
And the next step by the SFC is to assess the feasibility of allowing the licensed brokers to direct client orders to regulated overseas liquidity pools within the same group.
A Snapshot of the Regulatory Requirements for Shared Liquidity Book
(1) Eligible OVATPs and the clients
A Shared Order Book should be managed jointly by the Platform Operator and an OVATP licensed in the relevant jurisdiction for conducting its activities. A relevant jurisdiction refers to one which is a member of the FATF or has effective regulatory regime aligned with the FATF recommendations as well as the IOSCO2 Policy recommendations for Crypto and Digital Asset Markets3 with respect to market abuse and client asset protection.
(2) Trading and Settlement Risk
Trading Operations
The Shared Order Books should be operated according to a comprehensive set of rules which cover pre-funding, order placement, trade execution, settlement and default management;
Automated pre-trade verification should be implemented to confirm the pre-funding, ensuring sufficient assets available for settlement.
Settlement Controls
A Platform Operator should:
design its operational workflow to effectively mitigate unsettled trade exposure and related operational risks;
settle all trades with the OVATP at least once a day, and all client virtual assets should be held in custody by the Platform Operator’s associated entity.
Compensation Arrangement
A Platform Operator should:
maintain a reserve fund in Hong Kong held on trust and designated for client compensation;
have a compensation arrangement to cover potential loss of client virtual assets under its custody.
(3) Market Misconduct Risk
A Platform Operator should:
implement internal policies and controls for the proper surveillance of trading activities on the trading platform;
designate at least one Responsible Officer or Manager-in Charge to oversee the joint market surveillance programme, ensure compliance with the SFC’s requirements;
provide Shared Order Book data to the SFC promptly on request, including all order and trade data, order originator information.
(4) Approval from SFC
A Platform Operator should obtain prior written approval from the SFC, and to comply with the “Terms and Conditions for operating a Shared Order Book” after being licensed.
In another circular[3], the SFC put forward some facilitating measures to the VATPs:
(1) Token admission requirements
the SFC allows Platform Operators to offer trading in virtual assets without a 12-month track record for professional investors and for Hong Kong Monetary Authority-licensed stablecoins.
(2) Distribution of digital asset-related products and tokenized securities by VATPs
In order to provide a broader range of services and products, the SFC proposes to amend the standard set of licensing conditions[4] to permit the VATPs to:
(i) distribute digital asset-related products and tokenized securities in accordance with existing laws, codes, guidelines and regulations;
(ii) open a trust account or client account by the VATP with the custodian of the digital asset-related product or tokenized security in the VATP’s name for holding assets on behalf of the clients.
(3) Custody of tokens not traded on VATPs
VATPs with intention to provide such services can apply for modification of the relevant licensing conditions.
[1] The two circulars are: (1) Circular on shared liquidity by virtual asset trading platforms; (2) Circular on expansion of products and services of virtual asset trading platforms
[2] Circular on shared liquidity by virtual asset trading platforms (2025.11.03)
[3] Circular on expansion of products and services of virtual asset trading platforms (2025.11.03)
[4] The revised licensing conditions are stated in the Appendices II and III of the Circular
SIGNIFICANCE:
It is a gradual realization of the ASPIRe roadmap, making a first step under Pillar A (Access) to reach out with global platforms.
As Ms Julia Leung, the SFC’ s Chief Executive Officer, has said: “Today, we take a significant step to connect with global liquidity, underscoring our commitment to striking a right balance in fostering market innovation and vitality while upholding high standards for investor protection and market integrity.”
3. SFC consults on the Chinese version of financial resources rule enhancements
The SFC launched a public consultation on the Chinese version of the draft amendments to the Securities and Futures (Financial Resources) Rules (FRR).
On 14 July 2025, the SFC published the English version of the draft FRR amendments for public consultation and the Chinese draft FRR amendments for public consultation was posted on 7 Nov 2025.
