ComplianceOne Newsletter – Augest 2026

The topics discussed in this monthly newsletter are as follows: 

Market News

1. SFC welcomes NFRA’s announcement for supporting Mainland insurers to invest in Hong Kong ETFs under Stock Connect

2. Stronger Mainland connectivity reinforces Hong Kong’s leading role as China assets gateway: SFC Quarterly Report

   
   

Enforcement News

3. SFC obtains 13-year disqualification orders against former top executives of China Candy Holdings Limited for corporate malfeasance

4. SFC obtains six-year disqualification order against former executive director of National United Resources Holdings Limited over fictitious transactions

5. Former SFC staff member charged following joint investigation with ICAC

6. SFC revokes Ernest Chan Tsz Kin’s licence and bans him for 10 years

Markets News

1. SFC welcomes NFRA’s announcement for supporting Mainland insurers to invest in Hong Kong ETFs under Stock Connect

On 18 August 2026, the SFC welcomed the NFRA's announcement supporting Mainland insurance funds to invest in Hong Kong ETFs under Stock Connect, enriching their offshore asset allocation options through Hong Kong.

SFC Chairman Dr Kelvin Wong thanked the NFRA for fostering financial connectivity, noting the policy reflects the Nation's commitment to high-quality financial liberalisation. CEO Ms Julia Leung said the policy will bring more development opportunities to Hong Kong's asset management industry and consolidate Hong Kong's position as a leading wealth management hub.

SFC Executive Director Ms Elisa Ng joined a Hong Kong delegation led by Secretary for Financial Services and the Treasury Christopher Hui in Beijing to meet NFRA Vice Minister Mr Xiao Yuanqi on coordinated capital market development.

31 Hong Kong ETFs are eligible for southbound Stock Connect trading (market cap: HKD 343.6 billion as of 31 July 2026). Southbound turnover grew 59% year-on-year to HKD 780.7 billion in January–July 2026, about 7% of total turnover.

SIGNIFICANCE:

This opens a substantial new channel of Mainland insurance capital into Hong Kong ETFs. Licensed corporations, particularly asset managers and ETF providers are encouraged to assess ETF product eligibility for southbound trading and ensure compliance infrastructure can handle increased Mainland participation. Furthermore, licensed corporations need to review their distribution strategies to engage Mainland insurance institutions and monitor further NFRA and SFC policy developments on mutual market access.

2. Stronger Mainland connectivity reinforces Hong Kong’s leading role as China assets gateway: SFC Quarterly Report

On 26 August 2026, the SFC published its Quarterly Report for the quarter ending June 2026, highlighting strong growth across Hong Kong's capital markets driven by offshore product breakthroughs, sustained Stock Connect inflows, and vibrant IPO activity.

*For details, please refer to the SFC Quarterly Report dated 26 August 2026.

Enforcement News

3. SFC obtains 13-year disqualification orders against former top executives of China Candy Holdings Limited for corporate malfeasance

On 6 August 2026, the SFC obtained 13-year disqualification orders in the Court of First Instance against three former top executives of China Candy Holdings Limited (“China Candy”) (HK Stock Code: 8182) for their involvement in schemes that substantially overstated the company's cash and bank balances by falsifying accounting records, misleading the auditors, and concealing the company's true financial position in its 2016 interim report and annual report, overstating the figures by RMB 38.1 million and RMB 43.48 million respectively amounting to 87% and 97% of the reported balances.

The three former top executives subject to the disqualification orders are:

• Mr XU Jinpei, former chairman and executive director;

• Ms HONG Yinzhi, former executive director, chief executive officer and compliance officer; and

• Mr WANG Zhihong, former chief financial controller and compliance officer.

Under the orders, they are prohibited, without leave of the Court, from acting as directors, liquidators, receivers or managers of the property or business of any listed or unlisted corporation in Hong Kong for 13 years. The Court also ordered the trio to pay the SFC's costs in the proceedings.

As Mr Michael Duignan, SFC’s Executive Director of Enforcement, said: "Accurate corporate financial reporting is fundamental to market integrity and investor confidence. Senior executives, including finance professionals who are not directors, will be held accountable for misdeeds involving falsifying records, distorting financial statements, facilitating misconduct, or turning a blind eye to serious irregularities. Those entrusted with safeguarding corporate integrity but undermine it instead risk being removed from positions of corporate responsibility for an extended period."

*For more details, please refer to the Court of First Instance’s judgement on China Candy’s case.

SIGNIFICANCE:

This case is significant to every SFC licensed corporation because it confirms that personal accountability under section 214 of the SFO extends beyond directors to compliance officers and finance professionals who are not board members. The 13-year disqualification period — close to the statutory maximum of 15 years — sends a clear signal that the SFC will pursue the most severe sanctions against those who falsify financial records, mislead auditors, or turn a blind eye to serious irregularities. Licensed corporations should use this case to reinforce training on financial reporting integrity, ensure their compliance function has genuine independence, and verify that internal controls prevent the fabrication of bank statements and accounting records. Firms should also confirm that external auditors have unrestricted access to source documents and are not supplied with falsified information.

4. SFC obtains six-year disqualification order against former executive director of National United Resources Holdings Limited over fictitious transactions

On 13 August 2026, the SFC obtained a six-year disqualification order against Mr TIAN Songlin (“Tian”), former executive director of National United Resources Holdings Limited (“NUR”), for breaching his fiduciary duties by recklessly involving a NUR subsidiary in fictitious transactions.

Tian was disqualified for six years from managing any listed or unlisted corporation in Hong Kong and ordered to pay the SFC's costs in the proceedings. The order was made under the Carecraft procedure based on an agreed statement of facts and agreed proposed orders.

The case involved two back-to-back fuel oil transactions in 2015 totalling USD 75.46 million between NUR’s subsidiary, NUR Clean Energy Investment Limited (“NUR Clean”) and two external parties. The transactions were fictitious, the purported supplier and customer were controlled by NUR or connected parties, the bills of lading were not genuine, and funds circulated among related parties before returning to NUR.

The SFC has also accused three other former directors and senior management of NUR of serious misconduct. They are currently unlocatable:

In November 2025, the SFC obtained a three-year disqualification order against Mr LO Ka Wai, another former executive director of NUR, who admitted to negligence in committing NUR Clean to the fictitious transactions. Proceedings against the three unlocatable respondents are ongoing.

*For details, please refer to the Court of First Instance's judgement (Case No: HCMP 896/2022)

SIGNIFICANCE:

This case demonstrates the personal accountability of executive directors under section 214 of the SFO for fictitious transactions executed through subsidiaries. The Court will impose more severe sanctions on those who actively facilitated misconduct over those merely negligent in oversight. This case shows how essential having a governance control, active board engagement, robust payment authorization processes, and accurate disclosure practices.

5. Former SFC staff member charged following joint investigation with ICAC

On 16 August 2026, the SFC announced that the Independent Commission Against Corruption (“ICAC”) has charged a former SFC manager with obtaining access to a computer with a view to dishonest gain, following a joint SFC-ICAC investigation. The staff member's employment was terminated immediately upon her arrest, and the SFC has cooperated fully with the ICAC.

The SFC emphasized that protecting highly confidential regulatory information and enforcing strict controls over internal system access are core institutional responsibilities. It has launched an ongoing comprehensive review of the risks and internal governance issues highlighted by the case.

The SFC reiterated its zero-tolerance policy against misconduct, holding staff to the highest standards of integrity, professional conduct, and confidentiality that is consistent with the regulatory requirements it imposes on licensed corporations.

As court proceedings and related investigations remain active, the SFC is unable to comment further on the specifics of the case.

SIGNIFICANCE:

This case is a stark reminder that insider threats, particularly unauthorized access to confidential regulatory information can originate within the regulator itself. For SFC-licensed corporations, the case underscores the importance of implementing robust access controls and monitoring systems for sensitive data; maintaining strict segregation of duties to prevent any single individual from exploiting system access; conducting regular reviews of internal governance and risk management frameworks; and enforcing zero-tolerance policies for misconduct at all levels of the organization. Licensed corporations should take this opportunity to review their own information security protocols, ensuring that access to confidential client and regulatory data is appropriately restricted and monitored, and verify that their internal whistleblowing and reporting mechanisms are functioning effectively.

6. SFC revokes Ernest Chan Tsz Kin’s licence and bans him for 10 years

On 24 August 2026, the SFC revoked the licence of Mr Ernest Chan Tsz Kin (“Chan”), former responsible officer (RO) of Keptain Securities and Asset Management Limited (“Keptain”), and banned him from re-entering the industry for 10 years for window dressing Keptain's financial resources between June 2016 and March 2018.

Chan caused Keptain to window dress its liquid capital in 15 financial returns submitted to the SFC, creating the false appearance of compliance with the liquid capital requirement under the Securities and Futures (Financial Resources) Rules (“FRR”). In each return, Chan deposited cheques (issued by himself or connected companies) at month-end to inflate Keptain's liquid capital, but the cheques were dishonoured a few days later before the returns were submitted. Excluding these dishonoured cheques, Keptain would have breached the required liquid capital level every reporting month.

Despite liquid capital deficits ranging from HKD 731,000 to HKD 3,473,000 over 20 months, Keptain did not notify the SFC as required under the SFO and FRR.

The SFC considered that Chan's conduct was intentional, called into question his honesty and integrity, and that he was directly responsible for Keptain's window dressing. Mitigating factors included Keptain having no active clients during the Relevant Period and Chan's cooperation with the SFC.

*For details, please refer to the SFC Statement of Disciplinary Action for Ernest Chan Tsz Kin.

SIGNIFICANCE:

This case highlights the SFC's zero-tolerance approach to window dressing of financial resources. The SFC mandates all licensed corporations including the RO who submits the FRR that the liquid capital calculations must reflect genuine, settled funds (cheques that are subsequently dishonoured must not be included) in the liquid assets. The ROs bear personal responsibility for the accuracy of financial returns submitted to the SFC, and signing off on false returns constitutes serious misconduct. As per FRR rules, licensed corporations must notify the SFC immediately when its liquid capital falls below required thresholds, failure to do so is a separate breach. The SFC will impose severe sanctions such as licence revocation and a 10-year ban even if there were no clients harmed from the incident. ROs should review their financial resources reporting processes, ensure robust controls over month-end capital calculations, and implement cheque clearing verification before submitting financial returns.

[End of ComplianceOne Newsletter – Augest 2026]

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