ComplianceOne Newsletter – May 2025

The topics discussed in this monthly newsletter are as follows:

REGULATORY UPDATES

Updates to intermediaries of new acceptable account opening approaches

MARKET NEWS

ENFORCEMENT NEWS

SFC Fines Sino-Rich $2 Million and Suspends its Responsible Officer for Margin Lending Failures
SFC Issues Restriction Notice to Bloomyears Limited
SFC Revokes Mui Chok Wah’s Licence following Theft Conviction and Regulatory Breach of Non-disclosure
The Responsible Officer of Lion Futures Limited is Banned for breach of AML/CFT Regulations
SFC Prosecutes a Finfluencer for Providing Securities Advice Publicly without a License
Court Convicts Brothers-in-Law of False Trading Conspiracy in Pa Shun Shares
SFC Disqualifies National Agricultural Executives for Multiple Financial Misconduct

Regulatory Updates

1. Updates to intermediaries of new acceptable account opening approaches

On 30th May 2025, the SFC issued an update on acceptable account opening approaches allowing intermediaries to streamline the client onboarding process for overseas investors while ensuring compliance and enhancing security. These updates permit intermediaries flexibility in acceptable remote client account opening procedures. The table below lists out the updates on acceptable non-face-to-face (NFTF) account opening approaches. For more details, please refer to the SFC circular.

The updates on acceptable non-face-to-face (“NFTF”) account opening approaches are summarized as below:

(1) Certification services

(i) Certification services recognised by the Electronic Transactions Ordinance (Cap. 553) can be employed for client identity verification in NFTF account opening where the list of recognized certificates are made available on the website of the Digital Policy Office (“DPO”)[1] of the Hong Kong SAR Government.

(ii) Smartphones equipped with Near Field Communication (“NFC”) technology can be used for accessing the certification services provided by recognised Certification Authorities (“CA”) remote account opening.

(iii) Personal (Remote) ID-Cert Class 12 (a kind of Recognised Certificate), issued by Digi-Sign Certification Services Limited, can be subscribed by overseas investors holding ePassports for remote clients onboarding. The certificates must be in compliance with the standards of Internationals Civil Aviation Organization (“ICAO”).

(iv) Currently, more than 100 overseas jurisdictions have issued ICAO-compliant ePassports which are eligible for remote client onboarding.

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[1] The DPO was set up in July 2024 by merging the Office of the Government Chief Information Officer and the Efficiency Office. Representing a consortium of know-how of the two offices specialized in information technology (IT) and business processes re-engineering, the DPO is responsible for formulating policies on digital government, data governance and information technology. The establishment of the DPO is an important step in enhancing governance and driving the development of digital government by bolstering the Government’s capabilities in addressing long-term and strategic issues.

(2) iAM Smart

(i) iAM Smart is a newly included acceptable NFTF account opening approach by the SFC;

(ii) It is a one-stop personalised digital services platform, which provides a reliable and independent source of Hong Kong residents’ identities, which can be used for client identity verification;

(iii) iAM Smart has also been specified as a recognised digital identification system for client identity verification under paragraph 4.2.1 of the AML/CFT Guideline (June 2023);

(iv) To facilitate the adoption of iAM Smart by financial institutions, an iAM Smart Sandbox Program (“Programme”) has been launched by the DPO in collaboration with the Cyberport, licensed intermediaries are encouraged to join the Program for access to various documentation and resources via the SFC by visiting the “invitation letter” for details.

(v) Illustrative processes of the connection to and the adoption of iAM Smart for account opening are set out in Appendix B of the SFC circular for further reference.

The SFC has published a list of eligible jurisdictions that clients may maintain bank accounts with for first payments and ongoing fund movements for the purpose of remote onboarding of overseas individual clients, currently, 15 additional eligible jurisdictions are added.

SIGNIFICANCE:

As NFTF account opening approaches become more prevalent, financial intermediaries should keep themselves abreast of the latest technologies available in order to widen their access to onboarding overseas clients amid the intense competition in the local market.