SIGNIFICANCE:
This is absolutely an unprecedented step by the SFC since the rules and guidelines in the FRR are not comprehensible to general readers particularly with the complex nature of calculation and classifications; a provision of Chinese version facilitates the relevant personnel with enhanced readability and comprehensibility of the FRR references.
Market News
4. SFC unveils enhancement to facilitate client interaction under Cross-boundary Wealth Management Connect
The SFC announced new enhancements to Cross-boundary Wealth Management Connect Pilot Scheme (“Cross-boundary WMC”) to develop closer communication between participating licensed corporations (“Participating LCs”) and their clients under the scheme which was published on 24 Jan 2024.
For purpose of the new enhancements, the SFC set out anther circular on 13 Nov 2025
with the implementation details for client interaction, the key arrangements are:
A Participating LC can now obtain one-off written consent (valid for a year) from Southbound Scheme clients (“SSC”) who are not physically present in Hong Kong, thus the LC can explain the product information aligned with each client’ s needs and selected product categories; (noted: SSCs refers to Mainland investors who have open dedicated investment accounts with that LC and also have opened personal fund accounts with eligible Mainland brokers as remittance accounts under the scheme);
Upon the request of the SSCs, a Mainland partner broker (i.e. a Mainland broker that has been confirmed by the relevant Mainland regulatory authorities as eligible to provide Cross-boundary WMC services) within the same corporate groups as the Participating LCs (“Partner Brokers”) can arrange online three-party dialogues with the Participating LCs at their respective places of business, where the Participating LCs can explain product information to their clients;
With a one-off written consent as mentioned above from SSCs, Participating LCs can provide their clients with research reports on individual investment products prepared by their Partner Brokers;
The enhanced arrangements above are also applicable to the Northbound Scheme.
SIGNIFICANCE:
As Ms Julia Leung, the SFC’s Chief Executive Officer, said, “With enhanced communication and improved access to information, investors can be better informed when making investment decisions which would support the continuous and sustainable development of the Cross-boundary WMC.”
5. SFC further streamlines measures for authorized EU-regulated retail funds to implement changes efficiently
The SFC announced a series of streamlined post-authorisation measures for UCITS funds. UCITS funds means (i) Undertakings for Collective Investment in Transferable Securities (UCITS) domiciled in France, Luxembourg, Ireland and the Netherlands, and (ii) collective investment schemes domiciled in the United Kingdom authorised as UK UCITS. In a circular to facilitate their implementation of changes that are in compliance with their home jurisdiction regulation.
Recognising that UCITS funds offer robust investor protection commensurate with the standards of Hong Kong, the SFC considers further streamlining procedures can be adopted for facilitating UCITS funds in implementing changes that are subject to their home regulator’s supervision with immediate effect from 28 Nov 2025.
KEY streamlined measures for UCITS funds covering the following post-authorization matters:
(a) Change of key operators
Prior approval from SFC is removed for changes of depository and investment delegates supervised under the fund’s home regulators;
(b) Material changes in investment objectives, policies and restrictions
Prior approval from SFC is removed for material changes in investment objectives, policies and restrictions which comply with the fund’s home jurisdiction requirements;
(c) Post-authorization notifications
To align the SFC’s notification requirements with the fund’s home jurisdiction requirements.
For understanding of the latest measures in more details, the FAQs on SFC Authorization of UCITS Funds is available on SFC’s website.
SIGNIFICANCE:
As Ms Alexandra Yeong, the SFC’ s Interim Head of Investment Products, said, “These enhancements are integral to the SFC’ s ongoing efforts to strengthen Hong Kong’ s competitiveness as a leading global asset management centre, enabling UCITS funds to operate efficiently in our dynamic market.”
Enforcement News - Intermediary
6. SFC Reprimands and Fines Tung Tai $900,000 for Failures to Safeguard Client Assets
On 13 November 2025, the SFC reprimanded and fined Tung Tai Securities Company Limited (東泰證券有限公司) (“Tung Tai”) for regulatory breaches related to unauthorized sales of client securities and transfers of client funds.
