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The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – Feb 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES 1. SFC convenes inaugural VA Consultative Panel meeting 2. SFC sets out ASPIRe roadmap as blueprint to navigate Hong Kong as a global virtual asset hub 3. Hong Kong's market watchdog reviews 8 brokerages amid IPO oversubscription frenzy 4. SFC Supports Listing of Alternative Funds to Boost Investor Options 5. SFC Leads Regional Consensus on Sustainability, Tech, and Investor Protection 6. SFC proposes to relax position limits for key exchange-traded derivatives 7. SFC flags cybersecurity incidents in a thematic review report MARKET NEWS 8. SFC supports government budget measures 9. HashKey Capital is granted approval for VA discretionary accounts management services ENFORCEMENT NEWS 10. SFC Imposes Restriction Notices on Money Concepts Entities 11. SFC Launches Insider Dealing Case Against Wong Pak Ming Regulatory Updates 1. SFC convenes inaugural VA Consultative Panel meeting Earliest on 14 FEB, the SFC had convened an inaugural meeting of the Virtual Asset Consultative Panel (“ VACP ”) for the licensed virtual asset trading platforms (“ VATP ”s). Chaired by the SFC’s Executive Director of the Intermediaries Dr Eric Yip, the VACP comprises all the licensed VATPs represented by members of their senior management, and is expected to provide invaluable contribution to the SCF’s formulation of regulatory policy to further facilitate the development of a sustainable and resilient virtual asset ecosystem. Members of the VACP will collaborate towards the aim of identifying policy priorities, paving way for market and regulatory developments. As added by Dr Eric Yip, “The SFC looks forward to close collaboration with the members to encourage and develop innovation while ensuring adherence to regulatory standards in this rapidly changing landscape”. SIGNIFICANCE: The VACP is a good example of SFC’ s proactive engagement with the licensed VATPs in addition to its previous engagement in launching the swift licensing process for new VATP applicants with a streamlined approach. 2. SFC sets out ASPIRe roadmap as blueprint to navigate Hong Kong as a global virtual asset hub The SFC outlined 12 major initiatives to enhance the security, innovation and growth of Hong Kong’ s virtual asset (“ VA ”) market under a five- pillar “ ASPIRe ” roadmap, which stands for Access, Safeguards, Products, Infrastructure and Relationships. A snapshot of the pillars and initiatives: FIVE-pillars (incorporating the TWELVE initiatives) “ A-S-P-I-Re ” Roadmap for a Resilient Virtual Asset Ecosystem (1) Pillar A (Access) – Streamline market entry through regulatory clarity Key objectives: (i) Expand market accessibility (ii) Encourage responsibility participation (iii) Enhance investor opportunities Initiative 1 : Establish licensing regimes for OTC trading and custody services Initiative 2 : Attract global platforms, order flows and liquidity providers (2) Pillar S (Safeguards) – Optimising compliance burdens without compromising security Key objectives: (i) Align compliance requirements (ii) Adopt risk-proportionate oversight (iii) Promote regulatory clarity Initiative 3 : Explore adopting a dynamic approach to custody technologies and storage ratios Initiative 4 : Enhance insurance and compensation frameworks Initiative 5 : Clarify investor onboarding and product categorization (3) Pillar P (Products) – Expand product offerings and services based on investor categorisation Key objectives: (i) Enable risk-appropriate investment tools (ii) Safeguard retail investors (iii) Mitigate potential risks Initiative 6 : Explore regulatory framework for professional investor-exclusive new token listings and virtual asset derivative trading Initiative 7 : Explore virtual asset margin financing requirements aligned with securities market risk management safeguards Initiative 8 : Consider allowing staking and borrowing/lending services under clear custody and operational guidelines (4) Pillar I (Infrastructure) – Modernise reporting, surveillance and cross-agency collaboration Key objectives: (i) Strengthen market-wide oversight capabilities (ii) Early detection of illicit activities and misconduct (iii) Safeguard investor assets Initiative 9 : Consider solutions for efficient regulatory reporting and deploy advanced surveillance tools to detect illicit activities Initiative 10 : Strengthen local cross agency collaboration and promote cross border cooperation with global regulators (5) Pillar Re (Relationships) – Empower investors and industry through education, engagement and transparency Key objectives: (i) Enhance investor understanding (ii) Foster industry participation (iii) Promote fit-for-purpose policy making Initiative 11 : Consider regulatory framework for financial influencers (Finfluencers) to address new investor engagement channels Initiative 12 : Cultivate sustainable communication and talent network SIGNIFICANCE: Encountered with the ever-changing VA ecosystem, market participants are facing challenges from all edges: institutional-retail bifurcation, fragmented liquidity, and regulatory arbitrage risk due to discrepancies in development of VA regulatory regimes across regions; the SFC is pioneering itself with a pragmatic ASPIRe roadmap to secure and gradually materialize the mission of positioning Hong Kong as an international VA hub. 3. Hong Kong's market watchdog reviews 8 brokerages amid IPO oversubscription frenzy On 14 February 2025, a press release showing the SFC’s explicit concern with the oversubscription frenzy in IPO offering observed recently from eight brokers. Some key points are worth noted: the SFC will examine the brokers IPO financing policies, and advise that brokers should take into consideration the clients’ repayment ability, and set appropriate loan limit to avoid overfinancing; in November 2023 a couple of years ago, a circular form the SFC had been posted to remind brokers of the need to adopt a prudent risk management policy in providing IPO subscription services to its clients, in particular after the launch of FINI on 22 November then; since under the new FINI settlement, brokers are only required to pay for the maximum number of shares allotted in the IPO instead of the “full amount” of the subscriptions, thus allowing opportunities to further scale up the leverage offered to the clients. It is observed that some brokers tend to accept large subscription orders without collecting sufficient initial subscription deposits from clients as minimum upfront payments; brokers tend to take advantage of “the exemption to pay the full amount” to grant more IPO loans to the clients with larger multiples which further add fuel to boost up the oversubscription frenzy. SIGNIFICANCE: The FINI mechanism shortens the settlement period from “t+5” to “t+2” while at the same time alleviating the financial costs burden of having to pay the full amounts of subscription in previous arrangements. Though initial intention of the FINI is to streamline the IPO settlement process, it unexpectedly allows the possibility for more speculative IPO overfinancing activities. Market participants also expect the SFC to provide more clear guidelines on the margin-financing policies, not only as reference for prudent risk management, but also as a note of reminder to brokers of the potential risk of breaching the financial resources requirements amid the vehement buoyancy of IPO offerings. 4. SFC Supports Listing of Alternative Funds to Boost Investor Options The SFC of Hong Kong has issued new regulatory circular to encourage the listing of closed-ended alternative funds on the Stock Exchange of Hong Kong Limited (“ SEHK ”). Announced on 17 February 2025, this move aligns with the HKSAR Government’s 2024 Policy Address to expand private equity fund distribution and solidify Hong Kong’s position as a global asset management hub. Key takeaways: Funds already listed on recognized international exchanges may also qualify, subject to comparable regulations. Size & Scale: Funds must be sizeable (HK$780 million market cap), with management companies managing at least HK$780 million in alternative assets. Diversification: Funds should invest in well-balanced portfolios, with borrowing capped at 30% of net asset value (NAV). Transparency: NAV must be published quarterly, and offering documents must detail investment strategies, risks, and valuation methods. Investor Education: Management companies are urged to educate investors before launching these funds in Hong Kong. SIGNIFICANCE: “We’ve always welcomed closed-ended alternative funds,” said Ms. Christina Choi, SFC’s Executive Director of Investment Products. “This clarity will help investors tap into opportunities managed by top-tier asset managers.” This initiative broadens Hong Kong’s investment landscape, offering sophisticated investors access to alternative assets while maintaining robust safeguards. The SFC aims to balance innovation with investor protection, reinforcing the city’s financial competitiveness. 5. SFC Leads Regional Consensus on Sustainability, Tech, and Investor Protection The SFC has taken a pivotal role in shaping the future of capital market regulation across the Asia-Pacific, forging a united front with regional counterparts at the International Organization of Securities Commissions (“ IOSCO ”) Asia-Pacific Regional Committee (“ APRC ”) meetings held from 19 Feb 2025 to 21 Feb 2025, in Da Nang, Vietnam. Key takeaways: Collaborative Roadmap: Chaired by SFC CEO Ms. Julia Leung, the APRC brought together over 70 regulators from 19 jurisdictions to align on tackling scams, online harm, and investment fraud, while leveraging technology for regulatory innovation. Supervisory Cooperation: Vietnam’s State Securities Commission (“ SSC ”) joined as the 14th signatory to the APRC Multilateral Memorandum of Understanding (“ SMMoU ”), a milestone witnessed by Vietnam’s Finance Minister Mr. Nguyen Van Thang and celebrated during a signing ceremony. Global Dialogue: Ms. Leung co-chaired the EU-Asia-Pacific Forum on Financial Regulation, driving discussions on digitalization, fintech, and sustainable finance with European and regional financial leaders. Unified Approach to Emerging Challenges Regulators agreed on strategies to combat scams and harness generative AI and other technologies to enhance oversight. SFC senior executives also contributed to Enforcement and Supervisory Directors’ Meetings, sharing insights on enforcement trends, virtual asset safekeeping, and tech-driven supervision. Ms. Leung, in her keynote at the SSC Vietnam Symposium, underscored the APRC’s role: “This platform fosters collaboration essential for trust in our growing markets. Together, we can navigate emerging trends and risks effectively.” SIGNIFICANCE: As capital markets evolve with technology and sustainability at the forefront, the SFC’s leadership in the APRC reinforces Hong Kong’s role as a regulatory hub. This consensus sets the stage for stronger investor protection and innovation-friendly frameworks across the region. On the sidelines, Ms. Leung met with SSC Chairwoman Ms. Vu Thi Chan Phuong to deepen supervisory ties, focusing on crypto regulation and shared capital market priorities. Vietnam’s SMMoU entry marks a step forward in regional cooperation, enhancing information-sharing among Asia-Pacific regulators. For Ms. Leung’s full speech and more details, visit the SFC website . 6. SFC proposes to relax position limits for key exchange-traded derivatives On 27 February 2025, the SFC launched a Consultation proposing to increase the position limits for exchange-traded derivatives based on the three major stock indices in Hong Kong to keep pace with market development. To facilitate hedging activities of market participants, the proposals will lift the current position limits for the futures and options contracts as the table shown below: Underlying Index Existing position limit (net long/short position delta) Proposed position limit (net long/short position delta) Hang Seng Index (HSI) 10,000 15,000 (↑50%) Hang Seng China Enterprises Index (HSCEI) 12,000 25,000 (↑108%) Hang Seng TECH Index (HSTECH) 21,000 30,000 (↑43%) SIGNIFICANCE: These will enable Hong Kong’ s derivatives markets to keep pace with the growth in the market capitalisations of major stock indices and trading volumes of their constituents over the past years, without introducing additional risks to the markets. As Ms Julia Leung said, “ The relaxation of position limits will not only allow market participants to enjoy greater flexibility in managing positions, but also promote the liquidity and efficiency of both the derivatives and broader markets. ” 7. SFC flags cybersecurity incidents in a thematic review report Material cybersecurity incidents in recent years involving cyberattacks against licensed corporations (“ LC ”s) aroused attention of the SFC as LCs were vulnerable to significant business disruptions or hacking of client accounts. A Report on the 2023/24 Thematic Cybersecurity Review of Licensed Corporations (“ Report ”) was issued by the SFC on 6 February 2025 where eight incidents of material cybersecurity breach were reported to SFC between 2021 and 2024, examples identified are: unauthorized access to trading in clients’ account through loopholes in the network security of the LCs; end-of-life (“ EOL ”) software and weak algorithm for encrypting client data. In the light of these insufficient management oversight and inadequate controls on cybersecurity measures, the SFC has set out in the Report some standard of conduct expected of the LCs in relation to phishing detection and prevention, EOL software management, remote access control, third-party IT service providers management and cloud security. SIGNIFICANCE: As emphasized by Dr Eric Yip, the SFC’ s Executive Director of Intermediaries, that the LCs should take all necessary measures to tackle the sophisticated and prevalent cyberattacks, and failure to address these threats would cause detrimental influence on the LCs, their clients as well as the entire financial system in such a highly interconnected and digitalised world. Senior management should recognize the critical importance of safeguarding from and mitigating the cybersecurity risks by making reference to the Report for details. Market News 8. SFC supports government budget measures The SFC has expressed strong support for the Hong Kong government’s 2025-2026 budget measures, unveiled by Financial Secretary Paul Chan on 26 February 2025. These initiatives aim to solidify Hong Kong’s status as a leading international financial hub. Key takeaways: Boosting Securities and Derivatives Markets: SFC Chairman Dr. Kelvin Wong praised the budget for advancing Hong Kong’s securities, derivatives, and asset management sectors, reinforcing its competitive edge. Tech-Focused Listing Channel: The SFC will collaborate with Hong Kong Exchanges and Clearing Limited (“ HKEX ”) to launch a "technology enterprises channel," streamlining listings for tech and biotech firms. Listing Regime Refinement: A comprehensive review of listing rules, vetting processes, and market structures is underway, including exploring post-delisting trading mechanisms and optimizing dual/secondary listing thresholds. Risk Management Enhancements: The SFC will soon consult on raising position limits for key index derivatives to better serve investors. RMB Bonds and Fixed Income Hub: Partnering with the Hong Kong Monetary Authority, the SFC is crafting a roadmap to develop primary and secondary bond markets, alongside hosting a flagship forum in late 2025 to highlight Hong Kong’s strengths. Virtual Assets and Fintech: Following a mid-February regulatory roadmap, the SFC will guide the sustainable growth of Hong Kong’s virtual asset market, aligning with the government’s upcoming policy statement on blending traditional finance with innovative tech. SIGNIFICANCE: SFC CEO Ms. Julia Leung emphasized ongoing collaboration with regulators and stakeholders to strengthen Hong Kong’s role as a fixed income and currency hub, advance virtual asset markets, and deepen ties with Mainland China and global markets. The SFC’s proactive stance signals a dynamic year ahead for Hong Kong’s financial ecosystem. 