Whereas intermediaries should be reminded that some jurisdictions may have restrictions on citizens’ investments or capital transfers beyond their territorial boundaries, thus intermediaries are advised to seek reference to the requirements of that domestic regulatory authorities when onboarding overseas clients.

Market News

2. SFC-HKEX launch Technology Enterprises Channel for Technology and Biotech Companies

The SFC and the Hong Kong Exchanges and Clearing Limited (the “HKEX”) jointly announced the launch of a dedicated technology enterprises channel (“TECH”) to further facilitate New IPO Listing applications from prospective Specialist Technology Companies (“STC”) and Biotech Companies (“BTC”), and introduced new confidential filing option. There are views that the establishment of TECH is a key measure for Hong Kong to consolidate its position as a global hub for capital of technology and innovation, effectively highlighting the advantages of listing in Hong Kong.

TECH supports prospective STCs and BTCs in understanding applicable Listing Rules and preparing for their listing in Hong Kong before submitting formal New Listing applications, the following facilitating measures are:

(i) a specialized team with relevant experience has been designated in reviewing and providing guidance on the Main Board Chapter 18A, 18C applications;

(ii) engagement with the prospective STC or BTC in order to gain a deeper knowledge of their specific business;

(iii) provision of guidance on the eligibility and suitability for listing on the products and services to be offered;

(iv) opportunities for the STC or BTC to discuss and seek guidance from the SEHK on Listing Rules;

(v a confidential filing option is made available for listing applications filed under the Main Board Chapter 18A, 18C in the wake of this announcement.

SIGNIFICANCE:

The TECH channel is strategically vital for Hong Kong's financial hub status. By providing pre-application guidance and confidential submissions tailored specifically for high-potential, high-risk specialist tech and biotech firms, TECH directly addresses a critical market gap. This significantly enhances Hong Kong's attractiveness and competitiveness against global rivals in capturing innovative, fast-growth companies seeking capital.

3. HK Government welcomes passage of the Stablecoins Bill

The Hong Kong Government announced the passage of the Stablecoin Bill (the “Bill”) by the Legislative Council on 21 May 2025 to establish a licensing regime for the fiat-referenced stablecoin (“FRS”) issuers in Hong Kong.

Important takeaways with the Stablecoins Ordinance

It is required to obtain a license from the Hong Kong Monetary Authority if any person who, in the course of business, issues an FRS in Hong Kong, or issues an FRS that purports to maintain a stable value with reference to Hong Kong dollars in or outside Hong Kong.

Some key points to note

(a) The relevant person must satisfy reserves asset management and redemption requirements which include:

(i) a proper segregation of client assets;

(ii) maintenance of a robust stabilisation mechanism, and;

(iii) the processing of stablecoin holders’ requests for redemption at par value with reasonable conditions.

(b) The relevant person must comply with other requirements which include:

(i) anti-money laundering and counter-terrorist financing;

(ii) risk management;

(iii) disclosure and auditing; and

(iv) fitness and propriety.

(i) only specified licensed institutions may offer an FRS in Hong Kong;

(ii) only an FRS issued by a licensed issuer may be offered to a retail investor;

(iii) only advertisements of licensed FRS issuance are allowed in order to avoid any fraud and scams.

SIGNIFICANCE:

As the Secretary for Financial Services and the Treasury, Mr Christopher Hui, had said, “The Ordinance adheres to the ‘same activity, same risks, same regulation’ principle, with a focus on a risk-based approach to promote a robust regulatory environment. This is not only in line with international regulatory requirements, but also lays a solid foundation for Hong Kong’s virtual asset market…”

It is also of crucial importance to know how the Bill defines the meaning of stablecoin:

A "stablecoin" is a cryptographically secured digital representation of value that –

(a) is expressed as a unit of account or store of economic value;

(b) is used, or intended to be used, as a medium of exchange accepted by the public for any one or more of the following purposes:- (i) payment for goods or services; (ii) discharge of a debt; (iii) investment;

(d) is operated on a distributed ledger or similar information repository; and

purports to maintain a stable value with reference to:- (i) a single asset; or (ii) a pool or basket of assets".