Case Details
The SFC's investigation revealed that Tung Tai failed to adequately safeguard client assets after acting on instructions from a bogus email address impersonating an overseas limited partnership company client (the “Client”).
Period | Case Detail |
13 February 2019 | Authorised Person of the Client email directly to the accounting department of Tung Tai with instructions. Tung Tai executed the instruction without noticing the ROs. |
6 September 2019 | Two banks in Mexico and Canada rejected several telegraphic transfers processed by Tung Tai based on instructions from the bogus email address, serving as early red flags of potential irregularities. However, the ROs of Tung Tai executed the trades and approved telegraphic transfers to the *False Bank Account.
*false bank account held by authorised person of the client, but not designated in the clients’ account opening form |
6 September 2019 | Tung Tai sold shares in the client's account and transferred the sale proceeds (US$3,301,740) via four telegraphic transfers to three false bank accounts in the United States, despite discrepancies in beneficiary addresses compared to account opening documents. |
Tung Tai did not respond to red flags, such as telegraphic transfer rejections by banks and discrepancies in beneficiary addresses, leading to the unauthorized transfer of sale proceeds to three overseas bank accounts not designated by the client. Additionally, Tung Tai lacked effective internal control procedures to prevent theft, fraud, or misappropriation of client assets.
Enforcement Act
The SFC reprimanded and fined Tung Tai HK$900,000 for regulatory breaches related to unauthorized sales of client securities and transfers of client funds. In determining the sanctions, the SFC considered the seriousness of the failures, Tung Tai's remedial actions, compensation to the client, cooperation with the investigation, and its clean prior disciplinary record.
Tung Tai compensated the affected client, engaged independent reviewers to assess internal controls, and implemented remedial measures to enhance order placing and trading execution procedures.
For more details of the case, please refer to STATEMENT OF DISCIPLINARY ACTION
SIGNIFICANCE:
This disciplinary action emphasizes the critical importance of robust internal controls and vigilance against fraud in safeguarding client assets within Hong Kong's securities industry. It serves as a reminder for all licensed corporations, including those with overlapping financial services, to implement effective procedures to detect and prevent unauthorized activities, thereby protecting investors and maintaining market integrity.
7. SFC Secures First Custodial Sentence Against Finfluencer for Provision of Paid Investment Advice on Social Media Chat Group Without Licence
On 7 November 2025, the SFC secured a conviction against Mr CHAU Pak Yin (周柏賢) (“CHAU”), a finfluencer previously known as CHAU Kin Hei (前名周建希), in a criminal prosecution at the Eastern Magistrates’ Court.
Case Details
CHAU was found guilty of providing unlicensed investment advice through a subscription-based Telegram chat group he hosted, named “Futu真。財自Private Group” under his username “Futu大股東”.
During the relevant period, CHAU circulated commentaries, recommendations, and target prices on various securities, including responses to subscriber questions about Nasdaq-listed securities' performance. He charged a monthly subscription fee of US$200 or HK$1,560, earning a total of HK$43,680 from the group, which was open to public paid subscribers.
Court Order
This activity constituted "Type 4: advising on securities", a regulated activity under Schedule 5 of the SFO, and CHAU was charged under sections 114(1)(a) and 114(8) of the SFO for operating without an SFC licence.
CHAU was sentenced to six weeks imprisonment and ordered to pay the SFC investigation costs. He was remanded in custody after his bail application was rejected, pending an appeal against the conviction and sentence.
SFC Effort to Curb Activities of Unauthorised Finfluencers
On 6 June 2025, the SFC issued a Press Release announcing its accession International Organization of Securities Commissions (“IOSCO”) efforts to combat unauthorized activities by financial influencers through a multi-pronged approach including supervisory actions, enforcement, and investor education.
SIGNIFICANCE:
Mr Michael Duignan, SFC’s Executive Director of Enforcement, emphasized the SFC’s commitment to tackling unlawful finfluencer activities and holding them accountable for unlicensed regulated activities. He warned that unlicensed finfluencers may not meet SFC standards, exposing investors to risks, and advised the public to verify licences via the SFC’s Public Register of Licensed Persons and Registered Institutions.