9. HashKey Capital is granted approval for VA discretionary accounts management services Following the approval from SFC, Hashkey Capital is now able to offer discretionary account management services for virtual assets to professional investors (“ PI ”s) subject to type 9 license. This approval enables HashKey Capital to deliver customised services to professional investors subject to a pre-approved list of exchanges across the entire investment lifecycle ranging from: (i) tailored investment mandates: from spot investments to OTC trading and derivatives; (ii) flexibility in trading platforms: to offer discretionary account management service across a multiple of exchanges available to the clients taking into consideration the issues of compliance, operational efficiency; (iii) seamless strategy execution: providing a full-fledged discretionary account management from buying, selling, asset allocation, monitoring, rebalancing and final reporting. SIGNIFICANCE: Hindered by the complex virtual assets landscape, investors are always averse to the unforeseeable risks beyond their investment perspectives; discretionary account management services offer a bespoke solution by shifting the burden of regulatory and technical complexities from investors to professional market practitioners who are more conversant in the newly evolving regime. Enforcement News 10. SFC Imposes Restriction Notices on Money Concepts Entities The SFC took decisive action on 18 February 2025, issuing restriction notices to Money Concepts (Asia) Holdings Limited (“ MCAH ”) and its subsidiary, Money Concepts Asset Management Limited (“ MCAM ”). The SFC cited potential risks to the investing public and the broader public interest as key drivers for the restrictions. Restriction in Place: Both firms are barred from engaging in any licensed regulated activities—directly or via agents—without prior SFC approval, until further notice. SIGNIFICANCE: The move stems from concerns over their honesty, reliability, integrity, and competence in conducting regulated activities, raising doubts about their fitness to remain licensed. 11. SFC Launches Insider Dealing Case Against Wong Pak Ming The SFC kicked off criminal proceedings against businessman Wong Pak Ming on 27 February 2025, at the Eastern Magistrates’ Court. Wong, former chairman and controlling shareholder of Transmit Entertainment Limited (formerly Pegasus Entertainment Holdings Limited), faces charges of insider dealing tied to the company’s shares. Case Details Allegations : Wong is accused of counselling or procuring someone to trade Pegasus shares between 25 August 2017 and 17 October 2017, while possessing inside information about the company. Background : Pegasus, listed on Hong Kong’s Growth Enterprise Market in 2012 and later moved to the Main Board in 2015, was renamed Transmit Entertainment in March 2018 after Wong sold his controlling stake. Legal Basis : Insider dealing violates section 291 of the Securities and Futures Ordinance (“ SFO ”) . SIGNIFICANCE: No plea has been entered yet. The case is adjourned to March 27, 2025. Wong was released on $200,000 cash bail with conditions to stay at his provided address, notify police of any residence change, and inform the SFC 24 hours before leaving Hong Kong.This prosecution highlights the SFC’s ongoing efforts to combat market misconduct. [End of ComplianceOne Newsletter –February 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – June 2023 The topics discussed in this monthly newsletter are as follows: No "light-touch regulation" in Hong Kong new crypto rules SFC updated guidance to prepare for HKD-RMB Dual Counter Model HKEX’s New IPO Settlement Platform (FINI) to be launched in October HK Aiming to invite 200 family offices domiciled in Hong Kong by the end of 2025 130 Sustainability-Linked Bonds and ESG ratings of hundreds of listed companies displayed on the STAGE The SFC Annual Report 2022-23 SFC banned Xie Yanxiong for life for fraudulence and misrepresentation Taiping Securities (HK) Co Limited was fined $1.3 million for internal control failures over employee dealings Four people charged following SFC and Police joint operation against securities fraud and illegal short selling SFC obtained disqualification orders against former directors of National Agricultural Holdings Limited MARKET NEWS 1. No "light-touch regulation" in Hong Kong new crypto rules As Hong Kong has been advocating to global arena of its determination to develop HK as an international financial hub for virtual assets; in an interview at Bloomberg, the HKMA Chief Executive Eddie Yue Wai-man said that, “We will let them create the ecosystem here and that actually brings a lot of excitement. But that doesn’t mean light-touch regulation. ” Hong Kong has started marching into a new licensing regime for virtual assets service providers with effect from 1 June, and is preparing to grant the access to retail-investor participation for trading major tokens like Bitcoin and Ether. Apart from the regulatory guidelines published by the SFC, further guidelines for banks on serving crypto clients are still under progress. Despite negative news like bankruptcy of FTX exchange, and the high profile demonstration of the US officials to crack down on digital-asset business with enforcement actions, Hong Kong has been lowering its crypto guardrail to a “ reasonable and sustainable level ” from previous tight environment before. Aside from permits for virtual-asset platforms, a mandatory licensing regime for stablecoins — a type of crypto token that’s meant to hold a constant value — is due by 2023-2024. SIGNIFICANCE: Though regulatory bodies are showing that the surveillance of virtual asset landscape in Hong Kong is analogous to regulatory regime in other regions, and are by no means lenient compared with others, it cannot be denied that Hong Kong is one of the few jurisdictions where the government proactively participating in the nourishment and development of regulatory regime to foster the nascent growth of virtual assets business. It is also noted that the government is facilitating the onerous due diligence process of virtual asset exchanges to open bank accounts with local banks in Hong Kong which has always been a tough issue for many new participants or awaiting licensees in the virtual assets licensing regime. 2. SFC updated guidance to prepare for HKD-RMB Dual Counter Model The SFC published on 6 June 2023 a revised guidance on short selling reporting and stock lending record keeping to prepare for the launch of the HKD-RMB Dual Counter Model in the Hong Kong securities market on 19 June 2023. The Guidance Note on Short Selling Reporting and Stock Lending Record Keeping Requirements has been updated to cover inter-counter transactions of securities under the Dual Counter Model; and practical and operational examples can be found in the Frequently Asked Questions for Short Position Reporting as well. Suffice to say that the Guidance Note clarified that as HKD and RMB counters for the same security are of the same class, the following inter-counter transactions fall within the current framework: when an investor buys a security at one counter first and sells at another, the sale is considered an ordinary sale, and when a Dual Counter Model market maker sells a security at one counter and buys it at another, the inter-counter transaction falls under the current exemption, subject to certain conditions. SIGNIFICANCE: As Ms Julia Leung, the SFC Chief Executive Officer, had said, “the SFC supports dual counter trading, which will help promote the renminbi’s internationalisation and use as an investment currency.” With such dual counter in place, it provides an effective and efficient mechanism for market makers with improved market liquidity and helps minimise price differences between the two counters. 3. HKEX’s New IPO Settlement Platform (FINI) to be launched in October HKEX announced on 28 June of the launch of FINI, its innovative IPO settlement platform, in October this year, which significantly shortened the time between the pricing of an IPO and the trading of shares from five business days (T+5) to two business days (T+2). HKEX Chief Executive Officer Nicolas Aguzin said: “By digitalising, streamlining and modernising IPO settlement workflows, FINI will shorten the time between IPO pricing and the start of trading, enhancing market efficiency and strengthening the competitiveness and attractiveness of Hong Kong’s IPO market.” Following the successful completion of the FINI External User Testing earlier in June, HKEX will arrange market practice sessions and market rehearsals in July and August, to simulate interactive, end-to-end IPO settlement operations under FINI, paving the way for full migration to FINI in October. The new platform will also introduce a new public offer pre-funding model to help alleviate the scale of funds that are locked up in over-subscribed IPOs. 4. HK Aiming a target to invite 200 family offices domiciled in Hong Kong by the end of 2025 The Financial Secretary, Paul Chan, delivered a speech on 12 June in the launch of a family office network, proclaiming a plan to develp Hong Kong as a premier hub for family offices and a target of 200 family offices to be established by the end of 2025 has been on schedule. On the government side, legislations have been passed to enhance the competitiveness of the tax system for family offices, and with concerted efforts from various regulatory bodies like the SFC and HKMA, to fuel the momentum for accelerating the development . SIGNIFICANCE: Having recovered for the 2019 social movement and the global epidemic of COVID-19, the HKSAR government has been endeavoring to start off the engine for moulding Hong Kong not only as international financial centre as it is used to be, but also a pioneer around the world for the nascent virtual asset licensing regime and a premier hub for the growth of family offices. 5. 130 Sustainability-Linked Bonds and ESG ratings of hundreds of listed companies displayed on the STAGE Mr Wilfred Yiu, Co-Chief Operating Officer & Head of Equities of the HKEX stated that up to end of May this year, the Sustainable & Green Exchange (STAGE) has displayed more than 130 Sustainability-Linked Bonds and ESG ratings of hundreds of listed companies in Hong Kong. Mr Yiu also said in a forum that the number of ESG ETFS listed on HK continued to grow, and there was a total of 11 ESG ETF amounting in market capitalization of HKD 2.5 billion dollars, with turnover approaching HKD 6 million dollars. Beside the First Carbon Futures ETF listed last year, through the Stock Connect came another new China A Low Carbon Index ETF and the first Greater Bay Area Climate Transition ETF listed in Hong Kong in March this year. Mr Yiu further pointed out that the Exchange’s ESG reporting requirements had incorporated certain key recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), proposing for the issuers to prepare for the mandatory TCFD-aligned climate-related disclosures by 2025. 6. The SFC Annual Report 2022-23 The SFC published its Annual Report 2022-23 on 21 June 2023, which sets out its achievements in the past year as well as its vision for nurturing high-quality market growth and upholding world-class regulation to advance Hong Kong’s position as a leading international financial centre. Some key achievements included: the introduction of Swap Connect; launch of a new lsiting regime for specialist technology companies with limited or no revenue or track record; the investor identification regime for Hong Kong (HKIDR); the Hong Kong Dollar-Renminbi (RMB) Dual Counter Model for the secondary market trading of a first batch of stocks; the regulatory requirements for the new licensing regime for virtual asset trading platforms effective in June; the proposed risk management guidelines for licensed persons dealing in futures Mr Tim Lui, Chairman of SFC, said, “ We are committed to strengthening market resilience and integrity and expanding the breadth and depth of our financial markets as a premier gateway to Mainland China .” The Chief Executive Officer, Ms Julia Leung, also said, “ We strive to promote sustainable and responsible development of our financial markets whilst safeguarding investor interests and managing market risks through our robust regulation, vigilant supervision and resolute enforcement action. ” SIGNIFICANCE: The transition from 2022 to 2023 was fraught with many challenging changes lauched by the regulatory bodies and its determination to crack down on the investment fraud and social media ramp and dump scams which were detrimental to the integrity of the financial market Hong Kong has strived to uphold. Nowadays, maintaining in compliance is not merely an obligation to be fulfilled, but more of a challenge to be encountered amid such avalanche of regulatory innovations formulated and launched by the HKSAR government while orchestrating a regulatory landscape to accomodate the latest developments in the international financial markets. ENFORCEMENT NEWS 7. SFC banned Xie Yangxiong for life for fraudulence and misrepresentation The SFC had banned Mr Xie Yangxiong, a director of Wansom Asset Management (Hong Kong) Limited (WAML) and Wansom Securities (Hong Kong) Limited (WSL), from the industry for life. It was found in the SFC investigation that Xie, who had access and control of bank accounts of WAML and WSL, was providing false information of both firms to SFC in support of their license applications in July and August 2018. In the case, Xie deliberately made deposits in the bank accounts of WAML and WSL, and then withdrew the same amount afterwards. With the withdrawn funds into consideration, the liquid capital condition of both WAML and WSL would fail to meet the regulatory requirement for their licenses to be granted. Further that Xie also failed to ensure that WAML and WSL should have notified the SFC of their liquid capital deficits within one business day of their liquid capital falling below the required level. The SFC was of the view that the misconduct of WAML and WSL was the direct result of Xie’s consent or connivance, and his conduct cast serious doubt on his fitness and properness to be a “regulated person”! SIGNIFICANCE: Given the fact that Xie was also the sole owner of the entity which wholly owned WAML and WSL. Although Xie was not a licensed person under the Securities and Futures Ordinance (SFO), he came within the definition of a “regulated person” under section 194(7)(c) of the SFO which includes a person who is or at the relevant time was involved in the management of the business of a licensed corporation. 8. Taiping Securities (HK) Co Limited was fined $1.3 million for internal control failures over employee dealings The SFC had reprimanded and fined Taiping Securities (HK) Co Limited (TSCL) $1.3 million for internal control failings in relation to employee dealings between 1 January 2016 and 30 November 2018. It was found in the investigation that TSCL failed to put in place adequate and effective internal controls over monitoring of employee dealings, and the senior management, compliance department and responsible officers (RO) did not have a clear understanding of their roles and duties as well. The SFC also found that TSCL failed to communicate its personal dealing policy applicable during the relevant period to all employees and ensure their compliance with it. 9. Four people charged following SFC and Police joint operation against securities fraud and illegal short selling Four suspects appeared at the Eastern Magistracy on 23 June 2023 charged with offences of fraud with alternative charge of illegal short selling following an earlier joint operation of the SFC and the Police against fraudulent activities in securities transactions and illegal short selling. Suspicious trading activities during an intensive investigation of suspected ramp-and-dump activities were discovered which were found to involve suspected money laundering and other fraudulent activities, the case was referred to the Police. 10. SFC obtained disqualification orders against former directors of National Agricultural Holdings Limited The SFC had obtained disqualification orders in the Court of First Instance against a former executive director Mr Liu Yong, and two former independent non-executive directors, Ms Kathy Chiu Kam Hing and Mr William Fan Chung Yue of National Agricultural Holdings Limited (NAH). Liu was disqualified for three years while Chiu and Fan for 20 months from being any director, liquidator, or receiver or manager of any corporation in Hong Kong including NAH or any of its subsidiaries and affiliates. The Court proceedings followed the SFC’s investigations into allegations of a series of misconduct orchestrated by NAH’s controlling shareholder Parko (Hong Kong) Limited (Parko), the former chairman Mr Chen Li-Jun and three other senior officers of NAH (Chen and others) from 2015 to 2017. The orders were made having regard to the findings that Liu, Chiu and Fan had neglected or omitted to identify or rectify the misconduct of Chen and others. They also failed to raise concerns, queries or seek necessary information in relation to the significant and questionable transactions discovered in SFC’s investigation as above. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or call us at (852) 39550277 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk To unsubscribe, please simply reply with “ I don’t like to know more about Compliance ”.