According to the above meaning, it is worth to note that stablecoins can be used as a medium of exchange for payment of goods or services owing to its stable value with reference to certain assets like fiat money and be exchanged for in equivalent value ; whereas other cryptocurrencies are only convertible to fiat money subject to prevailing market values. Most important is that the issuers of stablecoins are required to obtain a license from HKMA.

4. The Mainland-Hong Kong Swap Connect to include enriched Product Types to foster internationalization of RMB

To further promote the collaborative development of financial derivatives markets on Mainland and Hong Kong, and to support a high-quality opening-up of Mainland’s financial markets, the People’s Bank of China (“PBoC”), the SFC and the HKMA work together to enrich the product types under the Swap Connect by the following ways:

(i) tenor of the interest rate swap contracts to be extended to 30 years;

(ii) the scope be expanded to cover interest rate swap contracts using the Loan Prime Rate (“LPR”) as the reference rate.

The Timeline for Mutual Access:

Back in May 2023, following the launch of the Mainland-Hong Kong interest rate swap markets mutual access scheme (“Swap Connect”) for opening-up of Mainland’s financial markets, transaction volume under the scheme has been growing steadily.

In 2024, the Swap Connect had been enhanced to provide more flexibility for offshore institutional investors to manage their interest rate risk, increasing the attractiveness of RMB assets.

As of April 2025, 20 Mainland dealers and 79 offshore investors had participated in Swap Connect, completing more than 12,000 interest rate swap transactions with an aggregate notional amount of approximately RMB 6.5 trillion.

SIGNIFICANCE:

It is the second round of enrichment for Swap Connect since May 2024, the operational performance is amazing as stated above. Looking ahead, the regulatory authorities in Mainland and HK will continue to leverage on this promising scenario to enhance relevant arrangements for further opening-up of the financial markets in Mainland with an aim toward internationalization of RMB in a steady manner.

5. Renewed Mutual Recognition of Funds between Ireland and Hong Kong

Further to the memorandum dated back on 5th November 1997, Central Bank of Ireland (“CBI”) and the Hong Kong SFC enter another memorandum of understanding for Mutual Recognition of Funds (“MRF”) on 14 May 2025. The purpose of the Memorandum is to enhance cooperation in relation to (i) collective investment schemes; and (ii) management companies of the CIS, either in Hong Kong or Ireland. The main points of the Memorandum are as below:

(1) General Principles

a) under the MRF, a CBI-authorized Irish Covered Fund (CBI-authorized “ICFD”) seeking or has received authorization in HK, shall:

(i) meet the eligibility requirements;

(ii) remain authorized by the CBI, and available to retail investors;

(iii) be operated/ managed by relevant laws and regulations in Ireland;

(iv) be sold and distributed in compliance with applicable laws in Hong Kong;

(v) ensure investors in both Ireland and Hong Kong receive fair treatment;

(vi) ensure ongoing disclosure of information be made available at the same time.

b) if an ICFD complies with the relevant Irish laws and regulations, it is generally deemed to have complied in the same manner with those of Hong Kong, and will enjoy a streamlined process of authorisation for offering to the public;

c) the existing Acceptable Inspection Regimes on managers and Recognised Jurisdiction Schemes on funds, and the streamlined measures are still applicable to ICFD.

(2) Eligibility Requirements and types of eligible funds

a) the requirements are set in details in the Annex B;

b) for ICFD to be authorized by SFC, it must fall within at least one of the following eligible fund types:

(i) general equity funds, bond funds, mixed funds and funds that invest in other schemes;

(ii) feeder funds;

(iii) unlisted index funds;

(iv) passively managed index tracking exchange traded funds (ETFs);

(v) listed open-ended funds.

c) ALL ICFD must comply with the requirements under the “Requirements applicable to all Irish Covered Funds” below.