This landmark case marks the SFC’s first custodial sentence against a finfluencer for unlicensed investment advice, highlighting the regulator’s intensified focus on social media and online platforms where such activities can proliferate. It serves as a strong deterrent to unlicensed individuals providing paid financial advice, reinforcing the need for proper licensing to ensure investor protection, accountability, and compliance with SFO standards.
8.SFC Bans Cheung Ngai Yi for Life Following Criminal Conviction for Theft of Client Assets
On 5 November 2025, the SFC issued a lifetime ban on Mr. CHEUNG Ngai Yi (張藝議) (“CHEUNG”), a former relevant individual of Hang Seng Bank Limited (恒生銀行有限公司) (“HSB”), prohibiting him from re-entering the securities industry.
Case Details
The action follows CHEUNG's criminal conviction for theft, where he was found guilty of misappropriating client funds. The court established that CHEUNG misappropriated a total of HK$1,530,500 from a client's bank account through 88 unauthorized ATM withdrawals. This misconduct occurred over a period of approximately nine months, highlighting a pattern of repeated breaches of trust in handling client assets.
Enforcement Act and Court Order
In result, CHEUNG had been sentenced by the District Court to 30 months' imprisonment on 31 March 2025. Case No.: DCCC 425/2022
The SFC's investigation and subsequent ban were based on the determination that CHEUNG is not a fit and proper person to be registered or licensed due to his conviction, which involved dishonest conduct directly related to his regulated activities.
SIGNIFICANCE:
In imposing the ban, the SFC emphasized that CHEUNG's actions demonstrated a severe lack of integrity, which is fundamental to maintaining public confidence in the financial markets.
This enforcement action reinforces the SFC's zero-tolerance policy toward misconduct involving client asset misappropriation, serving as a stark reminder to all licensed individuals and firms of the severe consequences for breaching ethical and regulatory standards. It underscores the importance of robust internal controls and ongoing vigilance in financial institutions to prevent theft and protect client interests, while deterring similar dishonest behaviour that could undermine the integrity of Hong Kong's securities industry.
9. SFC Commences Prosecution in Securities Fraud Case Involving Illegal Short Selling
On 6 November 2025, the SFC commenced a prosecution in a securities fraud case involving illegal short selling.
The SFC has initiated criminal proceedings against:
Mr. CHAN Hoi Shing (陳海城) (“CHAN”); and
Mr. LI Po Ching (李寶程) (“LI”)
engaged in unauthorized short selling activities in the shares of certain companies, resulting in potential market distortions and illicit gains.
Case Details
CHEN and LI falsely claimed that CHEN held a sufficient number of shares in the 28 companies to support sell orders placed through CHEN's securities account at Black Marble Securities Limited (貝格隆証券有限公司), but this was not the fact. Consequently, the two were able to conduct illegal short selling transactions on the shares of the relevant companies and profit approximately HK$11 million.
Adjourned Process
The defendants did not enter a plea hearing on 6 November 2025, and the case was adjourned to 6 February 2026, for a further hearing. At that time, the prosecution will apply to transfer the case to the District Court. CHEN and LI were granted bail pending the next hearing.
SIGNIFICANCE:
This action demonstrates the SFC's ongoing vigilance in combating securities fraud and enforcing short selling rules to protect market integrity and investor interests in Hong Kong. It serves as a reminder for market participants to adhere strictly to regulatory requirements on short selling, as violations can lead to criminal charges, fines, and reputational damage.
10. SFC suspended Two Licensed Companies Linked to Prince Group (太子集團)
The Prince Group (太子集團) founded by Chen Zhi (陳志), has been implicated in operating telecom fraud parks in Cambodia, with Chen Zhi facing US prosecution and sanctions, including the freezing of approximately HK$120 billion in Bitcoin assets.