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – March 2023 ComplianceOne Newsletter – March 2023 The topics discussed in this monthly newsletter are as follows: 1. Hong Kong Regulators Welcomed UBS AG's Acquisition of Credit Suisse AG 2. LME Warehouse Delivered Stones Instead of Nickel 3. OKX Expressed Interested in Virtual Asset Service Provider Licence in Hong Kong 4. SFC Published Quick Licensing Guides for Family Offices and Private Equity Firms 5. SFC Issued Quarterly Report to Highlight the Latest Development in the Financial Industry 6. HKEX Commenced to Test the New FINI Settlement Platform to Shorten the IPO Period 7. SFC Banned Citigroup Global Markets Asia Limited’s Former Responsible Officer for 10 Years 8. SFC Reprimanded and Fined City International Futures (Hong Kong) Limited for AML Breaches 9. SFAT Affirmed SFC Decision to Reprimand and Fine I-Access Investors Limited over System Failure 10. SFC Banned Wong Kwun Shing for Life for Stock Manipulation 11. Five More Arrested in SFC and ICAC Joint Operation against Sophisticated Ramp-and-dump Syndicate 12. Court Reaffirmed SFC’s Restriction Notices related to a Suspected “Ramp-and-dump” Scheme MARKET NEWS 1. Hong Kong Regulators Welcomed UBS AG’s acquisition of Credit Suisse AG The SFC and the HKMA welcomed the announcements made by the Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank (SNB) on 20 March 2023 of the acquisition of Credit Suisse AG (CS) by UBS AG. It was stated that the operations of CS merely comprised a branch under the HKMA and two licensed corporations under the SFC, and were maintained intact to continue as usual in its banking and trading services. The total assets of CS amounted to about HKD100 billion which represented an insignificant portion of less than 0.5% of the entire banking sector in Hong Kong. The Hong Kong banking sector is resilient with strong capital and liquidity positions with total capital adequacy ratio of locally incorporated authorized institutions stood at 20.1% at the end of 2022, well above the international minimum requirement of 8%. SIGNIFICANCE: It was quite a big deal for two large Swiss Banks, one of UBS to take over its long-time rival Credit Suisse for about USD3.2 billion, to prevent CS from being liquidated which once was an emblem of pride of Switzerland. Another point of interest was the controversial way the FINMA rescued this giant bank by writing down the USD17 billion of AT1 bond to zero value, an administrative tact dumbfounded many bondholders as the Swiss government was rescuing a renowned historical bank at the expense of its prestige in the long-established heritage of the banking industry! 2. LME Warehouse Delivers Stones Instead of Nickel Nickel delivered by London Metal Exchange (LME) approved warehouse firm turned out to be stones, and nine warrants or 54 tonnes of nickel valued around USD1.3 million were cancelled. The incidence shaken the confidence in nickel trades, and was shocking to traders in the LME system and over the world. Warehousing sources said that the substitution of stones for nickel would have been discovered if the standard operating procedures of checking the weight of bagged nickel briquettes before warranting for delivery had been properly observed. In the wake of the incidence, the LME, a subsidiary of the HKEX, reacted by immediately reminding the operators to strictly comply with the weighting requirements of all metals. Again, the LME postponed nickel trading during Asian hours by a week to March 27 after the reported incidence. SIGNIFICANCE: It is really ironical that a well-established LME system, now a full-owned subsidiary of the HKEX, a renowned exchange in an international financial centre as Hong Kong, would have come up with such embarrassing incidence; not to mention the nickel crisis in March last year where the trading of nickel had been suspended, unprecedented for decades ever since 1988 when prices jumped to a record above USD100,000! 3. OKX Expressed Interest in Virtual Asset Service Provider licence in Hong Kong OKX, the second largest crypto exchange and a Web3 technology company, announced on 28 March 2023 that is would apply for a licenses of the virtual asset service provider (VASP) through its entity set up in Hong Kong, namely for the Type 1 & 7 licenses under the SFC regime of the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance 2022 to be in effect from 1 June 2023. Lennix Lai, OKX Managing Director of Global Institutional, had stated that regulation and licensing were key to the success of the crypto and Webs sector, and OKX found immense potential in Hong Kong in its strong determination to establish a robust regulatory framework and furnish a niche for licensing the virtual asset industry. Another crucial character, Bing Zhao, OKX General Counsel, also reiterated the commitment of OKX to collaborate with the SFC through the application process, and was keen to demonstrate how conversant and versatile OKX was in fulfilling the robust standards under the prevailing licensing regime. SIGNIFICANCE: While jurisdictions over the world are tightening their grips on crypto exchanges, HK is taking a contrarian and proactive approach to formulate a licensing regime for attracting potential VASP applicants, and through their participation the efforts to develop Hong Kong as a financial virtual asset hub has been further leveraged. 4. SFC Published Quick Licensing Guides for Family Offices and Private Equity Firms The SFC published quick reference guides on 22 March 2023 to help family offices, private equity firms, hedge fund managers and overseas and Mainland industry professionals better understand the SFC’s licensing regime. “ By providing useful, important and frequently sought information to prospective licence applicants via the quick reference guides, the SFC encourages more family offices and private equity businesses to operate in Hong Kong, ” said Mr Keith Choy, the SFC’s Interim Head of Intermediaries. SIGNIFICANCE: As stated in the circular, the SFC has actually been working on the licensing regime of family offices and private equity firms long before with consultations since 2020 as shown in the circulars below: (1) Circular on licensing obligation of family offices (7 Jan 2020) (2) Circular to private equity firms seeking to be licensed (7 Jan 2020) (3) Family Office FAQ (8 Sep 2020) 5. SFC Issued Quarterly Report Highlight the Latest Development in the Financial Industry The SFC published its latest Quarterly Report on 7 March 2023 which summarised key developments from October to December 2022 amidst increasing business activity. It was reported with a great number and wider variety of investment products were authorised or registered; twelve new open-ended fund companies were also registered during the quarter. As at 31 December, the assets under management of Hong Kong-domiciled funds increased 11% from three months earlier, to US$165.2 billion, and the number of firms licensed for asset management grew to 2,069! The report also showed the priority policy areas of the SFC in advocating the climate-related risks in fund governance as well as the authorization of the first two virtual asset futures exchange-traded funds in Hong Kong. SIGNIFICANCE: One thing encouraging here is that despite the challenging financial environment during the COVID-19 months, there were still 1,470 license applications filed to SFC during the quarter most of them pertaining to individuals while the rest to corporations. 6. HKEX Commenced to Test the New FINI Settlement Platform to Shorten the IPO Period HKEX ( 00388.HK ) announced that it will commence FINI (Fast Interface for New Issuance) external user testing on 1 March 2023, to prepare for the official rollout of FINI later this year. HKEX is striving to achieve an intended launch of FINI to June, far behind its initial schedule in the fourth quarter last year. The FINI is a new platform which streamlines and digitalises Hong Kong’s IPO settlement process, reducing the time gap between an offering being priced and the new share be listed for trading on the Exchange from existing “T+5” to “T+2” (the IPO pricing time), in aspiration to align with other exchanges towards a T+1 settlement. Materials and guidelines for user acceptance test (UAT) have been circulated to market participants to get ready for the coming rehearsals. Data provided by the Exchange showed that market participants, banks, sponsors and intermediaries were assigned with designated time slots for testing due to large number of registrations and had already started the rehearsal. SIGNIFICANCE: Despite a long-awaited launch of the FINI, it is never too late as it demonstrates the commitment of the HKEX to adhere to innovation as it always declares, and the keen responses from market practitioners validate the HKEX is heading a right direction. ENFORCEMENT NEWS 7. SFC Banned Citigroup Global Markets Asia Limited’s Former Responsible Officer for 10 Years The SFC had banned Mr Philip John Shaw, a former responsible officer (RO), board member and Head of Pan-Asia Execution Services of Citigroup Global Markets Asia Limited (CGMAL), from re-entering the industry for 10 years from 4 March 2023 to 3 March 2033. The disciplinary action followed the SFC’s earlier sanctions against CGMAL for serious regulatory breaches and internal control failures which, in the view of the SFC, were attributable to Shaw’s failure to discharge his duties as an RO and senior management. SIGNIFICANCE: “ The disciplinary action against Shaw also underscored the SFC’s determination to hold errant senior management accountable for their firms’ failures. This is imperative for driving changes in the culture and behaviour of intermediaries, ” added by Mr Christopher Wilson, the SFC’s Executive Director of Enforcement. As stated in the news, with Shaw’s incompetence as an RO and his connivance with misconduct of his subordinates, a culture of chasing revenue at the expense of client interests and basic standards of honesty within CGMAL had been engendered. 8. SFC Reprimanded and Fined City International Futures (Hong Kong) Limited for AML Breaches The SFC has reprimanded and fined City International Futures (Hong Kong) Limited (CIFHKL), now known as VERCAP Financial Services Limited, $100,000 for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) and other regulatory requirements between March 2016 and October 2018. The SFC’s investigation found that CIFHKL did not conduct any due diligence on the customer supplied systems (CSSs) used by its clients for placing orders. Other key findings were: (1) amounts of deposits made into two client accounts were incommensurate with their declared financial profiles; but no proper follow-up enquiries or assessment of ML/TF risks been made; (2) no effective ongoing monitoring system to detect suspicious transactions and trading patterns typical of ML/TF risks; (3) internal systems and controls were inadequate and ineffective, and failed to ensure compliance with the AML Guideline. SIGNIFICANCE: It seems amount to a "rule of thumb" that the use of CSS definitely poses uncontrollable and unavoidable ML/TF risks, and camouflages suspicious transactions under its system which the LC could have no access to monitor or assess for its compliance. 9. SFAT Affirmed SFC Decision to Reprimand and Fine I-Access Investors Limited over System Failure The SFC had reprimanded and fined I-Access Investors Limited (I-Access) $600,000 for breach of the Code of Conduct after the Securities and Futures Appeals Tribunal (SFAT) upheld the SFC’s disciplinary action against it The SFC’s disciplinary action arose from I-Access’s response to an internal system test conducted by HKEX on 6 April 2015. It was found that I-Access in turn disseminated such data in its own system when they should have been disregarded, resulting in the incorrect triggering of 27 stop loss sell orders by 12 clients and their executions on the following trading day. SIGNIFICANCE: It was ridiculous and frivolous that a LC having infringed the interests of the clients, and did not take the initiative to promptly notify the affected clients of the incident and make imminent remedial compensations. The SFC is of the view that I-Access was in breach of the Code of Conduct by failing to act with due skill, care and diligence, and in the best interests of its clients. 10. SFC Banned Wong Kwun Shing for Life for Stock Manipulation The SFC has banned Mr Wong Kwun Shing, a former licensed representative of Convoy Asset Management Limited (CAML), from re-entering the industry for life; having found that he was involved in a stock manipulation on the Growth Enterprise Market of HKEX. Apart from actively navigating and facilitating the manipulation process with the manipulators and clients’ orders through his ex-colleague to prop up the prices of the target shares, Wong would also collect the cash rebates from the manipulators and pay his ex-colleague for onward distribution to his clients. It ended up with the clients of his ex-colleague suffering huge losses. SIGNIFICANCE: Even worse was that Wong obfuscated the true story by giving false and misleading answer amid the SFC investigation. Such misfeasance of Wong rendered him a life-long ban to the industry which was the price he had to pay! 11. Five More Arrested in SFC and ICAC Joint Operation against Sophisticated Ramp-and-dump Syndicate Five key members of an active ramp-and-dump syndicate were arrested in a follow-up joint operation of the SFC and ICAC, involving illicit gains of HKD191 million. The five arrestees were key members of the syndicate, including qualified accountants and senior executives of a number of Hong Kong-listed companies. Whereas another eight people, including a suspected ringleader and other key members of the syndicate, were arrested on suspicion of corruption in an earlier joint operation mounted in November 2022. Amid the intensive investigation by the SFC and the ICAC, another criminal offences including perverting the course of public justice and obstructing the SFC’s investigations. SIGNIFICANCE: The concerted efforts of the SFC and the ICAC in the joint operation demonstrated to the public again the determination to tackle corruption and market misconduct, and zero tolerance of any wrongdoers and illegal acts which are core values to uphold the integrity of the financial markets which Hong Kong cannot afford to relinquish. 12. Court Reaffirmed SFC’s Restriction Notices related to a Suspected “Ramp-and-dump” Scheme The Court of First Instance has dismissed a judicial review application against the SFC relating to restriction notices issued in an ongoing investigation into a suspected “ramp-and-dump” scheme. The judicial review application sought to challenge the restriction notices issued on 9 February 2021 by the SFC to freeze assets of two individuals in various trading accounts held with certain licensed corporations, which were supposedly to be related to a suspected“ramp-and-dump” scheme. As Mr Christopher Wilson, the SFC’s Executive Director of Enforcement, had said: “ We welcome the Court’s decision reaffirming the SFC’s statutory powers to issue restriction notices to freeze suspects’ assets held with licensed corporations. This enables the SFC to take front-loaded actions to protect investors and the public interest .” For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or call us at (852) 39550277 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk To unsubscribe, please simply reply with “ I don’t like to know more about Compliance ”.