(3) Requirements applicable to all Irish Covered Funds

a) Representatives in Hong Kong

(i) Appoint a firm as representative in HK.

b) Operational and ongoing requirements

(i) Home jurisdiction supervision: remain authorized by CBI.

(ii) Changes to Irish Covered Funds: either notification or approval from SFC is required from the ICFD.

(iii) Breach: report to SFC if the ICFD is found in breach of domestic laws.

(iv) Withdrawal of authorization.

c) Sales/ distribution, offering documents, ongoing disclosure and advertisements

(i) Sales/ distribution: by intermediaries licensed with SFC.

(ii) Offering documents: must be complete, accurate, fair, clear and effective, and up-to-date.

(iii) Ongoing disclosure: be made available at the same time in both locations.

(iv) Language: in English and Chinese.

(v) Advertising.

(vi) Fees.

(4) Requirements applicable to each specific type of Irish Covered Funds

a) Please refer to Annex A for details

(5) Application Process

a) FASTrack

(i) ICFD seeking authorization will be processed under the FASTrack.

b) Two-stream approach

(i) If the ICFD does not meet the FASTrack requirements, the process of “Standard Applications” stream and “Non-standard Applications” stream will apply.

SIGNIFICANCE:

Ireland is a dominant global hub for fund management, particularly renowned as the leading domicile for UCITS funds. Its strengths include EU market access via passporting, a favourable tax treaty network, and deep expertise. Partnering with Ireland is vital for Hong Kong as it provides crucial entry to the vast EU investor base and distribution networks, while Hong Kong offers Ireland a strategic gateway into Asian markets.

Enforcement News

6. SFC Fines Sino-Rich $2 Million and Suspends its Responsible Officer for Margin Lending Failures

SFC has reprimanded and fined Sino-Rich Securities & Futures Limited (“Sino-Rich”) $2 million for significant lapses in its margin lending policy and practices between 1 December 2017 and 30 September 2019. The firm failed to properly document its margin lending policy, neglected to enforce a requirement that clients’ credit limits be based on objective proof of their net income or net worth, and did not mandate written justifications for policy deviations.

In addition, the SFC has suspended the license of Mr. Budihardjo Wilhelm Soeharsono, a responsible officer at Sino-Rich, for five months and two weeks, from 8 May 2025, to 22 October 2025. The SFC holds Mr. Budihardjo accountable for failing to fulfil his oversight duties as a senior manager during this period.

Key Factors in the SFC’s Decision

The SFC considered several factors when determining the penalties:

Prior Disciplinary History:
- Both Sino-Rich and Mr. Budihardjo faced SFC sanctions previously—Sino-Rich in 2021 for anti-money laundering lapses
- Mr. Budihardjo in 2009 for inadequate client monitoring at another firm.
Remedial Efforts: Sino-Rich has since taken steps to enhance its margin lending practices.
Cooperation: The firm and Mr. Budihardjo cooperated fully with the SFC’s investigation.
Financial Position: Accounting for Sino-Rich’s financial situation and cooperation, the fine was reduced from a potential $3.5 million to $2 million.

SIGNIFICANCE:

This disciplinary action highlights the critical need for robust compliance in margin lending, an area where lax policies can expose firms and clients to significant risks. Licensed corporations are urged to ensure their lending practices are well-documented and strictly enforced to align with regulatory standards.

7. SFC Issues Restriction Notice to Bloomyears Limited

On 21 May 2025, SFC has imposed a restriction notice on Bloomyears Limited (“Bloomyears”), prohibiting the firm from conducting its licensed activities or managing any property, including client assets, without prior SFC approval. This decision, driven by concerns over Bloomyears’ reliability, integrity, and competence, signals potential risks to investors as the SFC’s investigation continues.

SIGNIFICANCE:

SFC issued the notice due to doubts about Bloomyears’ fitness and properness to remain licensed, citing deficiencies in its reliability, integrity, and ability to operate competently, honestly, and fairly. The regulator views this action as necessary to protect the investing public and uphold public interest.

SFC’s investigation into Bloomyears is ongoing, suggesting that additional findings or enforcement measures may follow. The restriction notice serves as an interim step to limit potential harm while the inquiry progresses.

8. SFC Revokes Mui Chok Wah’s Licence following Theft Conviction and Regulatory Breach for Non-disclosure

SFC has taken significant disciplinary action against Mr. Mui Chok Wah, revoking his licence and banning him from the financial industry for two years, effective from 16 May 2025 to 15 May 2027.

This decision follows Mui’s criminal conviction for theft and his failure to promptly notify the SFC of the criminal charge against him, which constitutes a breach of regulatory requirements.

On 13 June 2024, Mui was arrested and charged by the Hong Kong Police Force for stealing a wallet left on an ATM machine. He was convicted of theft by the Eastern Magistrates’ Courts on 11 September 2024.

Mui pleaded guilty and was sentenced to two months’ imprisonment, suspended for three years, and ordered to pay HKD 3,400 in restitution for the stolen items.

SIGNIFICANCE:

The SFC’s decision to revoke Mui Chok Wah’s licence and impose a two-year ban reflects its rigorous approach to enforcing regulatory standards. This case highlights the critical importance of transparency, timely reporting, and maintaining professional conduct in the financial industry. Licensed individuals and firms are encouraged to ensure compliance with all regulatory requirements to avoid similar disciplinary actions.

9. The Responsible Officer of Lion Futures Limited is Banned for breach of AML/CFT Regulations

SFC has imposed a five-month ban on Mr. Ho Hin Hang, a former responsible officer (“RO”), manager-in-charge (“MIC”), and director of Lion Futures Limited (“LFL”). The ban, effective from 21 May 2025 to 20 October 2025, stems from compliance failures during his tenure at LFL between May 2017 and September 2018.

This disciplinary action follows previous sanctions against LFL for breaches of anti-money laundering and counter-terrorist financing (“AML/CFT”) regulations and other regulatory requirements from May 2017 to July 2019.

Key Findings

SFC investigation found that LFL, under Mr. Ho’s oversight, failed to perform adequate due diligence on clients using client-supplied systems (“CSSs”) to place orders. These systems, linked to LFL’s broker-supplied system (“BSS”) via application programming interfaces, presented significant risks of money laundering and terrorist financing, which LFL did not properly address.

Furthermore, the firm lacked an effective system for ongoing monitoring to identify and evaluate suspicious trading patterns in client accounts. The SFC holds Mr. Ho accountable for these lapses, citing his failure to fulfil his duties as an RO and senior manager.

SIGNIFICANCE:

In deciding the sanction, the SFC highlighted:

The severity of the compliance failures, which jeopardized market integrity and public trust.
The need to send a clear deterrent message to the financial industry.
Mr. Ho’s clean disciplinary history, which was considered but did not outweigh the need for action.

This case reinforces the SFC’s commitment to enforcing robust AML/CFT controls and diligent oversight within Hong Kong’s financial markets.

10. SFC Prosecutes a Finfluencer for Providing Securities Advice Publicly without a Licence

SFC has launched legal action against Mr. CHAU Pak Yin, previously known as CHAU Kin Hei, a financial influencer (the “Finfluencer”) on social media. On 8 May 2025, the Eastern Magistrates’ Court scheduled a pre-trial review for 24 July 2025 after CHAU pleaded not guilty to charges of advising on securities without a license.

Background

Finfluencers are individuals who share investment-related content on social media platforms. The SFC alleges that between 16 April 2021 and 14 May 2021, CHAU hosted a Telegram chat group where he provided securities advice. This activity, conducted without an SFC license and without reasonable excuse, is claimed to violate sections 114(1)(a) and 114(8) of the SFO.

SIGNIFICANCE:

Under the SFO, "advising on securities" is the Type 4 Regulated Activity requiring a license from the SFC.

The SFC’s enforcement efforts aim to protect investors and maintain market integrity by ensuring that only licensed individuals engage in regulated activities like securities advising.

This case serves as a warning to finfluencers and others providing financial advice online. The SFC also urges investors to verify the licensing status of individuals and firms offering securities dealing services. This can be done easily through the SFC’s Public Register of Licensed Persons and Registered Institutions, accessible at www.sfc.hk. Engaging with unlicensed parties poses significant risks, including financial loss and fraud.

11. Court Convicts Brothers-in-Law of False Trading Conspiracy in Pa Shun Shares

The Eastern Magistrates’ Courts today convicted Mr. LIN Tai Fung and his brother-in-law, Mr. OR Chun Nin, after they pleaded guilty to conspiracy to commit false trading in the shares of Pa Shun International Holdings Limited (00574.HK) (“Pa Shun”) between 9 April 2017 and 7 March 2018. The prosecution was initiated by the SFC.

Details of the Conviction

False Trading Conspiracy: LIN and OR conspired to purchase Pa Shun shares to artificially maintain the closing share price at or above a certain level, misleading investors about the stock’s attractiveness.
Failure to Disclose Interests: LIN also pleaded guilty to failing to notify the Stock Exchange of Hong Kong of changes in his shareholding in Pa Shun on eight occasions between 2 June 2017 and 14 March 2018, despite a legal obligation to do so.

The case has been adjourned to 10 June 2025 for sentencing. Both individuals were granted bail with conditions of $20,000 cash bail and $50,000 surety.

SIGNIFICANCE:

12. SFC Disqualifies National Agricultural Executives for Multiple Financial Misconduct

SFC has secured disqualification orders from the Court of First Instance against former directors and a senior executive of National Agricultural Holdings Limited (01236.HK) (“NAH”), barring them from corporate management roles in Hong Kong for periods ranging from two to nine years. This follows an investigation revealing significant financial misconduct and breaches of duty.

Key Findings

The SFC uncovered multiple instances of misconduct:

Unpaid Shares: NAH’s controlling shareholder, Parko (Hong Kong) Limited, failed to pay approximately HK$676 million for 212,194,500 shares allotted on 9 June 2015.
Fund Misappropriation: Between January and June 2015, HK$384 million was transferred to another company under the pretext of establishing an investment fund for NAH, orchestrated by former chairman Mr. CHEN Li-Jun. The funds were diverted for unrelated purposes, including transfers to Parko.
Suspicious Transfers: In August 2017, a refund of RMB1.85 billion from lapsed transactions was quickly moved out of NAH through dubious transactions for unknown purposes.
Unauthorized Transfer: In 2015, CHEN transferred HK$50 million from NAH to a connected company without justification, disguising it as a loan to another entity.

Roles, Breaches and Disqualification Details

Name	Roles and Breaches	Disqualification
Ms. LU Ying	As financial manager, she coordinated the questionable payments and knew or should have known of the misconduct.	Disqualified for nine years.
Mr. REN Hai; and Mr. PENG Guojiang	As executive directors and Parko directors, they allowed Chen to dominate NAH’s affairs for personal benefit, failing to investigate or address the misconduct.	Each disqualified for seven years.
Mr. TING Tit Cheung	As an independent non-executive director and audit committee member, he neglected oversight duties, ignoring auditor concerns and failing to question suspicious transactions.	Disqualified for two years.

The above-mentioned individuals are prohibited from serving as directors, liquidators, receivers, or managers of any corporation in Hong Kong, including NAH and its affiliates, and from participating in corporate management. They were also ordered to cover the SFC’s legal costs. They all admitted to breaching their duties to NAH, leading to the court’s orders.

SIGNIFICANCE:

This action follows disqualification orders against three other NAH directors on 23 June 2023, signalling ongoing efforts to address governance failures at the company, whose shares were delisted from the Hong Kong Stock Exchange in November 2019.

Orders reinforce the SFC’s commitment to upholding corporate governance standards, protecting investors, and maintaining Hong Kong’s financial market integrity. Stakeholders are encouraged to prioritize robust oversight in their organizations.

Case Reference: HCMP 36/2021

[End of ComplianceOne Newsletter –May 2025]

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