Suspended Licensed Companies
According to the SFC website, two license companies Mighty Divine Investment Management Limited and Mighty Divine Securities Limited - entities linked to Prince Group, have had their licenses temporarily revoked. See below table for details:
Last updated: 03 Nov 2025
These companies are noted as having "Licence suspended" and “Ceased business of regulated activities”, reflecting heightened regulatory measures in response to the ongoing investigations.
Enforcement News - LISTCO
11. Director of Hong Kong-based LISCO FSM Holdings (01721.HK) resigns amid Cambodian crime allegations Linked to the Prince Group (太子集團)
The Prince Group (太子集團) founded by Chen Zhi (陳志), has been implicated in operating telecom fraud parks in Cambodia, with Chen Zhi facing US prosecution and sanctions, including the freezing of approximately HK$120 billion in Bitcoin assets.
Update news of Hong Kong-Listed Companies related to Chen Zhi
Movements in two Hong Kong-listed companies controlled by Chen Zhi:
· Geotech Holdings Ltd. (致浩達控股) (01707.HK); and
· Khoon Group Ltd. (坤集團) (00924.HK);
have attracted significant market attention following the exposure of the fraud allegations.
LI Thet (李添), chairman of FSM Holdings (01721.HK), has resigned after being connected to Chen Zhi. Li Thet, Prince Group's CFO, was also sanctioned, accused of overseeing Prince Group's money laundering, and large-scale cash smuggling. U.S. relevant documents did not list out any connection between LI Thet and Hong Kong List-CO, until FSM Holdings issued a statement announcing LI Thet's resignation as chairman and executive director, revealing a third listed company.
(See Sanction and Registration of Executive Directors: 2025-10-21)
12. SFC Seeks Court Orders to Disqualify Former Directors of China Longevity (1864.HK) for Financial Misstatements and Disclosure Failures
On 31 October 2025, the SFC initiated proceedings to seek disqualification orders against three former executive directors of China Longevity Group Company Limited, formerly known as Sijia Group Company Limited (中國龍天集團有限公司, 前稱思嘉集團有限公司) (*1864.HK) (“China Longevity”).
*trading in shares of China Longevity has been suspended since 4 December 2014
The three former directors of China Longevity named in the proceedings are:
Mr Lin Shengxiong (林生雄) | former Chairman and Executive Director |
Mr Zhang Hongwang (張宏旺) | Executive Directors. |
Mr Huang Wanneng (黃萬能) | Executive Directors. |
Case Details
The action stems from the SFC's investigation, which uncovered material overstatements in the China Longevity's cash and cash equivalents, leading to misrepresentations in key financial reports. Specifically:
As of 31 December 2011, China Longevity materially overstated cash and cash equivalents by RMB198.9 million, representing 13.6% of net assets.
As of 30 June 2012, China Longevity materially overstated cash and cash equivalents by RMB302.4 million, representing 19.9% of net assets.
These inaccuracies resulted in material misrepresentations in the China Longevity's 2011 annual report, 2012 annual report, and 2012 interim report. Additionally, the directors failed to ensure timely disclosure of the overstatements and related audit irregularities identified by the China Longevity's auditors, exacerbating the misconduct.
Petition Filing and Service Proceedings
The SFC filed the Petition on 25 November 2022 against the three former directors (all located in PRC) and obtained leave from the Court of First Instance to serve the Petition on them out of the jurisdiction on 28 April 2023.
Judicial assistance was sought in the Mainland to effect service of the Petition on the former directors. The first direction hearing was held on 30 October 2025 and the next case management conference is scheduled for 25 February 2026.
SIGNIFICANCE:
This enforcement action underscores the SFC's commitment to holding corporate directors accountable for financial reporting integrity and timely disclosures, which are essential for maintaining investor confidence in Hong Kong's capital markets.
It highlights the risks of disqualification for executives involved in such breaches, serving as a deterrent against similar misconduct in listed companies and reinforcing regulatory oversight in the financial sector.
[End of ComplianceOne Newsletter – November 2025]
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