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - March 2024 The topics discussed in this monthly newsletter are as follows: 1. Reminder to submit audited accounts and BRMQ 2023. 2. Hong Kong sees surge in investment fund net inflows: SFC Quarterly Report 3. Circular to licensed corporations and management companies of SFC-authorized funds-Shortening of the US securities transaction settlement cycle to T+1 4. Insurance Authority signs Memorandum of Understanding with the Hong Kong Police Force to strengthen collaboration MARKET NEWS 1.Reminder to submit audited accounts and BRMQ 2023 We would like to remind you, our valued clients, that pursuant to section 156(1) of the Securities and Futures Ordinance (Cap. 571, laws of Hong Kong), licensed corporations and associated entities of intermediaries (the “Companies”) are required to submit their audited accounts and the BRMQ within 4 months after the end of each financial year to Securities and Futures Commission. The submission deadline for those Companies with financial year end on 31 December 2023 is 30 April 2024. Please prepare sufficient time to fill in the new version of BRMQ2023 which necessitates more preliminary readiness for completion. SIGNIFICANCE: Having noted that the SFC had published a circular dated 23 Dec 2022 as a reminder to the licensed corporations and their associated entities that a revised BRMQ would be adopted. The reminder explicitly stated " LCs and AEs are urged to review and familiarise themselves with the revised questionnaires, which are included in Annex 1 and Annex 2 to this circular, start gathering the newly required data and information and make system enhancements where necessary. " Therefore, the LCs should take a pragmatic and serious attitude to this revised BRMQ, and spare more time than before in order to prepare and consolidate the relevant documentations in fulfilling the stated requirements. 2. Hong Kong sees surge in investment fund net inflows: SFC Quarterly Report On 8 March 2024, the SFC published its latest Quarterly Report to provide operational and financial highlights for the quarter ending 31 December 2023. Key summaries of the Report are as follows: (1) For the asset management regime: there recorded a 92.9% increase year-on-year (YOY) in 2023 with inflows of funds up to HKD87.1 billion into Hong Kong. As at 31 December, the assets under management of the 914 Hong Kong-domiciled funds increased 4.9% YoY as well. (2) For Mainland-Hong Kong Stock Connect: the average daily northbound trading rose 8% YoY in 2023 whilst average daily southbound trading remained steady. Shares traded in both Mainland and Hong Kong stock markets showed increases in 2023 with both northbound and southbound trading recorded with net buys last year, amounting to RMB43.7 billion and RMB292.9 billion. (3) For listing market: the SFC approved rules amendments for GEM listing reforms by introducing a new route for GEM listing and a streamlined mechanism for Main Borad transfer. A total number of 270 listing applications were processed for 2023, with average processing time reduced by 11% YoY to 108 business days. (4) For the SFC license regime: licence applications received rose 16% YoY for the whole year. Of the 56 licensed corporation applications approved by the SFC in the last quarter 2023, Type 9 (asset management) and Type 4 (advising on securities) regulated activities accounted for 88% and 66% (because a licensed corporation may have multiple SFC licenses). And six VATPs applications were received during the quarter. (5) For combating fraudulent activities, the SFC has also established a joint working group with the Hong Kong Police SIGNIFICANCE: Despite the deemed atmosphere from successive news of closures of licensed corporations, findings of the quarter reports though suggest the pessimism pervading through the year is a bit exaggerated. As mentioned in the previous Newsletters, it is not hard to notice that the HKSAR government, the regulatory bodies and the financial institutions all collaborated to preserve the status of Hong Kong as an international financial centre, particularly in its devotion to stay ahead in the development of virtual assets regimes while other competitors are still hesitant. 3. Shortening of the US securities transaction settlement cycle to T+1 A circular was published on 27 March 2024 that effective from 28 May 2024, the standard settlement cycle for transactions in US securities will be shortened from two business days after the trade date (T+2) to one business day after trading (T+1) (the Transition). Since the timeline for completing post-trade settlement process will be compressed, the SFC is of the view that the impact of the Transition may be particular significant for market participants in Hong Kong due to time zone differences. The SFC has notes of reminder to the following entities: Licensed corporations (LCs): (1) Be aware of the cross-currency transaction: since the standard settlement cycle for foreign-exchange transactions remains at T+2, the LCs should be aware of the potential liquidity mismatches and settlement failure from such difference in settlement cycles; (2) To ensure the availability of staff to complete the post-trade settlement processes within the shortened timeframe; (3) To proactively communicating with the clients who are potentially affected by the Transition in order to raise their awareness and facilitate their preparation for a smooth transition. Management companies of the SFC-authorised funds (Funds): (1) The Funds should pay attention to such transition if they have considerable exposures to US securities; (2) Carefully assess the impact of the Transition including any potential mismatches in settlement cycles relating to the arrangement of subscription money from non-US markets to purchase US securities; (3) Making appropriate arrangement such as expanding pre-funding facilities and allocating additional staff to handle the compressed settlement timeline; (4) Give early alerts to investors about any intended changes arising from the Transition which may have material influence on the Funds and investors, and to take remedial actions accordingly. SIGNIFICANCE: The amendment was proposed in February 2023 in the Securities and Exchange Commission (SEC) in US under “ Amendment to Rule 15c6-1 " where it stated that standard settlement cycle for most broker-dealer transactions be shortened from T+2 to T+1, and would be effective on 28 May 2024; obviously it takes more than two years for the brokers to equip themselves in business operation and settlement process in order to ensure a seamless transition. Given the scale of the US stocks markets, brokers in Hong Kong should take this Transition seriously to assure themselves of a seamless and secured transition as well particularly in the eyes of other competitors in the vicinity in SEA. 4.Insurance Authority signs Memorandum of Understanding with the Hong Kong Police Force to strengthen collaboration The Insurance Authority (IA) and the Hong Kong Police Force (HKPF) entered into a Memorandum of Understanding (MoU) on 27 March 2024, setting out the framework between the IA and the HKPF to cooperate and provide guidance on matters such as case referrals, joint investigations, mutual investigative assistance and the exchange of information. During the ceremony, the signing of the MoU between the IA and HKPF have affirmed the joint commitment from both organizations to ensuring the insurance market is underpinned with integrity and trust so that it can continue to make contribution to maintaining Hong Kong’s position as a vital international financial centre. The Assistant Commissioner of Police (Crime), Ms Chung Wing-man, expressed in the ceremony the enthusiasm about the milestone collaboration, stating that the power of the alliance extended far beyond the immediate benefits to the two organisations. It will strengthen the resilience of the regulatory framework and hence, the protection of members of the public. SIGNIFICANCE: It is worth noted that the HKPF and the SFC had already entered into a MoU on 25 August 2017 to formalise and further strengthen co-operation in combating financial crime; and another MoU on 16 September 2022 between HKPF and the Financial Reporting Council (FRC) with the aim of enabling full collaboration and co-operation in combating commercial crimes ad illicit activities in relation to financial reporting and audit quality in Hong Kong. The HKPF has demonstrated to the public of its strong determination to ensure collaboration with other regulatory organizations to establish a full-fledged coverage network to combating financial crimes in order to safeguard the status of Hong Kong as a safe international financial centre. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – May 2022 ComplianceOne Newsletter – May 2022 The topics discussed in this monthly newsletter are as follows: 1. ETF Connect marks another milestone in mutual market access 2. Court orders Pyramid and Ponzi scheme fraudsters to compensate investors 3. SFC bans Ho Pak Hay for life MARKET NEWS 1. ETF Connect marks another milestone in mutual market access The Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) today announced details for the implementation of plans to include eligible exchange-traded funds (ETFs) in Stock Connect. According to the joint announcement, the principal arrangements for ETF Connect will follow the existing fund operations, regulations and operational models governing trading and clearing in the two markets. “ ETF Connect is another milestone in the expansion of mutual market access between Hong Kong and Mainland China,” said Mr. Ashley Alder, the SFC’s Chief Executive Officer. Significance: Investors in both markets are provided with more choices, and help foster a healthy development of ETF by expanding the investor base and improving liquidity in the market. ENFORCEMENT NEWS 2. Court Orders Pyramid and Ponzi scheme fraudsters to compensate investors Under the scheme, DFRF and its founder Filho falsely claimed that DFRF would soon be listed in the US, and persuaded a number of Hong Kong investors to acquire “membership units”. DFRF also falsely claimed that investors would be offered the option to convert their units into preferred shares of DFRF at certain price. In December 2016 and March 2017, the SFC obtained interim injunctions to freeze the assets of DFRF in their two bank accounts. And the Court has appointed administrators to receive and distribute the proceeds of the scheme remaining in the two bank accounts – approximately totalling $2.8 million – for the benefit of the investors on a pro rata basis. Significance: The global scale of such a scam as the Ponzi scheme is really unprecedented in recent decades. The scheme camouflaged itself as a type of investment scheme where the founders (basically the "crooks") stole money from investors and masked the theft by funneling returns to clients from funds contributed by newer investors. 3. SFC bans Ho Pak Hay for life The SFC has banned Mr. Ho Pak Hay, a former licensed representative of KGI Asia Limited (KGI) and KGI Futures (Hong Kong) Limited (KGI Futures), from re-entering the industry for life. It was found that Ho had misappropriated and misused funds totalling $1.8 million from the clients between 2018-2019; instead of making investments for the clients , Ho had spent the funds on gambling, and had also issued dishonoured cheques to the clients as repayment of funds. The SFC considers that Ho is not a fit and proper person to be licensed, and has decided that a life ban on Ho is appropriate and commensurate with the gravity of his conduct. Significance: Ho had misappropriated client money and undermined the fundamental principles of GP1 of “Honesty and Fairness” as a licensed person, and GP8 of “Client Assets” being adequately safeguarded. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================== The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or call us at (852) 39550277. Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk To unsubscribe, please simply reply with “ I don’t like to know more about Compliance ”.

The topics discussed in this monthly newsletter for Licensed Corporations are as follows: ComplianceOne Newsletter – October 2025 The topics discussed in this monthly newsletter are as follows: MARKET NEWS SFC Supports Market’s Initiatives on Regulatory Compliance for Digital Asset Funds and Tokenised Funds Navigating Fast-evolving Capital Markets through Balanced Regulation – the Golden Mean SFC and Québec’s AMF Enhance Regulatory Cooperation on Supervision of Cross-border Investment Management Activity Enforcement News - Intermediary SFC Reprimands and Fines UBS AG $8 million for Professional Investor Misclassification SFC Suspends MTF Securities and its Responsible Officer Over Suspicious Transaction Monitoring Failures SFC Prohibits Ex-Employee of BOCOM Over Undisclosed Nominee Account SFC Suspends Ex-employee of Shanxi Securities Over 945 Unauthorized Trade Orders ENFORCEMENT NEWS - LISTCO SFC Seeks Court Order to Freeze Assets up to $394 Million for Investors Compensation in Suspected Manipulation of Grand Talents Shares Court Penalises AMTD Global Markets Limited for Contempt of Court Due to Non-compliance with SFC Notices and Orders it to Produce Records and Pay Fine Court Order Sentenced Wong Ming Chun to 7 Years and 8 Months' Imprisonment for Money Laundering Related to Misappropriation of Listed Company Funds SFC and HKEX Collaborate in Enforcement Action Against Former Directors of Universal Star for Failure to Disclose Material Loans and Conflicts of Interest in Prospectu SFC Obtains Court Order to Freeze up to $82.4 Million of Assets Belonging to Suspected Manipulators of Smartac Shares Market News 1. SFC Supports Market’s Initiatives on Regulatory Compliance for Digital Asset Funds and Tokenised Funds The SFC showed its support to the market’s initiatives in a seminar organized by the Association of Fund Administrators of Hong Kong and the Greater Bay Area (“ AFA ”) in October for raising industry awareness of regulatory compliance standards in the fast-evolving digital asset sector. During the seminar, the AFA discussed various risk management and control measures to support the management of digital asset funds and tokenized funds. It is worth noted in the discussion of the importance for collaborative efforts within the fund industry to strengthen digital asset-related technical and regulatory compliance capabilities while adopting innovative technologies in fund management. SIGNIFICANCE: Participation of the SFC in the seminar showed its commitment to the industry as its initiative under the Pillar Re ( Re lationship) of the “ ASPIRe ” Roadmap. Dr Eric Yip, the SFC’s Executive Director of Intermediaries, said in the seminar that “b y supporting industry participants in their ongoing efforts to uphold regulatory compliance standards in managing digital asset funds and tokenized funds, we (the SFC) aim to cultivate a safe, reliable, sustainable and competitive digital asset fund ecosystem anchored in robust risk management and investor protection measures . ” 2. Navigating Fast-evolving Capital Markets through Balanced Regulation – the Golden Mean Chairman of the SFC, Dr Kelvin WONG, delivered a speech on 21 October 2025 on the perspective of the SFC in maintaining a balanced regulatory approach, cherished with a mission to ensure that the capital market of Hong Kong would “continue to thrive in a well-regulated environment that upholds integrity.” And he also expressly emphasized that the SFC plays dual roles as both a guardian and a facilitator, and put forward with the following three reflections. Some key takeaways are as follows: (1) Evolving challenges to capital markets: regulator’s perspective There are challenges to market integrity and market stability (1.1) Challenges to market integrity though remains as the world’s top three financial center, with its Fintech ranking jumping to global No.1, Hong Kong is still facing challenges stemming from gatekeeping listed issuers’ quality and forms of misconduct; encountered with increasing demand from international investors for accountability, transparency and strong board leadership given Hong Kong as the world’s top IPO listing center; enhancing listing market quality, particularly the standards of corporate governance, is not without challenges; over the years, there were cases of misconduct, false disclosure or accounting fraud that were jeopardizing the interests of the investors, and damaging public trust; besides, evolving financial fraud, scams and deception cases also pose significant risks. (1.2) Challenges to market stability external risk factors threaten to exacerbate market volatility and systemic vulnerabilities, including geo-economic fragmentation and shifts in monetary policies; our market resilience has stood the test of time as an effective shield against unexpected external shocks when global trade tensions intensified, HK was able to withstand the extreme volatility with no system failure in normal operations; digitalisation, algorithmic trading and heightened market connectedness pose profound risks to systemic stability by amplifying vulnerabilities and accelerating the transmission of shocks; monitoring mechanism and resilience framework to mitigate system risks remain as deep concerns. (2) A balanced regulatory approach in fostering sustainable development In meeting the above challenges, Dr WONG shared his view of “ Golden Mean ” to maintain a balance between competing extremes; and to align the dual roles of investor protection and market development. (2.1) Safeguarding investors by upholding high standards of corporate governance, companies can improve their performance with rigorous internal controls and board oversight; the SFC remains steadfast in delivering high-impact enforcement actions that punish wrongdoings, deter criminality, and restore investor confidence; educating and bringing alert to the public against suspected fraud and suspicious trading platforms or products, while dedicating additional resources to anti-scam publicity campaigns. (2.2) Fostering growth opportunities Hong Kong’s evolving listing regimes and enhancement to IPO price discovery, provided fresh momentum for its listing market growth and diversification from traditional sectors; the second notable achievement is our regulatory regime for digital assets as SFC pioneered itself in adopting robust standards while preserving the long-term potential; (3) Proactive stakeholder engagement as key to balanced regulation engagement is essential to attaining that Golden Mean in the regulatory approach; through open dialogues with the financial industry which enables the SFC to ensure its frameworks effectively address market needs; deepened mutual understanding with industry stakeholders through numerous seminars as regular engagement efforts; SIGNIFICANCE: As Dr WONG has said in the speech, “ For the SFC, our mission is to find that Golden Mean where law, integrity, and development co-exist and reinforce each other. We believe this balanced regulatory approach has underpinned public trust in our markets for decades, and will continue to do so in the future. ” 3. SFC and Québec’s AMF Enhance Regulatory Cooperation on Supervision of Cross-border Investment Management Activity The SFC and the Autorité des marchés financiers (“ AMF ”), the financial regulator of Québec, Canada, have concluded a Memorandum of Understanding (“ MoU ”) to enhance cooperation on the supervision of investment managers of collective investment schemes operating in either market; and the two parties signed the MoU in Madrid, Spain on 27 October 2025. What the MoU has achieved? it provides for a regulatory framework for consultation, cooperation and exchange of information for regulated entities engaging in cross-border investment management services with respect to supervision and oversight; it marks a new chapter in regulatory collaboration between the SFC and the AMF in the realm of asset management; it included Québec of Canada on its list of Acceptable Inspection Regimes which facilitates the AMF-licensed managers in providing investment management services in respect of SFC-authorized funds. SIGNIFICANCE: As Mr. Yves Ouellet, the AMF’s President and Chief Executive Officer has said, “ this MoU reflects our shared commitment to fostering robust, transparent regulatory standards. By strengthening cooperation between Québec and Hong Kong, we are enabling asset managers to access new opportunities, better serve investors, and support innovation, integrity, and resilience in our capital markets . ” Enforcement News - Intermediary 4. SFC Reprimands and Fines UBS AG $8 million for Professional Investor Misclassification On 20 October 2025, the SFC publicly reprimanded and fined UBS AG (“ UBS ”) HK$8 million under section 196 of the SFO for systemic deficiencies in its internal controls, leading to the misclassification of clients as Professional Investors (“ PIs ”) over a 12-year period from 2009 to July 2022. Case Details The breaches stemmed from UBS's automated verification process, which misinterpreted the minimum portfolio requirements under the Securities and Futures (Professional Investor) Rules (“ PI Rules ”) for joint accounts, resulting in non-professional investor (“ Non-PI ”) clients being incorrectly treated as PIs. A UBS look-back review for July 2018 to July 2022 identified 560 misclassified joint accounts (including 135 non-associate and 425 parent-child accounts), with 23 accounts involved in 9,190 securities pooled lending (“SPL”) transactions and 94 accounts in 500 PI-restricted product transactions. This misclassification enabled UBS to provide securities pooled lending services without valid standing authorities or required disclosures, and to sell PI-restricted products (such as Chapter 37 bonds, accumulators, decumulators, and loss-absorption products) to ineligible clients, violating: Securities and Futures (Client Securities) Rules ; Securities and Futures (Contract Notes, Statements of Account and Receipts) Rules ; and Code of Conduct for Persons Licensed by or Registered with the SFC . Remediate Result The SFC noted aggravating factors, including the prolonged duration and a prior 2021 fine of HK$9.8 million for similar issues, but considered UBS's self-reporting (prompted by internal review and HKMA referral), cooperation, remedial enhancements to controls, and implementation of Enhanced Complaint Handling Procedures for affected clients. In result, the SFC issues public reprimand and HK$8 million fine against UBS. For more details of the case, please refer to STATEMENT OF DISCIPLINARY ACTION SIGNIFICANCE: This disciplinary action underscores the SFC's emphasis on robust internal controls for accurate client classification to protect non-professional investors from unsuitable products and services. It highlights recurring compliance risks in automated systems for global firms like UBS, serving as a reminder for licensed entities to regularly review interpretations of regulatory requirements, especially post-amendments, to avoid prolonged breaches and escalating penalties. The case also demonstrates the value of self-reporting and remediation in mitigating sanctions, while reinforcing inter-regulator cooperation in upholding market integrity in Hong Kong's financial sector. 5. SFC Suspends MTF Securities and its Responsible Officer Over Suspicious Transaction Monitoring Failures The SFC has imposed a four-month suspension on Mr. Joey Lo Wai Hon (羅偉漢) (“ Mr. LO ”), effective from 30 September 2025 to 29 January 2026. MR. LO, a former responsible officer (“ RO ”) and manager-in-charge at MTF Securities Limited (泰富證券有限公司) (“ MTF ”) (formerly Magusta Securities Limited), was found to have failed in overseeing credit risk management and suspicious transaction monitoring. Failures in Credit Risk Management MTF granted substantial trading limits to three new clients (Client A, B, and C) shortly after they opened cash trading accounts in January 2021. Each client deposited only HK$10,000, yet MTF approved limits of HK$4 million for Clients A and C, and HK$5 million for Client B—without client applications or adequate due diligence. Notable Red Flags included: Trading limit exceeded client’s declared annual income No records of income proof, bank statements, trading history, or personal reputation checks. Client A ✓ Client B ✓ ✓ Client C ✓ ✓ Mr. LO, as an RO and Credit Committee member, was responsible for assessing creditworthiness and setting limits. However, he approved these at the request of MTF's substantial shareholder without independent scrutiny, potentially risking a liquid capital deficit if the clients defaulted. Suspicious Trading Patterns and Reporting Delays These three clients used nearly all their limits to trade shares of a Hong Kong-listed company (“ Company X ”) between 22 and 27 January 2021, generating profits from HK$3.8 million to HK$5.3 million. The trades exhibited suspicious features indicative of potential market misconduct and money laundering: Clients bought shares at low prices just before a surge, without any apparent positive news. Clients sold at high prices in the first minute of the afternoon session before a 68% price collapse, followed by further declines. The trades accounted for 46%, 52%, and 30% of Company X's daily turnover during the period. Post-trade, clients withdrew nearly all proceeds and conducted no further activity, inconsistent with their financial profiles. The above patterns aligned with AML Guideline indicators (e.g. unusual transaction sizes, rapid withdrawals etc.) Mr. LO did not investigate or report promptly. MTF only filed a suspicious transaction report (“ STR ”) to the Joint Financial Intelligence Unit (“ JFIU ”) in late July 2021, after SFC intervention. For the full details, refer to the SFC's press release dated 2 October 2025 , and Statement of Disciplinary Action . SIGNIFICANCE: The SFC deemed Lo guilty of misconduct, questioning his fitness and properness. Regarding to such matter, Licensed Corporation (“ LC ”) should reference the below table for ensuring its compliance: Due Diligence LC must rigorously assess client financials before granting credit, avoiding undue influence from shareholders. Monitoring Systems Implement effective, ongoing transaction reviews to detect anomalies like unusual price movements or disproportionate trades. Timely Reporting Suspicious activities must be documented, investigated, and reported without delay to authorities like the JFIU and SFC. In June 2025, the SFC also prohibited Ms. WONG Lai Suen, another former MTF RO and executive director, from re-entering the industry for six months. ( See Enforcement News – WONG Lai Suen ) This enforcement action reinforces the SFC's commitment to upholding market standards amid evolving risks. Firms should review their policies against the Code of Conduct, Internal Control Guidelines, and AML Guideline to mitigate similar exposures. 6. SFC Prohibits Ex-Employee of BOCOM Over Undisclosed Nominee Account On 27 October 2025, the SFC prohibited Mr. CHENG Lai Ho (鄭禮豪) (“ CHENG ”), a former licensed representative accredited to: Bank of Communications Co., Ltd. (交通銀行股份有限公司); and Bank of Communications (Hong Kong) Limited (交通銀行（香港）有限公司) (collectively, “ BOCOM ”); from re-entering the securities industry for seven months, from 27 October 2025 to 26 May 2026, pursuant to section 196 of the SFO. Case Details The sanction arises from CHENG's repeated violations of BOCOM's Staff Dealing Policy and Employee Code between April 2017 and April 2022, which aligned with regulatory requirements under paragraph 12.2 of the Code of Conduct for Persons Licensed by or Registered with the SFC. Key breaches included failing to disclose two pre-existing personal securities accounts at other institutions, opening and controlling an undisclosed nominee securities margin account in his mother's name (where he conducted over 260 unreported trades), and violating the minimum 13-trading-day holding period on at least 12 occasions after 15 July 2020. Reasons for the Disciplinary Action The SFC found CHENG's actions wilful and dishonest, as he deliberately used the nominee account to evade BOCOM's monitoring and internal controls, despite attending compliance trainings and signing false declarations. In determining the penalty, the SFC considered the five-year duration of the misconduct, the need for deterrence, CHENG's cooperation, and his clean prior record, noting no harm to clients or the market. For more details, please refer to STATEMENT OF DISCIPLINARY ACTION . SIGNIFICANCE: This disciplinary action underscores the SFC's stringent enforcement of internal compliance policies to mitigate conflicts of interest and maintain the integrity of licensed representatives, serving as a strong deterrent against deliberate evasion of employer monitoring and regulatory standards in Hong Kong's securities sector. It highlights the importance of honest disclosures and adherence to fitness and propriety requirements, potentially influencing firms to strengthen oversight of employee trading activities. 7. SFC Suspends Ex-employee of Shanxi Securities Over 945 Unauthorized Trade Orders On 28 October 2025, the SFC suspended Mr. TANG Wai Choi (鄧偉財) (“ TANG ”), a former licensed representative of Shanxi Securities International Limited (山證國際證券有限公司) (“ SSIL ”), for seven months from 28 October 2025 to 27 May 2026, pursuant to section 194 of the SFO. Case Details The disciplinary action stems from TANG's misconduct between 10 July 2019 and 10 December 2019 (Relevant Period): During which he logged into a client's securities account using the client's password and placed 945 orders via the internet without valid written authorization from the client or SSIL's knowledge, thereby circumventing internal controls and creating a false appearance that the trades were placed directly by the client. Additionally, TANG failed to maintain proper records of the client's order instructions, breaching paragraph 3.9 of the Code of Conduct for Persons Licensed by or Registered with the SFC ( Code of Conduct ), which requires time-stamped records and telephone recordings for agency orders. This exposed the client to risks of unauthorized trading, deprived SSIL of audit trails, and violated General Principle 2 (Diligence) of the Code of Conduct. The SFC deemed TANG guilty of misconduct and not fit and proper to remain licensed, considering the duration and frequency of the breaches, the need for deterrence, and his otherwise clean record. The investigation originated from a probe into a suspected ramp-and-dump scheme involving securities transactions handled by TANG at SSIL. For more details, please refer to STATEMENT OF DISCIPLINARY ACTION . SIGNIFICANCE: This enforcement action highlights the SFC's commitment to upholding professional standards among licensed representatives by addressing breaches that undermine client protections and internal controls, serving as a deterrent against unauthorized account access and inadequate record-keeping that could facilitate market misconduct in Hong Kong's securities industry. It reinforces the importance of compliance with the Code of Conduct to maintain market integrity and prevent risks such as trade disputes or unauthorized activities. Enforcement News - LISTCO 8.SFC Seeks Court Order to Freeze Assets up to $394 Million for Investors Compensation in Suspected Manipulation of Grand Talents Shares On 30 September 2025, the SFC filed an application with the Court of First Instance for an interim order to freeze assets up to $394,067,589. This amount represents the estimated losses suffered by investors affected by an alleged sophisticated ramp-and-dump scheme involving the shares of Grand Talents Group Holdings Limited (廣駿集團控股有限公司) ( 08516.HK ) (“ Grand Talents ”), which was listed on the GEM board of the Stock Exchange of Hong Kong Limited in October 2018. The application is part of broader legal proceedings under section 213 of the Securities and Futures Ordinance (“ SFO ”) against 16 defendants, including suspected masterminds, accused of manipulating Grand Talents shares between June 2021 and June 2022. The SFC aims to prevent the defendants from disposing of their assets in Hong Kong to secure funds for potential compensation to victims. The following table provides a chronological summary of key events in the Grand Talents case (for reference only): Date Remarks Source 25 Apr 2023 The SFC issued a notice under Sections 204 and 205 of the SFO imposing restrictions on four client accounts at Silverbricks Securities Company Limited, totaling HK$94,610,762.71, due to suspected manipulative trading in Grand Talents shares from 24 November 2021 to 14 June 2022, leading to a 93% share price plunge on 15 June 2022. The notice aims to prevent asset dissipation amid investigations into possible false trading, price rigging, and stock market manipulation. G.N. 2821 5 Aug 2025 The SFC issued a notice under Sections 204 and 205 of the SFO prohibiting Tiger Brokers (HK) Global Limited from dealing with assets in a specified account (no. 63820919) linked to suspected manipulative trading in Grand Talents shares from 24 November 2021 to 14 June 2022, which culminated in a 93% share price drop on 15 June 2022. The restrictions are to preserve assets during ongoing investigations into potential violations including false trading and stock market manipulation. G.N. 4982 29 Sep 2025 The SFC applied for an interim court order to freeze assets up to HK$394,067,589 from 16 defendants, including suspected masterminds, in an alleged social media ramp-and-dump scheme manipulating Grand Talents shares from June 2021 to June 2022. The court granted an interim injunction against four defendants, with the matter adjourned for the remaining 12. This action aims to secure funds for investor compensation estimated at the frozen amount. SFC - Press Release Court Orders to the 16 defendants To date, the Court has granted an interim injunction against 4 of the defendants, restraining them from dealing with assets up to $394 million, which remains in force until further order. For the remaining 12 defendants, the Court has issued directions and adjourned the matter to a future date. The SFC has indicated it will refrain from further comments as proceedings are ongoing. SIGNIFICANCE: This enforcement action by the SFC underscores its commitment to combating market manipulation and protecting investors in Hong Kong's financial markets. By seeking asset freezes, the regulator aims to preserve resources for restitution, deterring similar schemes that erode market integrity and investor confidence. It highlights the SFC's proactive use of legal tools to address complex frauds, such as social media-driven ramp-and-dump operations, and reinforces the importance of transparency and accountability in securities trading, potentially setting precedents for future cases involving cross-border or digital manipulation tactics. 9. Court Penalises AMTD Global Markets Limited for Contempt of Court Due to Non-compliance with SFC Notices and Orders it to Produce Records and Pay Fine On 13 October 2025, the Court of First Instance ordered AMTD Global Markets Limited (現稱:奧翱驁集團（香港）證券有限公司, 前稱: 尚乘環球市場有限公司) (“ AMTD ”, formerly known as orientiert XYZ Securities Limited and currently known as oOo Securities (HK) Group Limited) to produce records and pay a fine for contempt of court, following proceedings initiated by the SFC under section 185 of the SFO. The Court ordered AMTD to comply with the outstanding requests by 19 January 2026 and imposed a fine for past non-compliance, with the amount to be determined later. It rejected AMTD's excuses, including changes in ownership, management, and loss of records, deeming them unreasonable. Case Overview: Period/Date Remarks Prior to 2023 SFC issues notices under sections 181, 182, and 183 of the SFO to AMTD, requiring records, documents, and answers related to IPO investigations involving suspected fraud and misleading information. 30 Jan 2023 SFC issues a notice under section 183 of the SFO; Court later finds AMTD not liable for non-compliance with this specific notice. 23 Nov 2023 SFC commences legal proceedings under section 185 of the SFO against AMTD and its former executives (including Lo Chi Hang, Philip Yau Wai Man, and See Hiu Lun) for non-compliance with notices in IPO-related investigations. 13 Oct 2025 Court of First Instance rules AMTD in contempt, orders compliance by 19 January 2026, and imposes a fine (amount to be determined later); rejects AMTD's excuses for non-compliance. Case Number: HCMP 2027/2023 19 Jan 2026 Deadline for AMTD to comply with outstanding SFC notice requests. To be determined Court to decide the amount of the fine imposed on AMTD for contempt. Current Status of the Case The Court ordered AMTD to comply with the outstanding requests by 19 January 2026 and imposed a fine for past non-compliance, with the amount to be determined later. It rejected AMTD's excuses, including changes in ownership, management, and loss of records, deeming them unreasonable. SIGNIFICANCE: The SFC's Executive Director of Enforcement, Mr. Christopher Wilson, stated: “The SFC does not tolerate non-compliance with the SFO. Non-compliance undermines the SFC’s ability to discharge its regulatory functions and erodes the integrity of Hong Kong’s capital markets. The SFC will take robust enforcement action against non-compliance.” This ruling emphasizes the SFC's zero-tolerance approach to non-compliance with investigative notices, highlighting the importance of licensed entities maintaining proper records and cooperating fully to uphold market integrity. It serves as a precedent for robust enforcement against excuses like corporate changes, potentially deterring similar failures in IPO-related probes and reinforcing regulatory oversight in Hong Kong's capital markets, with cross-border cooperation exemplified by the UK FCA's involvement. 10. Court Order Sentenced Wong Ming Chun to 7 Years and 8 Months' Imprisonment for Money Laundering Related to Misappropriation of Listed Company Funds On 22 October 2025, the SFC welcomed the High Court's conviction and sentencing of Mr. WONG Ming Chun (王名俊) (“ WONG ”), the former financial controller and company secretary of Hua Han Health Industry Holdings Limited (華瀚健康產業控股有限公司) ( 00587.HK ) (“ Hua Han ”), for two counts of money laundering. Case Details The case originated from the SFC's investigation into suspected false or misleading disclosures in Hua Han's financial statements from 2013 to 2015, which uncovered the misappropriation of fundraising proceeds. These findings were referred to the Police for further action. Hua Han, listed on the Main Board of The Stock Exchange of Hong Kong Limited since 2002 and delisted in 2020 , was involved in health industry operations, highlighting vulnerabilities in financial controls within sectors that may intersect with insurance and investment products. Enforcement Act and Court Order WONG pleaded guilty to the charges under section 25(1) of the Organized and Serious Crimes Ordinance ( Cap. 455 ), stemming from the misappropriation of funds raised by Hua Han in 2015. He was sentenced to seven years and eight months' imprisonment and disqualified from serving as a director of any Hong Kong company for 12 years without court leave, pursuant to section 168E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance ( Cap. 32 ). [Court Case: HCCC 402/24] SIGNIFICANCE: This conviction emphasizes the critical role of financial gatekeepers, such as controllers and secretaries, in upholding corporate integrity and investor trust. As noted by SFC's Executive Director of Enforcement, Mr. Christopher Wilson, failures in these positions not only breach fiduciary duties but also threaten market stability. For the insurance sector, it serves as a reminder of the need for robust internal controls to prevent similar abuses, particularly in entities handling policyholder funds or linked investments, reinforcing collaborative enforcement efforts between regulators to maintain transparency and deter financial misconduct. 11. SFC and HKEX Collaborate in Enforcement Action Against Former Directors of Universal Star for Failure to Disclose Material Loans and Conflicts of Interest in Prospectus On 23 October 2025, the SFC and the Stock Exchange of Hong Kong Limited (“ HKEX ”) announced a collaborative enforcement outcome resulting in disciplinary action against: Mr. LU Qingxing (呂慶星) (“ LU ”), former non-executive director; and LU’s son, Mr. LYU Zhufeng (呂竹風) (“ LYU ”), former executive director; of Universal Star (Holdings) Limited (星宇（控股）有限公司) ( 02346.HK ) (“ Universal Star ”). Case Details The action stems from: SFC's investigation into the directors' failure to disclose 13 outstanding loans totaling approximately RMB49 million where a Universal Star subsidiary served as co-borrower or guarantor, in the company's May 2019 IPO prospectus. These loans, taken out by LU between April 2017 and April 2019, primarily benefited him personally (with at least RMB44 million paid directly to him and RMB2 million to LYU, who transferred it to the subsidiary). The undisclosed loans represented material financial liabilities, breaching disclosure obligations to the sponsor and other directors. Additionally, post-IPO, the pair caused the subsidiary to pledge its property as security for the loans without the knowledge or approval of other directors, independent shareholders, or the compliance adviser—violating Listing Rules on major and connected transactions. This conduct also involved unmanaged conflicts of interest, as LU personally profited, constituting a breach of fiduciary duties that prejudiced investors. The SFC shared its investigation findings, including loan and pledge evidence, with HKEX, leading to the disciplinary sanctions. Regarding the STATEMENT OF DISCIPLINARY ACTION : HKEX issued a "Prejudice to Investors’ Interests Statement" (PII Statement), indicating that the directors' continued board tenure would have harmed investors, along with a public censure. Both individuals, who resigned in 2021 and 2023 respectively, agreed to settle without contesting the breaches. SIGNIFICANCE: This collaborative enforcement action between SFC and HKEX underscores the regulators' commitment to accountability in corporate governance, particularly for directors of listed entities, to safeguard investor interests and market transparency. The case reinforces the value of inter-regulator cooperation in detecting and addressing misconduct that could erode trust in Hong Kong's capital markets. 12. SFC Obtains Court Order to Freeze up to $82.4 Million of Assets Belonging to Suspected Manipulators of Smartac Shares On 27 October 2025, the Court of First Instance granted an interim injunction order sought by the SFC under section 213 of the SFO against 12 individuals suspected of manipulating shares of Smartac International Holdings Limited (環球智能控股有限公司) ( 00395.HK ) (“ Smartac ”, formerly Smartac Group China Holdings Limited, delisted from the HKEX Main Board on 20 February 2023). Case Details The proceedings form part of broader SFC legal actions against the former chairman and non-executive director of Ding Yi Feng Holdings Group International Limited (renamed Carmen Century Investment Limited on 3 July 2025), along with 28 other suspects and one corporate entity, for their roles in the alleged manipulation. Separately, in September 2025, the SFC obtained a consent order to freeze assets of one additional suspect, while an application for another remains pending. The interim injunction remains in effect until the next court hearing on 27 March 2026. Court Order The Court of First Instance prohibits the suspects from removing, disposing of, dealing with, or diminishing the value of their assets in Hong Kong up to $82.4 million, ensuring sufficient assets are available for potential restoration orders if contraventions of the SFO are proven. This action relates to alleged market manipulation of Smartac shares between 31 October 2018 and 11 March 2019. Enforcement News Consolidate Table: Remarks Source/Linkage SFC issues restriction notices to 14 brokers to freeze client accounts linked to suspected Smartac manipulation. 25 Jun 2019 SFC commences MMT proceedings against Sui Guangyi, two entities, and 28 suspects for alleged Smartac manipulation. 12 Nov 2024 SFC applies for asset freeze up to $82.4m against 14 suspects; obtains consent order for one suspect; hearing adjourned to 24 October 2025. 12 Sep 2025 Scheduled next hearing for the interim injunction order. 27 Oct 2025 SIGNIFICANCE: This court order highlights the SFC's proactive enforcement strategy to preserve assets in market manipulation cases, protecting investor interests and ensuring potential remedies for affected parties. By targeting a group allegedly involved in coordinated misconduct over an extended period, it underscores the regulator's commitment to combating sophisticated financial crimes that undermine market integrity, while the ongoing proceedings may set precedents for handling multi-party manipulations in Hong Kong's capital markets. [End of ComplianceOne Newsletter – October 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this analysis update are as follows: The 10 Most Significant Regulatory News for Insurance Sector in 2025 The topics discussed in this analysis update are as follows: Regulatory Updates Tackling Unlicensed Referral Activities Overhauling Commission and Referral Fee Structure Indexed Universal Life Product RO-CPTD requirement and Reference Checking Scheme Market News Macau's Modernized Intermediary Regulations JD.com Enters Hong Kong Insurance Brokerage! Enforcement News IA's Imposes Against the Insurance Company affiliated with the Infamous Prince Group! Tahoe Life Fined $10 Million for Unauthorized Transactions Landmark First Conviction! Broker Fined for Failing to Submit Audited Statements ICAC Crackdowns on Dummy Agent Fraud Schemes Regulatory Updates 1. Tackling Unlicensed Referral Activities In May 2024, The Insurance Authority (IA) issued Circular outlines key principles to regulate referral business models prohibiting unlicensed referral activities conducted by “Mainland China Visitors” (MCV). In Jun 2025, IA’s undercover inspections in Tsim Sha Tsui uncovered unlicensed street sales issues, targeting MCVs, leading to shared findings with the industries. (For more information: IA - Speeches/Articles 2025-06-15 ) 2. Overhauling Commission and Referral Fee Structure To boost transparency and consumer protection, the IA introduced major reforms for participating policies. From 1 Jan 2026, mandates spreading commissions with at least 70% in the first year and 30% over the next five; to prevent front-loading issues. (Source: IA - Circular 2025-07-30 ; Practice Note ) From 1 Oct 2025 , licensed insurance broker(s) should not pay referral fess above 50% of the total commission received from insurer(s), exceed the benchmark required enhanced disclosure and explanation subject to closer monitoring by the IA. (Source: IA - Circular 2025-09-01 ) 3. Indexed Universal Life Product IA and HKMA clarified regulations for Indexed Universal Life (IUL) products in Apr 2025, classifying as Class C (i.e. linked long-term) tailored for professional investors only. (Source: IA&HKMA – Joint Circular 2025-03-13 ) 4. RO-CPTD requirement and Reference Checking Scheme From 1 Aug 2025 , RO must complete at least 2 RO-CPD hours focused specifically on management and control functions during each CPD assessment period. (Source: IA - Circular 2025-07-11 ) From 1 Jan 2026 , the Reference Checking Scheme recommend all licensed insurance companies mandating checks on prospective intermediaries' past seven years , covering agents and technical representatives in long-term business to prevent misconduct migration. Not mandate but breaching the scheme may lead to closer monitoring by the IA. (Source: IA - Circular 2025-11-20 ) Market News 5. Macau's Modernized Intermediary Regulations The Monetary Authority of Macau (AMCM) introduced the Insurance Intermediary Business Law ( Law No. 15/2024 ) effective 1 Aug 2025, replacing a 36-year-old framework ( Decree-Law No. 38/89/M ). 6. JD.com Enters Hong Kong Insurance Brokerage! JD.com (京東集團)'s Hong Kong subsidiary, Jingdong Insurance Consultants (Licensed No.: GB1101), secured the insurance brokerage license in Oct 2025. Enforcement News 7. IA's Imposes Against the Insurance Company affiliated with the Infamous Prince Group! On 28 Oct 2025, IA imposed strict license restrictions on Mighty Divine Insurance Brokers Limited (Licensed No.: FB1329). Due to the company's association with the notorious Prince Group (太子集團); founded by Chen Zhi (陳志) . IA prohibited it from engaging in any regulated activities. 8. Tahoe Life Fined $10 Million for Unauthorized Transactions On 2 Sep 2025, IA reprimanded Tahoe Life and imposed a $10M fine from shareholders' funds. Penalties for unauthorized related-party deals that bypassed board approval, violating policies and regs. (Source: IA - Enforcement 2025-09-02 ) 9. Landmark First Conviction! Broker Fined for Failing to Submit Audited Statements On 19 Mar 2025, IA won its first conviction under Insurance Ordinance s73(1). Aurex Insurance Brokers Ltd fined $26,060 by court for failing to submit audited statements, auditor's report, and compliance report within 6 months (twice). (Source: IA - Enforcement 2025-03-19 ) 10. ICAC Crackdowns on Dummy Agent Fraud Schemes In 2025, ICAC targeted "puppet" and "dummy" agent frauds, securing convictions in related cases. A former branch manager was sentenced to 46 months in Feb, with 10 agents receiving 11-22 months, for a 2016-2020 scheme that defrauded two insurers of over HK$52 million through 478 lapsed policies. (Source: ICAC - Press 2025-02-11 ) In October, police sergeant and five others were charged for HK$3 million in bogus commissions from Sun Life and China Taiping using fake credentials and dummy recruits. (Source: ICAC - Press 2025-10-08 ) The final six defendants in the $52M case were jailed 12-21 months in Nov 2025. (Source: ICAC - Press 2025-11-21 ) [End of ComplianceOne's Summary – The 10 Most Significant Regulatory News fo r Insurance Sector in 2025 ] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – October 2022 ComplianceOne Newsletter – October 2022 The topics discussed in this monthly newsletter are as follows: 1. The SFC Considers Authorization of Virtual Asset Futures Exchange Traded Funds ( VA Futures ETFs ) 2. HKEX Announces the Launch of Core Climate - A New International Carbon Marketplace 3. Court orders Sound Global ( 0967.HK ) Chairman to Purchase Shares from Investors 4. SFC Reprimands and Fines Asia Research & Capital Management Limited HK$1.75 million and Bans its MIC of Compliance 5. Former Account Executive of Fullbright Securities Limited Convicted of Securities Fraud 6. Court Convicted Wong King Hoi for Obstruction of SFC's Search Operation 7. SFC Bans a Former Licensed Staff of China Galaxy for Violation of Company's Staff Dealing Policy MARKET NEWS 1. The SFC Considers Authorization of Virtual Asset Futures Exchange Traded Funds (VA Futures ETFs) The SFC would consider authorizing exchange traded funds (ETFs) that obtain exposure to virtual assets (VAs) primarily through futures contracts for public offering in Hong Kong. Unlike before in 2018 NOV where only professional investors are allowed to have exposure to VAs, and having witnessed the rapid evolution of the VA landscape; a Joint Circular in January 2022 between the SFC and the HKMA has announced that licensed and registered intermediaries are allowed to offer VA Futures ETF to retail investors in HK. For reasons that it has been observed that there are meaningful developments in the VA ecosystem recently and some of the initial concerns over VA Futures ETFs have become increasingly manageable and could be adequately addressed with proper safeguards, disclosure and investor education. SIGNIFICANCE: Despite the recent developments and innovations, the exposure to spot VAs are still restricted to professional investors only. Whereas VA Futures ETFs seeking for SFC authorization have to meet applicable requirements including the followings: (i) Management companies should demonstrate at least three years’ proven track record with relevant experience. (ii) Only VA futures traded on conventional regulated futures exchanges are allowed currently, only Bitcoin futures and Ether futures on CME are allowed. (iii) The management company is expected to adopt a flexibility investment strategy in the portfolio composition (iv) Disclosure of the product key facts statement is required. (v) Intermediaries are obliged to comply with the applicable requirements under the Code of Conduct when distributing the derivative products. (vi) Investor education should be provided. 2. HKEX Announces the Launch of Core Climate - A New International Carbon Marketplace HKEX announced on 20 OCT 2022, the launch of the Core Climate , a new international carbon marketplace that helps connect capital and resources with climate-related opportunities in Hong Kong, Mainland China, Asia and beyond. The HKEX is committed to provide an easy-access, one-stop, integrated carbon marketplace that includes trading, custody and settlement functions for investors and project owners across the climate value chain, contributing to the realization of global carbon neutrality goals. What is Core Climate: (i) Trading platform : investors can source, purchase, settle and retire voluntary carbon credits in phases. (ii) Trusted marketplace : provides best-in-class market infrastructure and effective, transparent and certified carbon credits and instruments that corporates and investors can use to deliver on their commitment to net zero. (iii) Global community : Core Climate builds Hong Kong’s position as a leading global finance center connecting capital with climate-related products and opportunities in vicinity and around the world. SIGNIFICANCE: HKEX is demonstrating to the world that Hong Kong , as an international financial center, also entrusts with itself the obligation to committing to building a more low-carbon and healthy community to our next generations. As CO-Head of Markets Glenda So said: " We see Core Climate developing to become essential infrastructure, part of our highly connected international ecosystem, matching investment capital with new climate projects, technologies and business models. This will accelerate the shared Net Zero transition and secure a sustainable future for coming generations .” ENFORCEMENT NEWS 3. Court orders Sound Global ( 0967.HK ) Chairman to Purchase Shares from Investors The Securities and Futures Commission (SFC) has obtained an order in the Court of First Instance against the chairman and executive director of Sound Global Ltd. (Sound Global), Mr. Wen Yibo, to purchase shares held by the other shareholders of the company at a price to be determined by the Court – after he was found to have orchestrated a scheme to falsify the company’s bank balances and fabricated relevant bank statements and balance confirmations. And the Court also issued a disqualification order for 12 years against Wen. As Mr Ashley Alder, the SFC’s Chief Executive Officer said: “ The share purchase order represents an important milestone in the SFC’s efforts to protect the investing public from wrongful conduct by management of listed companies and our determination to deploy our full range of regulatory tools to tackle market misconduct and uphold market integrity .” 4. SFC Reprimands and Fines Asia Research & Capital Management Limited HK$1.75 million and Bans its MIC of Compliance The SFC has reprimanded and fined Asia Research & Capital Management Limited (ARCM) HK$1.75 million for failures relating to its non-compliance with the European Union’s short selling reporting requirements (EU Regulation) and to promptly notify the SFC of its material regulatory breaches. The SFC has also banned Mr. Billy Wong Yim Chi, ARCM’s former Head of Compliance and Operations and Manager-In-Charge (MIC) for Compliance for two months from 10 October 2022 to 9 December 2022 for reason that ARCM’s failures to comply with the EU Regulation were directly attributable to Wong’s failure to discharge his duties as ARCM’s MIC for Compliance and a member of its senior management during the material time. The SFC also considers Wong’s conduct fell short of the standard required of him as MIC for Compliance. SIGNIFICANCE: This case seems to be the first instance since the introduction of the MIC regime that a person entrusted with MIC function is sanctioned by the SFC for his incompetence in discharging the duties for the licensed corporation. It conveys a signal to the licensed corporations and the MIC candidates that non-licensed personnel taking the roles of MIC are supposed to assume the same degree of accountability in the eyes of the SFC. 5. Former Account Executive of Fullbright Securities Limited Convicted of Securities Fraud The Eastern Magistrates’ Court has convicted Mr. Danny Fung Kwong Shing, a former account executive of Fulbright Securities Limited, of the offences of engaging in fraud or deception in transactions involving securities under the Securities and Futures Ordinance (SFO) in a criminal prosecution brought by the SFC. Fung admitted that he had employed a fraudulent scheme of effecting transactions between two accounts, one of his friend and one of his client (without proper authorization from the client), rendering the client a loss and his friend a profit instead. Fung was remanded in custody pending sentence on 27 October 2022 after pleading guilty to all 25 charges; and was later sentenced to two-and-a-half months’ imprisonment following his conviction. 6. Court Convicted Wong King Hoi for Obstruction of SFC's Search Operation The Eastern Magistrates’ Court has convicted Mr. Wong King Hoi (aka「 摸魚 」) after he pleaded guilty to a charge of obstructing employees of the SFC in the execution of a search warrant . When the SFC executed the search warrant at Wong’s residence, Wong allegedly delayed in giving the SFC search team access to his residence and attempted to dispose of four objects including two mobile phones and two notebooks. Wong was remanded in custody pending sentence on 10 November 2022. 7. SFC Bans a Former Licensed Staff of China Galaxy for Violation of Company's Staff Dealing Policy The SFC has banned Ms. Tang Shiyi, a former licensed staff of China Galaxy International Securities (Hong Kong) Co., Limited and China Galaxy International Futures (Hong Kong) Co., Limited (collectively, CGI), from re-entering the industry for 10 months from 29 October 2022 to 28 August 2023. The disciplinary action follows an SFC investigation which found that between July 2019 and February 2021, Tang: (i) failed to obtain CGI’s approval to open and maintain two securities trading accounts with an external brokerage firm and conducted 148 personal trades through the said accounts; (ii) dealt in a stock on CGI’s restricted list; (iii) engaged in day-trading on two occasions, in violation of CGI’s staff dealing policy; (iv) concealed the above securities trading accounts by providing a false and misleading declaration to CGI. The SFC considers that Tang’s conduct, which was willful and dishonest, calls into question her fitness and properness to be a licensed person . SIGNIFICANCE: Tang circumvented CGI’s internal control policies and her conduct prevented CGI from monitoring and reviewing its employees’ trading activities to ensure compliance with laws and regulations. It reminds the licensed persons that taking a frivolous attitude in complying with internal policies will not be construed by the SFC as a lesser breach as compared to violation of prevailing governing rules. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or call us at (852) 39550277 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk To unsubscribe, please simply reply with “ I don’t like to know more about Compliance ”.

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – June 2025 The topics discussed in this monthly newsletter are as follows: 1. CPD Compliance Reporting Guidelines for 2024/2025 2. IA Conducts Undercover Inspections of Un-Licensing Activities 3. IA Enforces Retrospective Compliance with Broker Companies under SROs Regime 4. IA Bans Two Intermediaries for Fabricating Policies Regulatory News 1. CPD Compliance Reporting Guidelines for 2024/2025 The IA has released comprehensive guidelines in a circular dated 6 June 2025, outlining the Continuing Professional Development (“ CPD ”) compliance reporting procedures for individual licensees and appointing principals for the Assessment Period 2024/2025 (1 August 2024 to 31 July 2025). This newsletter highlights the essential details. Key Deadlines Deadline What to do before the deadline 31 July 2025 Individual licensees must complete their required CPD hours 30 September 2025 Individual licensees must submit CPD Declarations to the IA via Insurance Intermediaries Connect (“ IIC ”) or to their appointing principals 31 October 2025 Appointing principals must report the CPD compliance status of their appointed licensees to the IA How to accessing CPD Information via IIC Individual Licensees : Log into IIC > select "CPD Requirement and Compliance Status" from the left menu to check required CPD hours and compliance status. Appointing Principals : Use IIC Supervisor or Admin accounts to search individual licensees’ CPD status or download CPD Lists under the "Report" option, selecting "CPD hours required for the Assessment Period 2024/2025." Reporting Procedures Individual licensees can submit CPD Declarations in two ways: 1. Direct Submission via IIC: Deadline : 30 September 2025. Before 31 July 2025 : Submit only if CPD hours are fully completed (status: "Yes"). 1 August to 30 September 2025 : Submit regardless of compliance status ("Yes" or "No"). 1 October to 15 November 2025 : Update submissions for those initially reporting shortfalls ("No") with rectified status. 2. Submission via Appointing Principals: Licensees submit CPD Declarations to principals by 30 September 2025 . Principals verify and report to the IA via IIC by 31 October 2025 . CPD Requirements and Penalties Minimum CPD Hours : 15 hours, including 3 hours on "Ethics or Regulations," except for travel agents with restricted scope licenses (3 hours total). Penalties : Shortfall < 8 hours : $600 fine per hour, must be rectified by 31 October 2025, or face a 3-month suspension (continuing until resolved) and potential license revocation. Shortfall ≥ 8 hours : $600 fine per hour, immediate 3-month suspension (continuing until resolved), with possible revocation if unresolved. Non-submission by 30 September 2025 : May trigger an IA investigation for fitness and propriety; false declarations risk license revocation and a 12-month ban. SIGNIFICANCE: The IA notes a rise in CPD compliance from 90% (2021/2022) to 99% (2023/2024) and urges full compliance in 2024/2025 to uphold professional standards in Hong Kong’s insurance market. For further assistance, email cpd@ia.org.hk (general inquiries) or licensing@ia.org.hk (IIC-related matters). Market News 2. IA Conducts Undercover Inspections of Un-Licensing Activities The IA has recently taken proactive measures to protect the interests of policyholders and uphold the integrity of the insurance industry. Ms. Maria Tsui, Head of the Enforcement Department, highlighted the IA’s increased focus on street sales activities in Tsim Sha Tsui, which have raised concerns due to a surge in the number of sales personnel conducting promotional activities in the area. On a weekend in early June 2025, the IA conducted a targeted surveillance operation in Guangdong Road, Tsim Sha Tsui. Undercover officers, acting as mystery shoppers, engaged with sales personnel to gather detailed information about these street sales practices. The findings from this operation have been shared with the relevant insurance companies to address any identified issues and prevent future non-compliance. Passersby witnessed suspected IA’s Undercover Inspections ( Source: Social Media – 3 May 2025 ) IA’s Guidelines related to MCV Unlicensed referrers In May 2024, IA issued Circular which outlines key principles to regulate referral business models for licensed insurance broker companies. This circular focuses particularly on long-term insurance products and clients from Mainland China, referred to as Mainland China Visitors (MCV). Its primary goal is to prevent unlicensed selling practices within the insurance industry. Unlicensed referrers are restricted to introducing potential clients to licensed insurance brokers. They are explicitly prohibited from providing regulated advice, explaining insurance products, or engaging in any sales activities related to insurance products. Such sales activities must only be conducted by individuals or entities holding a valid license from the IA. Undertaking these actions without proper licensing is illegal and carries significant consequences. Violations of these regulations can lead to criminal charges, especially in regions like Mainland China, where insurance laws are strictly enforced. Furthermore, non-compliance with the IA’s guidelines may result in severe disciplinary measures for licensed entities. These measures include, but are not limited to, suspension of licenses, substantial fines, and public reprimands. SIGNIFICANCE: Ms. Maria Tsui emphasized that the Enforcement Department is strengthening its monitoring capabilities to collect intelligence and detect any misconduct or harmful practices that could affect policyholders or tarnish the industry’s reputation. The IA is committed to early intervention, using public education and regulatory actions to deter wrongdoing before it escalates into systemic issues that could lead to severe disciplinary measures or criminal prosecution. In addition to on-the-ground surveillance, the IA is leveraging technology and data tools to monitor online activities and social media platforms for intelligence gathering. Recognizing the value of industry collaboration, the IA is also working closely with industry organizations to encourage the sharing of information and knowledge, further enhancing its monitoring effectiveness. Enforcement News 3. IA Enforces Retrospective Compliance with Broker Companies under SROs Regime On 2 July 2025, the IA has taken disciplinary action against two licensed broker companies for failing to comply with essential regulatory standards aimed at protecting policyholders. These cases highlight the importance of maintaining separate client accounts and securing adequate professional indemnity insurance. These violations breached guidelines under the three Self-Regulatory Organizations (“ SROs ”) and the current Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules (Cap. 41L) . Case 1: Century Investment Planning Limited Century Investment Planning Limited, a former licensed insurance broker company, received a public reprimand for the following breaches (incident occurred from April 2019 to March 2020): Failure to deposit client monies into a separate account on multiple occasions. Misuse of client funds. Delayed settlement of premiums payable to an insurer. Case 2: Unnamed Broker Company A second broker company was fined $12,000 for inadequate professional indemnity insurance (Incident took place in 2019): Miscalculation of required coverage under the SROs. Resulting in a shortfall of $11.8 million in coverage. No policyholders were harmed in either case, and both companies fully cooperated with the IA during the disciplinary proceedings. SIGNIFICANCE: The IA stresses that segregating client monies and maintaining sufficient professional indemnity insurance are non-negotiable requirements for insurance intermediaries. These safeguards are critical to ensuring policyholder security. The authority has made it clear that failure to comply will lead to proportionate disciplinary measures. 4. IA Bans Two Intermediaries for Favrucating Policies On 12 June 2025, the IA announced the ban of two insurance intermediaries, Ms. LEUNG Wai Mei (“ LEUNG ”) and Ms. Ip Ka Ying (“ IP ”), from acting as insurance intermediaries for 12 months and 21 months respectively. This disciplinary action was taken due to their unethical practice of creating bogus policies to meet sales targets. Details of the Misconduct Ms. LEUNG Wai Mei: Fabricated two policy applications by misusing a client’s personal information. She certified a fake proof of identity for her son and attempted to conceal her actions by changing her correspondence address. Ms. IP Ka Ying: Fabricated eight policy applications using personal details from clients and friends. Additionally, she fraudulently accepted exclusions of personal liabilities related to premises owned by two applicants. The IA has described these actions as "iniquitous and premeditated," highlighting that such misconduct severely damages the trust and professionalism expected of insurance intermediaries. SIGNIFICANCE: The IA stresses that segregating client monies and maintaining sufficient professional indemnity insurance are non-negotiable requirements for insurance intermediaries. These safeguards are critical to ensuring policyholder security. The authority has made it clear that failure to comply will lead to proportionate disciplinary measures. [End of ComplianceOne Insurance Newsletter – June 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – December 2022 ComplianceOne Newsletter – December 2022 The topics discussed in this monthly newsletter are as follows: 1. Asia's First Crypto Asset ETFs were launched on HKEX 2. SFC reminds the Risks associated with Unregulated Virtual Asset Platform 3. SFC revises Business and Risk Management Questionnaire (BRMQ) 4. SFC to launch investor identification regime (HKIDR) in March 2023 5. MSCI's Report to reveal trends in ESG & Climate for 2023 6. SFC suspends Wang Pei Yi for 10 months for making false declarations 7. SFC fines and suspends Chung Tung Sau for seven months for breach of conflicts of interest 8. SFC bans Sun Yiding eight months for circumvention of personal dealings without approval from employer 9. SFC reprimands and fines Guosen Securities (HK) Brokerage Company, Limited $2.8 million over regulatory breaches MARKET NEWS 1. Asia's First Crypto Asset ETFs were launched on HKEX CSOP Asset Management Limited (“CSOP”) launched the CSOP Bitcoin Futures ETF ( 3066.HK ) and CSOP Ether Futures ETF ( 3036.HK ) on 16 December 2022 which were then traded on the HKEX; the strategy of which was to capture the performance of the actively traded Bitcoin and Ether futures in CME which amount up to 39% and 17% of the total market cap respectively. SIGNIFICANCE: The launch of the two ETFs was marking the first time Asian retail investors can have access to this type of virtual assets with a minimum investment of USD100 traded through the traditional brokerage accounts. The approval from the SFC and the HKEX of two new ETFs based on the CME Bitcoin and Ether futures was an importance benchmark in the development of digital asset trading and an unprecedented step forward to accommodate the robust growth and vehement client demand for exposure to Bitcoins and Ethers, yet traded under highly regulated exchanges like CME where protection of investors can be assured. 2. SFC reminds the Risks associated with Unregulated Virtual Asset Platform The SFC wishes to remind investors of the risks associated with virtual asset (VA) platforms offering VA “ deposits ”, “ savings ”, “ earnings ” or “ staking ” services (VA Arrangements) to investors in Hong Kong in light of their continued prevalence. The SFC has observed that some of these platforms may offer a high “interest rate” on VA “deposits” or a daily generation of additional VA at a guaranteed or fixed rate to investors, and there are significant risks associated with investing in these types of VA Arrangements. Investors may suffer significant or even total loss, especially in the event of fraud or collapse of a VA platform. The SFC has figured out some key features investors have to be aware of: (i) Some VA Arrangements are commonly labelled as “deposits” or “savings” products, while they are NOT regulated and are not the same as ordinary bank deposits; and investors are not ensured with any protection; (ii) A vast majority of VA platforms offering VA Arrangements are unregulated; (iii) VA is exposed to heightened risks like insufficient liquidity, high price volatility or fraud, which may lose the entire value; (iv) Some VA Arrangements could amount to a collective investment scheme (CIS) as defined under the SFO, yet they are not authorized CIS per se and may be highly risky to investors. SIGNIFICANCE: On one hand, the HKSAR Government is keen on developing HK as an international financial hub for virtual asset trading; while on the other hand, the governing regime is still on the stage of coping and catch up with the inherent ever-changing and volatile market scenarios of the trading platforms or channels of these VA products. Currently, most of the VA or VA platforms are not yet regulated to ensure sufficient protection to investors at large which can justify the external potential regulatory risks incurred. The HKSAR Government should endeavour to maintain a balance in launching its financial policies. 3. SFC revises the Business and Risk Management Questionnaire (BRMQ) The SFC published a revised Business and Risk Management Questionnaire (BRMQ) on 23 Dec 2022 for licensed corporations (LCs) and associated entities (AEs). The BRMQ is a supervisory tool adopted by the SFC to collect additional data and information on a variety of functions and business activities to enhance the effectiveness of its risk-based supervision amid the rapidly changing operation and business environment. It is noted that many new questions are incorporated to collect more granular clients and transaction data with focus on analyzing the issues on money laundering and internal risk controls. SIGNIFICANCE: This Circular is published with an aim to allow sufficient preparation time for LCs and AEs, thus the revised BRMQ would be used for financial years ending on or after 30 November 2023. LCs and AEs are urged to review and familiarise themselves with the revised questionnaires, and start gathering, compiling the required information and implementing the system enhancement whatever deemed necessary. One crucial implication of the BRMQ is used as an indicative checklist, though not exhaustive, of the required standards expected by the SFC. It serves as an operational guideline with step by step for the LCs to prepare themselves the details of how the requirements in the guidelines are implemented in real operational routines. 4. SFC to launch investor identification regime (HKIDR) in March 2023 The SFC announced on 12 Dec 2022 that the investor identification regime (HKIDR) for the securities market in Hong Kong will finally be launched on 20 March 2023. Ever since the consultation in 2021, the SFC has been closely monitoring the readiness of the licensed corporations (“LC”) in implementing the HKIDR. The survey and recent rehearsals indicate that some intermediaries may need more time to obtain the client consent which is a prerequisite for the HKIDR to authorize the LC to collect, store and process the personal data of the underlying clients. Investors are also reminded to respond to their relevant brokers in order to facilitate the process. As Mr Ashley Alder, former CEO of the SFC, has said: “The launch of the investor identification regime will be a significant milestone in Hong Kong’s securities market ”. The HKIDR enables more effective market surveillance, reinforce market integrity and promote confidence of the investors, which are the indispensable pillar for Hong Kong as an international financial centre. 5. MSCI's Report to reveal trends in ESG & Climate for 2023 In the MSCI ‘s 11th annual ESG & Climate Trends to Watch Report , it is stated that listed companies will deplete their share of the global emissions budget for limiting temperature rise to 1.5°C by December 2026. Researchers explained in the ESG & Climate Trends to Watch Report that the ongoing war in Ukraine and record levels of inflation globally may limit near-term pressure to reduce global greenhouse-gas emissions as governments around the world are prioritizing energy security and affordability on their to-do-list. However, MSCI ESG data also reveals that major power companies are keeping their eyes on longer-term decarbonization trends and expanding deployment of renewables. Amid the above changes, investors continue to evaluate how the climate crisis will impact their portfolio in 2023. As Meggin Thwing Eastman, Managing Director and Global ESG Editorial Director at MSCI, has said: “ ESG risk is financial risk , and the ESG and climate research showcased in today’s report was conducted to support investor needs to synthesize previously unseen risks and incentivize companies to better manage both emerging issues and the longstanding, expansive threat of the climate crisis. ” SIGNIFICANCE: It is expected that ESG and climate-related risks remain and continue to remain as dominant factors of consideration for investors in constructing their portfolios. Apart from diverting resources to comply with the EGS standards which definitely incurs additional costs, it is still of paramount importance for companies to explore business opportunities upon this decarbonization transition; or otherwise, they will not be able to weather the storm in this global trend. ENFORCEMENT NEWS 6. SFC suspends Wang Pei Yi for 10 months for making false declarations The SFC has suspended Ms Wang Pei Yi, a former licensed representative of SinoPac Securities (Asia) Limited (SinoPac), for 10 months for making false declaration in the account opening forms of three corporate clients between June 2015 and April 2017. Wang had falsely declared that she had met and witnessed the signing of forms of the clients; and provided them with relevant risk disclosure statements. Her failure to take all reasonable steps to establish the true and full identity of the clients definitely violated the principles to act honestly, with care and diligence, and best interest of the clients themselves. 7. SFC fines and suspends Chung Tung Sau for seven months for breach of conflicts of interest The SFC has suspended Mr Chung Tung Sau, a former licensed representative of Quam Securities Company Limited (Quam), for seven months from 15 and fined him $60,000. It was found that between 1 and 11 August 2017 Chung had traded in the shares of a listed company (Company A) for himself while executing a client’s good-till-cancel buy order for the same shares (GTC Order). Chung deliberately arranged matched trades between the GTC orders of the client and his own selling orders, resulting in a profit of approximately $60,000 from these transactions. The SFC considers Chung’s conduct has called into questions his fitness and properness as a licensed person, in particular, his failure to: (i) take reasonable step to avoid the conflicts of interests between himself and the client; (ii) comply with the staff dealing policy of Quam; (iii) execute the GTC Order in best available price for the client. 8. SFC bans Sun Yiding eight months for circumvention of personal dealings without approval from employer The SFC has prohibited Ms Sun Yiding from re-entering the industry for eight months from 15 December 2022 to 14 August 2023. It was found in an investigation that between July 2019 and July 2020, Sun failed to obtain her then employer’s approval to open a securities trading account with an external brokerage firm and conducted 829 personal trades in the account unbeknownst to it. She also traded in three stocks on her then employer’s restricted list and sold certain stocks within 30 days of purchase without its pre-approval. SIGNIFICANCE: The same scenario as the case before, the SFC has demonstrated to the licensed persons that "fitness and properness" remain as crucial elements in assessing the integrity of a licensed person; and bear the same material weight as any breach of other market misconducts. 9. SFC reprimands and fines Guosen Securities (HK) Brokerage Company, Limited $2.8 million over regulatory breaches The SFC has reprimanded and fined Guosen Securities (HK) Brokerage Company, Limited (Guosen) $2.8 million for regulatory breaches in relation to the handling of client assets and the provision of client account statements. The SFC’s investigation found that: (i) between 1 January 2021 and 7 March 2021, Guosen relied on expired standing authority of 1,009 clients to obtain financial accommodation by repledging their securities collateral with a bank as collateral; (ii) from May 2020 to November 2020, Guosen had provided monthly statements with incomplete and incorrect information to 930 clients. Guosen’s failures constitute breaches of the Securities and Futures (Client Securities) Rules (CSR), the Securities and Futures (Contract Notes, Statement of Account and Receipts) Rules (CNR) and the Code of Conduct. SIGNIFICANCE The case is an excellent example of lack of internal controls and operation deficiency in fulfilling the annual routines in a timely manner. It also reveals the facts that some staff may be incompetent in fulfilling their obligations for providing statements which should be precisely reconciled. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or call us at (852) 39550277 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk To unsubscribe, please simply reply with “ I don’t like to know more about Compliance ”.

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - February 2024 The topics discussed in this monthly newsletter are as follows: 1. SFC welcomes government budget measures 2. SFC reminds transitional arrangement for public VATP application period has ended on 29 February 2024 3. SFC reprimands and fines PICC Asset Management (Hong Kong) Company Limited $2.8 million for fund management failures 4. SFC bans Lam Ching Chiu and Wong Siu Fung for five years for bribery offences 5. SFC secures first criminal conviction of securities fraud via illegal short selling MARKET NEWS 1.SFC welcomes government budget measures On 28 Feb 2024, the SFC announced that its welcome note to the new government budget 2024-2025. Mr. Tim Lui, Chairman of the SFC, said: “ The proposed initiatives will boost Hong Kong’ s competitiveness as a global asset and wealth management hub and fund-raising centre. ” And he further added that: “ Building on a decade of success for our mutual market access schemes, we will continue to deepen connectivity with Mainland markets, especially the Greater Bay Area, as well as consolidate Hong Kong’ s position as a leading offshore renminbi hub and a premier risk management centre. ” On the operation side, Ms Julia Leung, Chief Executive Officer of the SFC also said: “ We will work closely with HKEX to improve the market microstructure, reduce transaction costs and enhance market efficiency. ” It is worth noting that the SFC shares the view of the importance of reducing transaction costs, the minimum bid-ask spread in stock trading which are conducive to improving liquidity in the market. There are also other cost-saving measures and incentives like the extension of the Grant Scheme for Open-ended Fund Companies and Real Estate Investment Trust (REITS), stamp duty waiver for REITS etc. SIGNIFICANCE: It is not hard to notice that a regulatory body as SFC also publicly announces its support to the government even in economic measures intended to serve as catalyst to bolster the economy; the HKSAR government is harnessing strengths and supports from all side to consolidating financial resilience in Hong Kong. 2. SFC reminds transitional arrangement for public VATP application period has ended on 29 February 2024 The SFC announced a reminder note on 1 March 2024 of the deadline (29 February) for virtual asset trading platforms (VATPs) to submit licence applications; and those existing VATPs which do NOT submit applications would have to close down their business by 31 May 2024 pursuant to the transitional arrangement. Investors dealing with VATPs operating in Hong Kong which are not on the “List of licensed virtual asset trading platforms” or on the “List of virtual asset trading platform applicants” are urged to close their accounts with these VATPs or transfer to SFC-licensed VATPs for trading virtual assets. The SFC further reminds the public that the applications submitted by applicants on the “List of virtual asset trading platform applicants” are still being processed and they may – or may not – be approved . Hence, trading on these platforms carries a risk. From the SFC’s List of virtual asset trading platforms up to 1 March 2024, there are 24 applicants on the list, and it is odd that the popular platforms like Coinbase and Kraken are not on the list of 24 applicants. Besides, two applicants - Ammbr, BitHarbour – withdrew their applications and one application from Meex was returned by the SFC. It is also noted that Huobi HK re-submitted its application on 26 February 2024. SIGNIFICANCE: With the JPEX scam still fresh in mind, the SFC strongly urges investors to trade virtual assets only on SFC-licensed VATPs because they may expose themselves to unprotected risk on unlicensed platforms. ENFORCEMENT NEWS 3. SFC reprimands and fines PICC Asset Management (Hong Kong) Company Limited $2.8 million for fund management failures On 5 February 2024, the SFC made an announcement to reprimand and fined PICC Asset Management (Hong Kong) Company Limited (PICC) $2.8 million over its failures to discharge duties as the manager of a Cayman-incorporated fund between May 2018 and May 2020. From investigation of the SFC, it was found that PICC had failed to: (i) properly manage the fund to ensure its investments were in line with the stated investment objectives and restrictions; (ii) implement adequate and effective internal controls to manage the fund from any over-concentration risks of non-compliance in just three stocks; and (iii) supervise the designated investment manager (“IM”) in his investment activities of the fund. SIGNIFICANCE: It is ironical indeed that the fund’ s investment objective was to achieve capital preservation and steady capital appreciation through primarily investing in a diversified portfolio of equity securities; yet what the IM had been doing was to concentrate on a few stocks and not to comply with the stop loss procedures to preserve the capital! The IM was like acting unleashed from the mandate restrictions of the fund at all. 4. SFC bans Lam Ching Chiu and Wong Siu Fung for five years for bribery offences The SFC made an announcement on 6 February 2024 that Mr Lam Ching Chiu and Mr Wong Siu Fung, both former licensed representatives of Nerico Brothers Limited, from re-entering the industry for five years starting from 6 February 2024 following their criminal convictions of bribery offences. Lam and Wong were found guilty in August 2022 at the District Court of paying the then chief executive officer (CEO) of Hong Kong Financial Engineering Company Limited (HKFECL) bribes in relation to utilising a computerised algorithmic programme used for futures trading from late 2014 to early 2015. It was found that the CEO asked Lam and Wong for commission for each profitable transactions through the use of the trading programme where both of them were not alerted if the practices were known or acceptable to HKFECL. SIGNIFICANCE: In deciding the sanctions, the SFC considered that Lam and Wong were not fit and proper persons to be licensed to carry on regulated activities due to their criminal convictions. They were both sentenced to imprisonment, with suspension for two years. 5. SFC secures first criminal conviction of securities fraud via illegal short selling The Eastern Magistrates’ Court on 27 February 2024 convicted Ms Christine Yeung Tak Sum guilty of securities fraud involving illegal short selling in proceedings brought by the SFC. The case was found that Yeung submitted a settlement instruction form to her broker Aristo Securities Limited pretending she had 15 million shares in Aurum Pacific (China) Group Limited (Aurum) in another brokerage firm, and then sold the share which she did not have. After illegal short-selling Aurum shares, she proceeded to buy back the same quantity of shares at a lower price to cover her short-sold positions within the same day, making an illicit profit of about HKD602,600. SIGNIFICANCE: Intermediaries should be aware of their obligation to implement and maintain appropriate measures to comply with the short selling requirements and to be mindful of red flags indicating illegal short selling by its clients, especially clients with no sound rationale for not executing the sell instructions directly through their original brokers. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – Feb 2025 The topics discussed in this monthly newsletter are as follows: IA to Facilitate the Caps on Commission Rates Hong Kong to License Mainland Insurers for Greater Bay Area Retirement Plans Targeting Middle-Income Residents ICAC investigates puppet insurance agent case involving HK$52 million IA News Updates 1. IA to Facilitate the Caps on Commission Rates The Insurance Authority ( IA ) issued a Practice Note to address concerns that overly optimistic benefit illustrations for participating life insurance policies, influenced by aggressive investment assumptions, could mislead consumers. Under existing guidelines (GL16 and GL28), insurers must provide transparent, non-misleading projections of policy returns, balancing guaranteed and non-guaranteed benefits. The update, effective 1 July 2025 , mandates illustration rate caps of 6.0% for HKD-denominated policies and 6.5% for other currencies on projected surrender values (Customers’ IRR) to curb unrealistic expectations. These caps apply to Customers' IRR on projected surrender values across all payment modes, policy terms, and scenarios (base, optimistic, pessimistic). Illustration rate caps 6.0% for products denominated in Hong Kong Dollar (HKD). 6.5% for products denominated in other currencies. If the underlying IRR is below the cap, insurers must use the actual IRR (per best estimates under GL28). Caps do not limit underlying investment assumptions but guide illustration realism. Exemption: Caps do not apply to re-illustrations of in-force policies, but re-illustrations must not be used for aggressive sales tactics. SIGNIFICANCE: This Practice Note reflects a proactive regulatory stance to balance innovation, competition, and consumer trust in Hong Kong’s insurance sector. Insurers should begin preparing now to ensure compliance by July 2025. And the Consumers benefit from clearer, more reliable projections, fostering informed decisions and aligning with the principle of "treating customers fairly." 2. Hong Kong to License Mainland Insurers for Greater Bay Area Retirement Plans Targeting Middle-Income Residents The Insurance Authority ( IA ) plans to introduce new service providers, primarily large mainland Chinese insurers, to offer integrated retirement and elderly care insurance products targeting middle-class residents seeking to retire in the Greater Bay Area (GBA). This initiative, led by Mr Marty Lui Yu-kwok, the IA’s Executive Director for Long-term Business, aims to address growing demand from Hong Kong residents for northbound retirement options, driven by trends in cross-border consumption and aging populations. The proposed insurance products would provide one-stop solutions covering accommodation, healthcare, and other elderly care services in mainland China. These providers, which currently lack Hong Kong licenses, are expected to bring specialized expertise and value to the local market. The IA aims to issue licenses by the end of 2024, with product launches following shortly after. The target demographic includes middle-income earners with monthly salaries between HK$30,000-50,000, reflecting demand for affordable, high-quality retirement options in the GBA. This move aligns with broader regional integration efforts and responds to challenges posed by Hong Kong’s aging population and high local elderly care costs. The IA emphasizes collaboration with mainland regulators to ensure compliance and consumer protection. Market News 3. ICAC investigates puppet insurance agent case involving HK$52 million The Independent Commission Against Corruption (“ ICAC ”) investigated a corruption complaint involving "puppet insurance agents," leading to the conviction of a former insurance branch manager and 10 puppet agents for conspiracy to defraud and money laundering. Case Details: Between 2016 and 2020, the former branch manager of an insurance company recruited individuals to act as puppet insurance agents for two insurance companies. The insurance companies approved these 478 policy applications and paid commissions, bonuses, and allowances totaling over 52 million HKD to the defendants—exceeding 22 million HKD from one company and 29 million HKD from the other. Related insurance policies were high-commission products, and the majority lapsed due to non-payment of premiums. On 11 February 2025, the District Court sentenced the former branch manager to 46 months’ imprisonment. The 10 puppet agents received prison terms ranging from 11 to 22 months. SIGNIFICANCE: The convictions demonstrate the serious legal consequences for individuals involved in fraudulent activities within the insurance industry. The prison sentences imposed reflect the severity of the offenses and serve as a warning to others against engaging in similar misconduct. [End of ComplianceOne Insurance Newsletter –February 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk