The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – October 2024 The topics discussed in this monthly newsletter are as follows: 1. Dr Kelvin Wong appointed as new SFC Chairman 2. New Public Fund Depositaries Regime effective from 2 October 2024 3. New Listing Application Process in Hong Kong is streamlined 4. SFC launches a new Fund Authorization Simple Track (“FASTrack”) to bolster Hong Kong market appeal 5. e-IP application/ submission system on WINGS to be fully adopted in November 6. SFC concludes consultation on Enhanced REIT and Market Conduct regimes 7. SFC sets out vision to foster Fintech ecosystem in Hong Kong 8. Common Red-flags of suspicious transactions from using Customer Supplied System (CSS) observed in SFC investigations [1] 9. Tycoon Dickson Poon is alleged to be involved in Insider Dealing 10. SFC disqualifies former CFO of Fujian Nuoqi 11. SFC suspends former employee of Julius Baer for several regulatory breaches 12. First jail sentence for Unlicensed Activity with compensation order The topic involves multiple enforcement news. Market News 1. Dr Kelvin Wong appointed as new SFC Chairman On 14 Oct 2024, the SFC made a welcome announcement on appointment of new Chairman Mr Kelvin WONG Tin-yau effective 20 October 2024 who will succeed the existing Chairman Mr Tim LUI. A snapshot summary of the welcome speeches from various key figures regarding the appointment. Mr Tim LUI said: “ Kelvin has a wealth of knowledge and experience in the development and regulation of capital markets, in particular, being Chairman of the Accounting and Financial Reporting Council, which the SFC works closely with to uphold the quality and maintain the integrity of Hong Kong’s capital markets and its reputation as an international financial centre. ” And Mr LUI also added that as Kelvin been a Non-Executive Director of the SFC and Chairman of the then Investor Education Centre, Kelvin is well-versed in the policy objectives, its strategic priorities and its operation of the Commission. Mr WONG himself said: “ I am honoured to be appointed as Chairman of the SFC, a leading global securities regulator. I look forward to working cohesively with the Board, CEO Julia, and the management team, many of whom I closely partnered with in my previous role as a Non-Executive Director .” Ms Julia LEUNG, the SFC’s Chief Executive Officer, said: “ I would like to extend a warm welcome to Kelvin and express my deep gratitude to Tim for his exemplary leadership and invaluable guidance in steering the SFC through the many difficult challenges while continuing our mission in pursuing market integrity, transparency and resilience. We now have a set of very clear strategic priorities which would enable the SFC to continue its firm commitment in safeguarding the integrity of our markets and continuing to foster market development .” SIGNIFICANCE: As reflected in the speeches above that given the prior co-working experiences of Mr WONG with the Commission and its high-ranked officials, together with his vast experiences and familiarity with the policies and core missions from previous role as Non-Executive Director of the Commission, it can be expected of a smooth, consistent transition, and continuation of the mission and vision of the Commission in preserving the market integrity in Hong Kong as an international financial centre. 2. New Public Fund Depositaries Regime effective from 2 October 2024 The SFC has updated its codes and guidelines to implement the new Type 13 regulated activity (“RA 13”) regime for public fund depositaries, which will be effective from 2 October 2024 . To ease the transition, the SFC will grant RA 13 licences or registrations to 19 depositaries under major banking or insurance groups in Hong Kong and over 300 staff members on the launch date. Under the new regime, depositaries of SFC-authorised collective investment schemes (“CISs”) must be licensed or registered with the SFC to conduct RA 13 activities. They must also comply with conduct and regulatory requirements similar to those for other regulated activities. SIGNIFICANCE: " Integrating CIS depositaries under the RA 13 regime is crucial to the SFC's strategy to enhance public fund regulation, align with international practices, and boost investor protection ." said Ms Julia Leung, CEO of the SFC. 3. New Listing Application Process in Hong Kong is streamlined On 18 October 2024, the SFC and the Stock Exchange of Hong Kong Limited (the “ Exchange” ) jointly announced the launch of an enhanced timeframe for the New Listing application process (“ Enhanced Application Timeframe” ) to further elevate Hong Kong’s attractiveness as the leading international listing venue in the region. Over the years, the SFC and the Exchange have been endeavouring to enhance the application process for New Listing applications; and the Exchange has already published a Guide for New Listing Applicants in preparing the listing. Key Highlights: Current Regulatory Framework - Under the current structure for reviewing applications, the SFC plays the roles as statutory regulator in administering the Securities and Futures (Stock Market Listing) Rules (“ SMLR” ) and the Securities and Futures Ordinance ( SFO ); the Exchange as a frontline regulator in administering the listing rules and suitability of the listing; while the Listing Committee decides if the application is approved or rejected. Enhanced Application Timeframe - The Enhanced Application Timeframe will provide greater clarity and certainty to the timeline for reviewing New Listing applications by the SFC and the Exchange. Applications that fully meet the requirements - Where an applicant and its sponsor submit a New Listing application that meet all applicable requirements and guidance under the SFO, the SMLR and/or the Listing Rules (“ Applications Fully Meeting Requirements” ), the SFC and the Exchange will individually assess if there are any regulatory concerns (“ Regulators’ Assessment” ) after a maximum of two rounds of comments; and the time taken will be no more than 40 business days , and 60 business days to satisfactorily address regulator’s comments. Upon confirmation of no material regulatory concern, the Exchange will finalise the disclosure in the listing document, which then forwarded to the Listing Committee Hearing. The entire application process expected to take around 6 months . Accelerated Timeframe for Eligible A-share Listed Companies - If an existing A-share listed company meets the following criteria when submitting a New Listing application: (a) have a minimum market capitalisation of HKD10 billion ; and (b) it can confirm, with support of legal advisor’s opinion, that it has complied with all laws and regulations, throughout the two full financial years immediately before listing application, then the A-share listed company is eligible for an accelerated timeframe for the New Listing application process (“ Accelerated Timeframe” ). Under the Accelerated Timeframe, if an eligible A-share listed company submits an Application Fully Meeting Requirements , the Regulators’ Assessment will be completed after one round of regulatory comments; and each regulator will take no more than 30 business days to complete the Regulators’ Assessment (saving 10 business days than before). If material regulatory concerns arise, longer process may require, involving a more intensive and detailed assessment. SIGNIFICANCE: The SFC and HKEX believe this initiative will support Hong Kong’s listing journey by enhancing transparency and efficiency, to further elevate Hong Kong’s attractiveness as the leading international listing venue in the region. Please refer to the above summarized table in the Appendix for your reference. 4. SFC launches a new Fund Authorization Simple Track (“FASTrack”) to bolster Hong Kong market appeal On 21 October 2024, the SFC announced the launch of the Fund Authorization Simple Track (“FASTrack”) on 4 November 2024. Under the FASTrack, SFC aims to grant fund authorisations within 15 business days after receiving complete and quality submissions from applicants. The new approach will cover simple funds from jurisdictions which have mutual recognition of funds (“MRF”) arrangements with the SFC. The SFC has issued a pamphlet detailing the new features and a circular explaining the new authorisation process. Introductory Note (1) The SFC currently processes new fund applications under a two-stream approach where applications are classified as standard (with average processing time of 1.5 months) or non-standard (of 2.5 month) which are in line with SFC targets. (2) The SFC has entered into mutual recognition of funds arrangements with jurisdictions outside Hong Kong (“MRF Jurisdictions”) which comprise of regulatory regimes providing comparable investor protection for retail investment funds similar to Hong Kong; and there is room to further expedite the authorization process. (3) A new FASTrack has been launched for simple funds domiciled and regulated in MRF Jurisdictions applying for authorization. (4) The FASTrack aims to grant fund authorizations within 15 business days from applications so as to promote efficiency and maintain competitiveness of Hong Kong. Eligible funds under FASTrack (1) A simple fund from an MRF Jurisdiction will be processed under FASTrack ( “FASTrack Fund” ) if the following criteria are satisfied: (i) Type of funds: either (i) an equity, bond or mixed fund; (ii) an exchange-traded fund or unlisted fund tracking an index or a plain vanilla index; or (iii) a feeder fund; and the funds is NOT a derivative fund. (ii) The management company of the fund is located in an MRF Jurisdiction; (iii) The investment delegate is either (a) located in an MRF Jurisdiction; or (b) is an affiliate of the management company or is currently managing other SFC-authorised funds. (2) FASTrack Funds are not expected to contain novel features, have material issues or bear wider policy implications. Processing time and performance pledges (1) FASTrack Funds are intended to cover simple funds which are already subject to home regulators’ supervision, and the SFC aims to grant authorization within 15 business days upon receipt of complete and quality submissions from the applicants. (2) Under the expected timeframe for FASTrack, the SFC will either: take up or refuse to take up an application within 5 business days upon receiving it; or grant authorization within 10 business days from the take-up date. (3) Post-vetting will be conducted by SFC to ensure the applicable authorization conditions are complied with. Implementation (1) FASTrack will take effect on 4 November 2024 ( Effective Date ) with a six-month pilot period ending on 4 May 2025. (2) Applications meeting the above criteria received on or after the Effective Date will be processed under FASTrack; or otherwise with the previous two-stream approach. (3) Relevant Information Checklist and FAQ have been updated to smoothen the launch. (4) The SFC will monitor the FASTrack during the pilot period ending on 4 May 2025. Obligations of applicants (1) Applicants must discharge their responsibility and ensure that their SFC-authorised funds comply with prevailing regulatory requirements. The SFC will take action against any non-compliance cases. SIGNIFICANCE: Ms. Christina Choi, SFC’s Executive Director of Investment Products, noted that FASTrack will provide clarity and certainty for fund launches in Hong Kong, enhancing the city’s competitiveness as a premier asset management hub. 5. e-IP application/ submission system on WINGS to be fully adopted in November On 24 October 2024, the SFC announced an extension of the parallel run period of its new online application/submission system for investment products, e-IP, by one month to 29 November 2024. Following the circular dated 8 July 2024, the SFC had launched the e-IP on its WINGS portal on 29 July 2024 to streamline and enhance the efficiency of processing new product applications, post-authorization/ registration submission to Investment Product Division (“IPD”). An initial three-month period of parallel run was in schedule while applications and submission were also accepted via the existing channels whereas the SFC has been monitoring the e-IP and gathering feedbacks from industry participants. Since new features and more advanced settings were introduced, and to facilitate these enhancements, the SFC decides to extend the parallel run period by one month to 29 November 2024. SIGNIFICANCE: Starting 30 November 2024 after the parallel run period, applications and submissions of investment products administered by IPD must be submitted via e-IP. And the current submission from IPD via the IP E-submission system will be integrated into the e-IP, including reporting of net asset values, large redemptions and suspensions of dealing. 6. SFC concludes consultation on Enhanced REIT and Market Conduct regimes On 8 Oct 2024, the SFC released consultation conclusions on proposals for a statutory scheme of arrangement and compulsory acquisition mechanism for real estate investment trusts (“REITs”) and the enhanced market conduct regime for listed collective investment schemes (“CIS”) under the Cap. 571 (“SFO”). The REIT Scheme Proposal allows REITs to conduct privatisation and corporate restructuring in an orderly manner with investor safeguards akin to those under the Companies Ordinance. The Listed CIS Proposal aims to extend SFO market misconduct rules, including insider dealing and market manipulation, to listed CIS, enhancing market integrity. SIGNIFICANCE: The proposals received general support. Ms Christina Choi, SFC’s Executive Director of Investment Products, emphasized that these measures will provide transparency, consistency, and greater investor protection. The legislative process is underway to implement these proposals. 7. SFC sets out vision to foster Fintech ecosystem in Hong Kong In the Fintech Week 2024, the SFC announced its vision for fostering a healthy and robust fintech ecosystem in Hong Kong by outlining several major areas of its initiatives to balance market development and investor protection. In a speech delivered by Dr Eric Yip, the SFC’s Executive Director of Intermediaries, he elaborated the details of the initiatives to further develop and scale up the Hong Kong’s virtual asset market. Key Initiatives: Swift Licensing for VATPs: The SFC is implementing a swift licence approval process for handling deemed-to-be-licensed VATP applicants, and expects the first batch of formal licences to be granted to deemed-to-be-licensed VATP applicants by the end of this year. Consultative Panel: To support licensed VATPs’ development of sustainable business models, a consultative panel will be launched in early 2025 for all licensed VATPs with their representative and also other stakeholders, feedbacks will be collected for SFC’s forthcoming white paper on the virtual asset industry. Regulatory Development: The SFC is working with the HKSAR Government and other regulatory bodies to develop proposals for regulating the provision of virtual asset trading services, and the provision of virtual asset custody services. Tokenisation and Project Ensemble: The SFC is a core member of the Architecture Community of Hong Kong Monetary Authority’s Project Ensemble, co-leading tokenisation initiatives for the asset management industry; the Project Ensemble plays a crucial role in establishing the necessary infrastructure for Hong Kong’s tokenisation ecosystem. SIGNIFICANCE: SFC demonstrates its commitment in moulding itself as a pioneer in the virtual assets regime, and navigating Hong Kong toward the destination. Dr Eric Yip emphasized the SFC's commitment to balancing market development with investor protection through proactive monitoring and collaboration with other agencies. Enforcement News 8. Common Red-flags of suspicious transactions from using Customer Supplied System (CSS) observed in SFC investigations During the previous month of OCT 2024, a couple of SFC investigations were found to be related to AML/CTF breaches arising from the use of Customer Supplied System (“CSS”) by the clients instead of the official Broker Supplied System (“BSS”) provided by the futures brokers. Three brokers, namely, CSC Futures (HK) Limited (" CSC "), Xinhu International Futures (Hong Kong) Co., Limited (" Xinhu ") and Zheshang International Financial Holdings Co., Limited (" ZIF "), were reprimanded and fined by the SFC, and there are similar red-flags to be alerted from the three cases taking a look at the Statement of Disciplinary Action. In retrospect of the previous quarters, there were occasional investigation cases related to use of CSS, the following observations from the case studies above are as below. Summary of the COMMON red-flags of clients using CSS: (1) The Relevant Periods covered the investigations by the SFC were similar ranging from 2016 to 2019. (2) The CSS used by the clients was the same trading software of Xinguanjia (“XGJ” or “信管家” ) which allowed the clients (the users) to create sub-accounts for the authorized users in XGJ under the clients’ own accounts maintained with the futures brokers. (3) The brokers failed to conduct proper due diligence on the CSS , namely the XGJ, used by their clients instead of the official BSS provided by the brokers. (4) The brokers failed to conduct proper due diligence on the CSS authorized users whom operated under the sub-accounts within the XGJ system. (5) The internal monitoring system and control policy were not sufficient to effectively detect suspicious transactions with the findings of large number of self-matched trades executed by the same client account (with sub-accounts behind). As a result, the broker failed to ensure compliance with the AML/CTF Ordinance, the AML Guidelines and Code of Conduct required by the SFC. (6) The large size and number of deposits made by the client accounts (with suspicious transactions) were incommensurate with the declared financial status of the clients with regard to the information provided upon account openings. (7) The follow-up enquiries conducted by the brokers were not sufficient to address the observations of abnormal large deposits made by the client accounts concerned SIGNIFICANCE: The use of CSS has long been a loophole which allows client users to create sub-accounts to hide the authentic identities of the order originators and to circumvent the ongoing monitoring by the brokers. Brokers should be alert and adopt a conservative approach when granting the use of CSS to their clients if the brokers themselves do not have effective monitoring devices for detecting suspicious transactions, and the due diligence procedures are not so effective in assessing the compliance risk behind the veil of CSS. 9. Tycoon Dickson Poon is alleged to be involved in Insider Dealing The SFC had commenced proceedings in the Market Misconduct Tribunal (MMT) against chairman of Dickson Concepts (International) Limited (“ Dickson Concepts ”), Mr Dickson Poon, and Equity Advantage Limited (“ Equity ”) for alleged insider dealing in the shares of Dickson Concepts on 15 October. The SFC also alleges that Dickson Poon and his son, Pearson Poon, caused a seven-week delay in disclosing inside information about Paypal’s acquisition of Honey Science Corporation, which significantly benefited the Company. On 20 November 2019, Paypal Holdings, Inc. (“ Paypal ”) announced on its website that it had agreed to acquire Honey Science Corporation (“ Honey ”) for approximately US$4 billion (proposed acquisition). At the material time, Dickson Concepts held 24,834,600 shares of Honey, yet the holdings were only recorded as “Unlisted equity securities” under “Other Financial Assets” without any reference to Honey. On 9 January 2020, Dickson Concepts issued an announcement disclosing to the public, among other things, that Paypal and Honey had completed the proposed acquisition on 3 January 2020, thus resulting in a gain of approximately HK$928,744,921 over Dickson Concepts’ net book value , triggering the stock price of Dickson Concepts an increase of 33.3%! Findings of SFC revealed that: (1) Dickson Poon was in possession of the inside information about the proposed acquisition, and purchased a total of 2,756,500 shares of Dickson Concepts via the securities account of Equity between 28 November and 19 December 2019 before public disclosure. (2) Dickson Concepts failed to disclose inside information about the proposed acquisition as soon as reasonably practicable, Dickson Poon and Pearson Poon caused Dickson Concepts’ breach of the disclosure of insider information requirements. (3) Dickson Poon and Pearson Poon, who were members of senior management of Dickson Concepts, became aware of the inside information about the proposed acquisition; and failed to take steps to cause the Board of Dickson Concepts to disclose the inside information to the public as soon as reasonably practicable and Dickson Concepts only issued the announcement seven weeks later on 9 January 2020. SIGNIFICANCE: It is an illustrative exemplification of insider information where the individual possessing the information can take advantage of it for making lucrative remuneration. The SFC alleges that Dickson Poon and Pearson Poon, senior management of the Company, became aware of the inside information on 21 November 2019 but failed to ensure timely disclosure. The announcement was issued seven weeks later on 9 January 2020. And the SFC’s proceedings highlight the importance of timely and accurate disclosure to maintain market integrity. Dickson Poon has denied the allegation. 10. SFC disqualifies former CFO of Fujian Nuoqi The SFC has obtained a disqualification order against Mr. Au Yeung Ho Yin, the former CFO and executive director of Fujian Nuoqi Co., Ltd. (Stock Code: 1353) (“Nuoqi”), for failing to discharge his duties. Au Yeung is disqualified from holding directorial or managerial positions in any Hong Kong corporation for three years . Au Yeung admitted failing to oversee accounting functions and ensure proper governance. The SFC's investigation revealed that around RMB225 million was withdrawn from the Company’s bank accounts without proper approval . Justice Peter Ng of the Court of First Instance stated that Au Yeung breached his duties as CFO by failing to investigate unauthorized transfers totalling RMB225 million and not alerting fellow directors. He also falsely claimed in Nuoqi's 2013 annual report that unused IPO proceeds were deposited in Hong Kong banks, while RMB160 million was actually transferred to a Mainland bank and used outside the specified scope in the listing prospectus. SIGNIFICANCE: Mr. Christopher Wilson, the SFC’s Executive Director of Enforcement, emphasized that investors rely heavily on chief financial officers of listed companies to safeguard business assets through their oversight of financial functions and reporting. This case clearly shows CFOs have a duty to investigate suspicious transactions and promptly report them to the board. CFOs must ensure all financial report disclosures are accurate and complete, as investors depend on these reports to evaluate the financial health of listed companies. 11. SFC suspends former employee of Julius Baer for several regulatory breaches On 18 October 2024, the SFC announced the suspension of Mr. Singh Amit Kishan, a former employee of Bank Julius Baer & Co. Ltd. (“ Julius Baer ”), for seven months due to regulatory breaches. Key Findings: Singh falsely claimed he had a face-to-face meeting with a client as part of the required account opening procedure. Singh advised a client to make 14 transactions that appeared unsolicited, breaching company policies. Eleven transactions involved products not permitted for solicitation, while the others lacked pre-trade approval. SIGNIFICANCE: As a result, Singh circumvented the Company’s procedures on account opening, know-your-client (“KYC”), and product suitability, preventing proper compliance monitoring. In deciding the sanction, the SFC considered the lack of evidence suggesting the client information was materially deficient and Singh’s otherwise clean disciplinary record. 12. First jail sentence for Unlicensed Activity with compensation order On 30 Oct 2024, the Eastern Magistrates’ Court has sentenced Ms. LAI Ka Yi (“ LAI ”) to two weeks’ imprisonment and ordered her to pay $98,000 as a compensation to a victim of her unlicensed activity after she was convicted of holding herself out as carrying on a business in dealing in securities without a licence from the SFF. It is also the first time the Court imposed an immediate imprisonment for an unlicensed activity offence under section 114 of the SFO ( Restriction on carrying on business in regulated activities ). Between April and 10 May 2018, Lai who was then a university student, held herself out to the victim, who she knew personally, as carrying on a business in dealing in securities. Lai enticed the victim to transfer to her bank account funds for her to invest in securities on the victim’s behalf. In the end, the victim was unable to withdraw the investment from Lai except receiving from her $2,000 in purported earnings. SIGNIFICANCE: The SFC urges the public to verify the licensing status of firms and individuals on its Public Register of Licensed Persons and Registered Institutions. According to public information, LAI was licensed and accredited to Convoy Asset Management Limited to carry on Type 1 (dealing in securities) regulated activity from 30 December 2015 to 11 January 2016, for thirteen days only. And the incidence happened between April and 10 May 2018, a relatively short episode which was two years after expiry of her previous SFC license, while the only victim was a friend of LAI personally. This marks the first time an immediate jail sentence and compensation order have been imposed for such an offence under section 114 of the Cap. 571 Securities and Futures Ordinance (“SFO”). 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

Thematic Cybersecurity Review of Licensed Corporations Compliance Impact Alert: Thematic Cybersecurity Review of Licensed Corporations Feb 2025 Disclaimer: Contents contained in this document including should not be regarded as a substitute legal and / or compliance advice in any circumstances and shall not be reproduced (in whole or in part), distributed or otherwise passed on to any other person without our prior written consent. Language: English version only Overview The Securities and Futures Commission (“SFC”) completed a thematic review of cybersecurity practices among 50 licensed corporations (“LCs”) in Hong Kong engaging in internet trading. The review assessed compliance with Cybersecurity Guidelines and the Code of Conduct, focusing on phishing, end-of-life (“EOL”) software, and third-party provider management. On-site inspections were conducted at 7 internet brokers, and deep-dive discussions were held with 6 globally operating LCs. The review identified eight significant breaches between 2021 and 2024, linked to issues like weak two-factor authentication (“2FA”), poor security configurations, delayed security patches, inadequate encryption, and unauthorized access to admin accounts. The SFC highlighted insufficient senior management oversight and weak cybersecurity measures as key contributors. To address rising threats, the SFC issued guidelines on phishing prevention, software management, and cloud security. **For more details, please refer to 2023/24 Thematic Cybersecurity review of LCs ** Findings of Cybersecurity Incidents and Expectations The SFC surveyed 50 LCs to assess cybersecurity practices. Key findings, impacts and expectations are summarized below: Findings Impact Expections 1. Ransomware Attacks One LC's systems and data were encrypted, requiring a full rebuild to resume trading. Deploy anti-malware, avoid embedded hyperlinks, conduct training, and establish incident handling. 2. Phishing Vulnerabilities A ransomware attack traced to a phishing email encrypted an LC’s systems, necessitating a rebuild. Conduct simulations and ensure effective reporting procedures. 3. EOL Software Management EOL software increased risks of unauthorized access to critical systems. Maintain IT asset inventories, monitor software validity, and cease using EOL systems. 4. Vulnerability to Unauthorized Access Cybercriminals exploited unpatched VPNs and unsecured ports to access internal networks. Enforce least-privilege access, 2FA, VPNs, session timeouts, and monitor third-party access. 5. Third-Party Provider Management A cyber-attack on a provider disrupted clearing services; some LCs had non-compliant trading systems. Conduct due diligence, establish SLAs, monitor performance, and include providers in contingency plans. 6. Cloud Security Weak network policies increased data leakage risks. Secure infrastructure, enforce access controls, manage API keys, and back up data securely. Actions and Recommendations LCs must ensure senior management (e.g. MIC-IT) addresses cybersecurity risks by: 1. Appointing qualified staff and allocating resources. 2. Reviewing and approving risk management policies. 3. Conducting regular cybersecurity reviews and addressing vulnerabilities. 4. Restricting access to sensitive systems and enforcing secure remote access. 5. Maintaining and testing contingency plans. Requirements are effective immediately, but the SFC will adopt a practical approach for LCs needing time to upgrade systems. Future plans include a comprehensive review of cybersecurity requirements to develop a broader framework for all LCs. How We Can Help Our team comprises experienced professionals with deep expertise in compliance, risk management, and policy review and development in identifying gaps between the regulatory expectations in the circular and your current policies and procedures. We understand the complexities of regulatory requirements and provide tailored solutions to meet your specific needs and close any material gaps. Our expertise ensures adherence to regulatory standards and enhances overall compliance practices. If you have any questions, please feel free to Contact Us .

財經事務及庫務局 (“財庫局”) 及證券及期貨事務監察委員會 (“證監會”) 聯合發佈了一份公眾諮詢檔，旨在收集對規管香港虛擬資產交易服務的立法建議的回饋意見。The Financial Services and the Treasury Bureau (“FSTB”) and the Securities and Futures Commission (“SFC”) have jointly released a public consultation document to gather feedback on a legislative proposal to regulate virtual asset (“VA”) dealing services in Hong Kong. 有關規管虛擬資產交易的立法建議公眾諮詢 [30 June 2025] I. 背景 財經事務及庫務局 (“ 財庫局 ”) 及證券及期貨事務監察委員會 (“ 證監會 ”) 聯合發佈了一份公眾諮詢檔，旨在收集對規管香港虛擬資產交易服務的立法建議的回饋意見。此前，政府於2024年2月至4月就虛擬資產場外交易 (“ OTC ”) 服務進行了諮詢 [1] 。根據利益相關者的意見，諮詢範圍已擴大至涵蓋更廣泛的虛擬資產交易活動，按照「相同活動、相同風險、相同規管」原則下建立虛擬資產規管框架。 目前的提案以2024年場外交易市場諮詢為基礎，旨在透過引入虛擬資產交易服務牌照制度來解決這些差距。該提案體現了香港在2022年10月和2025年6月的政策聲明中概述的更廣闊的願景，即在降低風險的同時，建立一個全面的數位資產生態系統。 公眾意見徵詢截止日期為2025年8月29日，屆時將向立法會提交法案。 II. 擬議發牌制度 1) 誰需要獲得牌照 ? 任何人士在業務過程中提供虛擬資產交易服務，當中涉及訂立或要約訂立協議，或誘使或企圖誘使另一人訂立或要約訂立協定，目的是取得、處置、認購或包銷虛擬資產；或協定的目的或佯稱目的是使任何一方從虛擬資產的收益或參照虛擬資產價值的波動獲得利潤。 此制度將涵蓋所有虛擬資產交易服務，無論該等服務是通過實體店鋪及/或其他平臺提供。 就銀行和儲值支付工具 (“ SVF ”) 而言，經諮詢香港金融管理局 (“ 金管局 ”) 後，需要向證監會註冊，以在香港提供任何虛擬資產的交易服務。 2) 業務類型和業務模式： i. 簡單交易 : 以一種虛擬資產轉換另一種虛擬資產，或以虛擬資產轉換金錢 (或以金錢轉換虛擬資產) 。 ii. 較為複雜的虛擬資產交易活動 :經紀活動、大宗交易活動和顧問[2]或資產經理[3]從事的其他相關活動。 3) 豁免： i. 獲金管局發牌及(ii)在一級市場上要約提供或贖回其發行的穩定幣的穩定幣發行人將會被豁免。 ii. 個人與個人(peer-to-peer)之間不牽涉中介人的虛擬資產交易 III. 擬公司架構及規管要求 1) 公司架構 i. 公司架構 ：申請人(銀行除外)必須是(i)在香港成立或根據《公司條例》在香港註冊，並有固定營業地點的公司。 ii. 處所 ：合適處所儲存簿冊及記錄。 iii. 適當人選測試 ：包括申請人(或其董事、大股東或最終擁有人)，評估其犯罪記錄、財務穩定性和合規記錄。 iv. 負責人員 (RO) ：至少兩名經證監會批准的RO，具備監管知識和行業經驗。 2) 規管要求 i. 財政資源 ： 最低實繳資本：500萬港元。 流動資本：300萬港元(視業務模式而定)。 超額流動資本須足以支付12個月的營運開支。 ii. 散戶投資者可交易的虛擬資產 : 僅限於高流動性代幣和金管局發牌的穩定幣，與VATP標準一致。 iii. 其他服務 ： 顧問、資產管理、質押等，需根據量身定制的規管獲得單獨批准。 iv. 打擊洗錢及恐怖分子資金籌集 (“ AML/CFT ”)合規 ： 包括客戶盡職調查 (CDD)、記錄保存和使用區塊鏈分析工具進行交易監控。 v. 客戶資產保護 ： 持牌人應妥善保障其客戶資產，並採取額外措施，包括妥善分隔客戶資產，並由香港持牌虛擬資產託管人保管。 vi. 投資者保障 ： 評估客戶虛擬資產知識、提供培訓、風險分析、設定風險限額、確保適合性及管理利益衝突。 vii. 風險管理 ： 制定適當並與其業務規模和複雜程度相稱的風險管理政策和程序，以處理其活動可產生的洗錢及恐怖分子資金籌集和其他風險。 viii. 資料通知及財務披露 ： 提交經審計的帳目、錢包地址和業務詳情 IV. 運營方面 1) 非獲證監會發牌的VATP： 正在考慮允許通過受海外監管的VATP或流動性提供者進行交易，但需採取加強盡職調查和風險披露等保障措施（有待進一步諮詢）。 2) 託管： 客戶虛擬資產必須由證監會發牌的虛擬資產託管人持有，與2025年6月27日啟動的虛擬資產託管人諮詢相一致 [4] 。 3) 監控： 持牌人須採用適當的科技方案(例如區塊鏈分析工具)，以便追蹤虛擬資產的來源和去向。 V. 發牌及過渡安排 1) 牌照持續期限： 無期限，有效直至被撤銷（例如因不當行為）。 2) 無過渡安排： 原有的虛擬資產交易服務提供者必須在制度生效日期前申請牌照，沒有自動過渡批准。 3) 加快發牌程序： 適用於獲證監會發牌的VATP，及正在提供虛擬資產交易服務的持牌法團(視乎情況)。 4) 費用： 參照《證券及期貨條例》下的第1類受規管活動，例如持牌法團的申請費和年費為4,740港元。 VI. 監管權力及紀律處分 1) 監管權力 監管機構 授權權力 證券及期貨事務監察委員會 (“ 證監會 ”, “ SFC” ) 制定標準、施加條件、進行檢查、調查違規行為並採取紀律措施。 香港金融管理局 (“ 金管局 ”, “ HKMA” ) 監管銀行和SVF，擁有類似證監會的監管權力。 2) 紀律處分 違規行為 紀律處分 i. 無牌經營 可罰款 500萬港元 及 監禁7年 。 ii. 無牌行銷 可罰款 5萬港元 及 監禁6個月 。 iii. 違反AML/CFT規定 可罰款 100萬港元 及 監禁2年 。 iv. 欺詐行為 可罰款 1,000萬港元 及 監禁10年 。 v. 失實陳述 可罰款 100萬港元 及 監禁7年 。 vi. 不當行為 暫停或撤銷牌照、譴責或罰款高達 1,000萬港元 。 VII. 徵詢與下一步 公眾可以於2025年8月29日前通過以下方法提交意見： 電郵 ： vadealing-consult@fstb.gov.hk ;或 郵寄至 ：香港中環添馬添美道政府總部24樓財經事務及庫務局財經事務科第五組 政府將分析回饋後敲定最終方案。 VIII. 資料參考: 有關規管虛擬資產交易的立法建議 - 公眾諮詢 英文版: https://www.fstb.gov.hk/fsb/en/publication/consult/doc/VADEALING_consultation_paper_en.pdf 中文版: https://www.fstb.gov.hk/fsb/tc/publication/consult/doc/VADEALING_consultation_paper_tc.pdf [1] https://www.fstb.gov.hk/fsb/tc/publication/consult/doc/VAOTC_consultation_paper_tc.pdf [2] 顧問可從事的活動包括提供意見，以及接受買賣虛擬資產的指示等。 [3] 資產經理可從事的活動包括為其本身的客戶管理虛擬資產組合時，向交易商發出交易指示等。 [4] https://www.fstb.gov.hk/fsb/tc/publication/consult/doc/VACUSTODY_consultation_paper_tc.pdf Summary on Public Consultation on Legislative Proposal to Regulate Dealing in Virtual Assets I. Introduction The Financial Services and the Treasury Bureau (“ FSTB ”) and the Securities and Futures Commission (“ SFC ”) have jointly released a public consultation document to gather feedback on a legislative proposal to regulate virtual asset (“ VA ”) dealing services in Hong Kong. This follows an earlier consultation [1] from February to April 2024 focused on over-the-counter (“ OTC ”) VA trading services. Based on stakeholder input, the scope has been expanded to encompass a broader range of VA dealing activities, aligning with Hong Kong’s commitment to a robust digital asset regulatory framework under the "same activity, same risks, same regulation" principle. The current proposal builds on the 2024 OTC consultation and aims to address these gaps by introducing a licensing regime for VA dealing services. It reflects Hong Kong’s broader vision, outlined in policy statements from October 2022 and June 2025, to foster a comprehensive digital asset ecosystem while mitigating risks. Public comments are invited until 29 August 2025, with a bill to be introduced to the Legislative Council thereafter. II. Proposed Licensing Regime 1) Who Needs to Be Licensed? Any person, by way of business, making or offering to make an agreement with another person, or inducing or attempting to induce another person to enter into or to offer to enter into an agreement in respect of the following would require a license granted by or registration with the SFC. This regime will cover all VA dealing services irrespective of whether the services are provided through a physical outlet and/or other platforms. In respect of (i) banks and (ii) stored value facilities (“ SVFs ”), they need to be registered with the SFC (in consultation with the Hong Kong Monetary Authority (“ HKMA ”)) for providing services of dealing in any VAs in Hong Kong. 2) Business Types and Business Models: i. Simple Dealing Services: VA-to-VA or VA-to-fiat conversions (e.g. exchanging Bitcoin for Ethereum or HKD). ii. Complex Dealing Services: Brokerage, block trading, and activities by advisors[2] or asset managers[3]. 3) Exemption: i. stablecoin issuers who (i) are licensed by the HKMA and (ii) conduct offering or redemption of the stablecoins they issue in the primary market. ii. peer-to-peer trading of VAs between individuals where no intermediary is involved. III. Regulatory Requirements 1) Eligibility i. Corporate Structure: Applicants (except banks) must be locally incorporated or registered in Hong Kong under the Companies Ordinance, with a permanent place of business. ii. Premises: Suitable facilities for record-keeping. iii. Fit-and-Proper Test: Applies to applicants, substantial shareholders, and key personnel, assessing criminal history, financial stability, and compliance records. iii. Responsible Officers (“ RO ”): At least two SFC-approved ROs with regulatory knowledge and industry experience. 2) Key Obligations i. Financial Resources: Minimum paid-up capital: HK$5 million. Minimum liquid capital: HK$3 million (varies by business model). Excess liquid capital to cover 12 months of operating expenses. ii. Allowed VAs for Retail Investors: Limited to highly liquid tokens and HKMA-licensed stablecoins, mirroring VATP standards. iii. Other Services: Advisory, asset management, staking, etc. require separate approvals under tailored regulations. iv. AML/CFT Compliance: Includes customer due diligence (“CDD”), record-keeping, and transaction monitoring with blockchain analytic tools. v. Client Asset Protection: Segregation of assets and safekeeping with licensed VA custodians in Hong Kong. vi. Investor Safeguards: Assessing client VA knowledge, providing training, risk profiling, setting exposure limits, ensuring suitability, and managing conflicts of interest. vii. Risk Management: Policies to address ML/TF and operational risks. viii. Reporting: Submission of audited accounts, wallet addresses, and business details. IV. Operational Aspects 1) Non-SFC-Licensed VATPs: An option is under consideration to allow dealing via overseas-regulated VATPs or liquidity providers, with safeguards like enhanced due diligence and risk disclosures (subject to further consultation). 2) Custody: Client VAs must be held with SFC-licensed or registered VA custodians in Hong Kong, aligning with a separate VA custodian consultation launched on 27 June 2025 [4] . 3) Monitoring: Licensees must track VA origins and destinations using advanced technological solutions. V. Licensing and Transitional Arrangements 1) License Type: Open-ended, valid until revoked (e.g. for misconduct). 2) No Deeming Arrangement: Existing providers must apply for a license by the regime’s commencement date, with no automatic transitional approval. 3) Expedited Process: Available for SFC-licensed VATPs and regulated entities already offering VA dealing services. 4) Fees: Benchmarked to Type 1 regulated activity under the Securities and Futures Ordinance (“ SFO ”), e.g. HK$4,740 application fee and annual fee for licensed corporations. VI. Powers and Sanctions 1) Regulatory Powers Regulator(s) Authorised Power Securities and Futures Commission ( SFC ) Sets standards, imposes conditions, conducts inspections, investigates non-compliance, and applies disciplinary measures. Hong Kong Monetary Authority ( HKMA ) Frontline regulator for banks and SVFs, with similar supervisory powers. 2) Sanctions Violation(s) Sanction(s) i. Unlicensed Operations HK$5 million fine and 7 years imprisonment. ii. Unlicensed Marketing HK$50,000 fine and 6 months imprisonment. iii. AML/CFT Breaches HK$1 million fine and 2 years imprisonment. iv. Fraudulent Behavior HK$10 million fine and 10 years imprisonment. v. Misrepresentation HK$1 million fine and 7 years imprisonment. vi. Misconduct License suspension/revocation, reprimands, or penalties up to HKD$10 million . VII. Next Steps The Public can submit the comment on or before 29 August 2025: Via email: vadealing-consult@fstb.gov.hk ; or Post: Division 5, Financial Services Branch, Financial Services and the Treasury Bureau, 24/F, Central Government Offices, Tim Mei Avenue, Tamar Central, Hong Kong. The final proposals to be determined after analyzing feedback from the Public. VIII. Reference Materials Full Consultation Paper: English: https://www.fstb.gov.hk/fsb/en/publication/consult/doc/VADEALING_consultation_paper_en.pdf Chinese: https://www.fstb.gov.hk/fsb/tc/publication/consult/doc/VADEALING_consultation_paper_tc.pdf [1] https://www.fstb.gov.hk/fsb/en/publication/consult/doc/VAOTC_consultation_paper_en.pdf [2] An advisor may, among others, provide advice and also take an order to purchase or sell VAs. [3] Asset managers may, among others, place trade orders to dealers in the course of managing their own clients’ portfolios of VAs. [4] https://apps.sfc.hk/edistributionWeb/api/consultation/openFile?lang=EN&refNo=25CP7 天匯合規顧問有限公司 ComplianceOne Consulting Limited 2025年6月30日

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

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – Nov 2024 The topics discussed in this monthly newsletter are as follows: 1. Asian Insurance Forum 2024: Navigating Global Volatility 2. CPD Course for Insurance Brokers on Grandfathered ILAS Policies 3. The SFC Announces First Batch of Brokers for Wealth Management Connect Pilot Scheme and Insights on Insurance Connect IA News Updates 1. Asian Insurance Forum 2024: Navigating Global Volatility The IA's annual flagship event, the Asian Insurance Forum (“AIF”), will be held on 10 December 2024 , themed “Rising to the Challenge amidst Global Volatility.” This event will feature prominent speakers from the insurance and financial sectors, as well as regulators and government officials from Hong Kong and around the world. Keynote speakers include Mr. John Lee, Chief Executive of the HKSAR, Mr. Paul Chan, Financial Secretary of the HKSAR, and Mr. Jonathan Dixon, Secretary General of the IAIS. Panel discussions will cover: Global supervisory priorities. Strengthening the headquarters economy. Insurance solutions in wealth management, along with a dialogue with IA leadership. Participants can register online to join the forum virtually for free. For more details and the full program, visit the AIF 2024 website . 2. CPD Course for Insurance Brokers on Grandfathered ILAS Policies The IA published the circular on 8 November 2024 which provides additional details on the CPD course required for compliance with the Grandfathering Arrangements. From 1 October 2024, licensed insurance brokers offering advisory or discretionary investment services for ILAS Policies must meet new competency requirements as per the Practice Note . Grandfathering Arrangements: Licensed insurance brokers unable to meet the new requirements by 1 October 2024 can continue servicing policies issued before this date (Grandfathered ILAS Policies) until 31 July 2027, provided they comply with the Additional CPD requirement. This entails completing 2 additional CPD hours annually in the following periods: 1 August 2024 to 31 July 2025 1 August 2025 to 31 July 2026 1 August 2026 to 31 July 2027 Firs run of the Course for Insurance Brokers on Grandfather ILAS Policies The Hong Kong Securities and Investment Institute (“HKSI”), in collaboration with the Professional Insurance Brokers Association (“PIBA”) and The Hong Kong Confederation of Insurance Brokers (“CIB”), is launching the first Course on 26 November 2024 , which fulfills the Additional CPD requirement under the Grandfathering Arrangements established by IA. Market News 3. SFC Announces First Batch of Brokers for Wealth Management Connect Pilot Scheme and Insights on Insurance Connect SFC has announced that 14 LCs are now eligible to participate in the Cross-boundary Wealth Management Connect Pilot Scheme (“WMC”) in the Guangdong-Hong Kong-Macao Greater Bay Area (“GBA”). This scheme enhances connectivity between Hong Kong and Mainland China, offering new business opportunities for financial services. Impact on Insurance Brokers and Future of Insurance Connect The success of the WMC is seen as a positive indicator for the potential implementation of similar mechanisms, such as the anticipated Insurance Connect. This would allow Hong Kong and Macau insurance companies to sell insurance products directly to Mainland residents without establishing local branches. However, current Mainland regulations conflict with this approach, and a pilot for Insurance Connect is not yet feasible. Licensed insurer(s), insurance broker companie(s) shall see the WMC as a best practice to get ready for the eventual establishment of Insurance Connect. By familiarizing themselves with cross-boundary operations and regulatory requirements, they can smoothly transition once the Insurance Connect is approved. SIGNIFICANCE: Despite the delay in Insurance Connect, preparations for establishing insurance after-sales service centers in Nansha and Qianhai are in their final stages. These centers will offer policy management and claims services for Hong Kong policyholders in the GBA. [End of ComplianceOne Insurance Newsletter – November 2024] 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

天匯合規協助大公國際香港成功申請香港信貸評級服務牌照（10號牌） 天匯合規協助大公國際香港成功申請 香港信貸評級服務牌照（10號牌） 天匯合規顧問有限公司(「天匯合規」) 協助大公國際資信評估有限公司（「大公國際」）旗下的香港全資子公司：大公國際香港有限公司（「大公國際香港 」） (中央編號: BUK036) 成功向香港證券及期貨事務監察委員會（「香港證監會」）申請獲准經營第10類受規管活動：信貸評級服務牌照（即10號牌）。大公國際香港成為近四年多以來香港證監會唯一批准的10號牌的公司，也是全香港第九家獲香港證監會批准並持有10號牌的公司（同時為第四家來自中國內地的信用評級公司）。大公國際香港於2023年第四季首次遞交申請，於2024年4月成功取得香港證監會下發的原則性核准函（Approval-in-principle, “AIP”），並於5月27日正式獲批牌照。 大公國際香港的控股股東為大公國際，成立於1994年，是中國人民銀行和原國家經貿委共同批准成立的全國性信用評級機構。成立30年以來，大公國際先後對70多個行業的近萬家企業進行信用評級，是最早在中國內地開展信用評級業務的公司之一，為多家工商企業、金融機構、主權國家、國際公司、資產證券化類產品等提供評級服務，位居產業前列。為提升公司在國際評級競爭中的地位，並滿足其自身發展需求，於2023年6月成立了大公國際香港，該公司主要專注於提供企業和金融機構評級服務以及結構化產品評級服務。 天匯合規作為大公國際香港的合規顧問，為本項目提供了全方位的合規服務，包括提供申請方案設計、合規建議諮詢、內部監控流程的設計、以及協助回復香港證監會對大公國際香港的牌照申請提問的回饋等綜合服務。天匯合規合夥人Tao Wong及Tommy Chung領銜的合規顧問團隊專注於香港境內的金融牌照申請、反洗錢系統、以及各類型合規顧問服務。天匯合規成立7年多以來已成功為數十家公司申請成為持牌法團, 以及為數以百計的各類型金融機構提供不同類型的合規顧問服務, 在香港首屈一指。 大公國際香港這次獲批出信貸評級服務牌照, 特别感謝香港證監會 (SFC) 以及香港投資推廣署 (InvestHK) 對本次申請活動的關注和支持。 2024年5月27日 ComplianceOne helped Dagong Global Hong Kong successfully apply for Type 10 license (providing credit rating services) in Hong Kong ComplianceOne Consulting Limited ("ComplianceOne") assisted Dagong Global Credit Rating Co., Ltd. ("Dagong Global”) 's wholly-owned subsidiary in Hong Kong, Dagong Global Hong Kong Limited ("Dagong Global Hong Kong"), in successfully applying from the Securities and Futures Commission of Hong Kong ("SFC") for approval of Type 10 regulated activity: credit rating services license. Dagong Global Hong Kong became the only company approved by the SFC for Type 10 license in nearly four years, and the ninth company in Hong Kong to be approved and hold a Type 10 license (also the fourth credit rating agency from mainland China). Dagong Global Hong Kong submitted its application in the fourth quarter of 2023, obtained the SFC's approval-in-principle (AIP) from the SFC in April 2024, and obtained the license on 27th May 2024. Dagong Global, the controlling shareholder of Dagong Global Hong Kong, was established in 1994. It is a nationwide credit rating agency approved jointly by the People's Bank of China and the former State Economic and Trade Commission. Over the past 30 years, Dagong Global has conducted credit ratings for nearly ten thousand enterprises in over 70 industries, making it one of the earliest companies to engage in credit rating business in mainland China. It provides rating services for various industrial and commercial enterprises, financial institutions, sovereign states, international corporations, asset securitization products, and more, ranking among the industry leaders. To enhance its position in the international rating competition and meet its own development needs. Dagong Global established Dagong Global Hong Kong in June 2023, which primarily focuses on providing rating services for enterprises and financial institutions, as well as structured product rating services in Hong Kong. ComplianceOne serves as the compliance consultant for Dagong Global Hong Kong, providing comprehensive compliance services for this project. This includes offering assessment of the application, compliance advisory consultations, designing internal control processes, and assisting in responding to inquiries from SFC of Hong Kong regarding Dagong Global Hong Kong's license application. The compliance advisory team, led by partners Tao Wong and Tommy Chung, focuses on financial license applications in Hong Kong, anti-money laundering (AML) systems, and various types of compliance consulting services. Over the past seven years, ComplianceOne has successfully assisted dozens of companies in becoming licensed corporations and provided various types of compliance consulting services to hundreds of financial institutions, establishing itself as a leader in Hong Kong. Dagong Global Hong Kong and ComplianceOne express special gratitude to the SFC and InvestHK for their attention and support during the application process for the Type 10 license. 27th May 2024

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 ”.

ComplianceOne Newsletter – March 2022The topics discussed in this monthly newsletter are as follows:1 SFC emph ComplianceOne Newsletter – March 2022 ComplianceOne Newsletter – March 2022 The topics discussed in this monthly newsletter are as follows: 1. SFC emphasizes the importance of Business Continuity Planning ( BCP ) amidst latest COVID-19 situation 2. The requirement of End-To-End (E2E) Test for systems relating to Hong Kong Investor Identification Regime ( HKIDR ) 3. SFC Waives the annual licensing fee 4. Reminder to complete BRMQ by 30 April 2022 5. SFC reprimands and fines HSBC Securities Brokers (Asia) Limited $6.3 million for regulatory breaches 6. SFC reprimands and fines Emperor Securities Limited and Emperor Futures Limited $5.4 million for breaches of anti-money laundering regulatory requirements MARKET NEWS 1. SFC emphasizes the importance of BCP amidst latest COVID-19 situation Amidst the acute situation of the fifth wave of COVID-19 infections in Hong Kong, the SFC again reminds licensed corporations to review and update their business continuity plan ( BCP ). As the HKSAR Government has announced its intention to implement a Compulsory Universal Testing ( CUT ) scheme, albeit its timing and details have not been announced yet, licensed corporations should start preparing now considering the number of actions that may need to be taken in advance. Specifically, licensed corporations should critically assess the impact of sudden disruptive events such as the scenarios of temporary staff shortages or reduced service offerings by essential vendors and service providers, as a result of positive cases identified before or during the CUT scheme, and take steps to manage associated risks to ensure that their business operations and client interests are not unduly affected. Significance: Even the number of infected victims decreased recently, and the CUT scheme is temporary postponed, a BCP which should still be in place for every licensed corporation as something as "need-to-do". Preparing a BCP commensurate with its operational scale poses an insurmountable burden for those small-size brokers within which there is only one staff for each functional role, or even one staff to take several roles. Having considered that there is still a regulatory requirement of "segregation of duties" which governs that a single staff cannot assume roles of front end and back office at the same time which further complicates any job rotations to fill the gap of infected staff of any designated role. 2. The requirement of End-To-End (E2E) Test for systems relating to HKIDR Reference is made to the Circular on 13 September 2021 regarding the roadmap to implement the HKIDR and Over-the-counter Securities Transactions Reporting Regime (OTCR). To enable Relevant Regulated Intermediaries (RRIs) to get ready for the implementation of the HKIDR, an E2E Test will start between mid-May and June 2022 . It is mandatory for all RRIs to participate in the E2E Test. The E2E Test will cover: (i) the submission of the BCAN-CID Mapping File and Reporting Forms to the Stock Exchange of Hong Kong’s (SEHK) data repository (applicable to all RRIs), as well as (ii) the test on BCAN tagging for order submission to the SEHK trading system (applicable to RRIs who are Exchange Participants only). The following two set of documents will be published by SEHK by the end of March 2022: 1. E2E Test package; and 2. HKIDR File Transfer Connectivity Guide The exact start date of the E2E Test will be further announced in mid-April 2022 . Significance: Currently when the SFC begins an investigation, it is only possible to identify exchange participants (i.e. the brokers) which place securities orders directly through the HKEX trading system. In case the SFC intends to detect any suspicious trading activities, it is necessary to obtain information from brokers in order to identify the actual individual or any entity behind the scene where trades orders are placed. With the introduction of the HKIDR, any relevant information concerning the individual/ entity who places orders can be spot out directly with reference to the submitted BCAN-CID information provided by the brokers. From the brokers’ point of view, there will be a great burden to kick off given the complicated operational and technical procedures to be fulfilled before they can participate successfully in the E2E Test, examples are the generation of BCANs, preparation of the BCAN-CID Mapping File as well as submission of the Reporting Forms. Brokers, especially the EPs, have to make good preparation in understanding the entire BCAN regime and requirements beforehand, or otherwise it will be very time-consuming to implement remedial measures to revert and start all over again! Most of all, failure to comply with the BCAN-CID requirements is construed as a breach of the HKEX trading rules and induces reprimand from the SFC! 3. SFC Waived the annual licensing fee The Securities and Futures Commission (SFC) will waive the annual licensing fees of all intermediaries and licensed individuals incurred during the period from 1 April 2022 to 31 March 2023. The SFC will not issue the usual demands for payment for annual licensing fees which would ordinarily become payable during this one-year period. Payments of all other fees, including for licence applications and transfers, will not be affected. 4. Reminder to complete BRMQ by 30 April 2022 Licensed corporations are reminded that the deadline to submit the Business and Risk Management Questionnaire (BRMQ) via WINGS, the latest common flatform for electronic forms and submission, is 30 April 2022. ENFORCEMENT NEWS 5. SFC reprimands and fines HSBC Securities Brokers (Asia) Limited $6.3 million for regulatory breaches The Securities and Futures Commission (SFC) has reprimanded and fined HSBC Securities Brokers (Asia) Limited ( HCCB ) $6.3 million for internal control failures and breaches of the Code of Conduct. The SFC found that between September 2018 and September 2021, HCCB failed to ensure compliance with the Rules of the SEHK (Rules of the Exchange) by making multiple errors: (a) in the assignment of the BCAN to its clients who traded A-shares through the China Connect Securities (CCS), (b) in the mapping of CID to BCAN, and (c) in the tagging of BCAN to the clients’ orders. As a result, incorrect BCAN and CID information in relation to 92 clients were submitted to SEHK, involving 3,379,065 orders and 4,202,534 trades . Significance: It was found that the errors were due to deficiencies in HCCB’s client onboarding and BCAN assignment, more seriously the manual nature of account creation procedures and the use of manual process in updating data between their systems with multi-layered data structure. It has been reminded and reiterated in the SFC circulars that the use of manual process should be kept to minimal as practicable as possible in order to avoid any human input errors and manipulations of data integrity. Moreover, it was also found that HCCB erroneously self-matched 370 warrant orders with their market making engine for reason of their insufficient knowledge of the system in handling live orders across trading sessions. It demonstrates expressly the failure of HCCB to act with due skill and diligence in conducting their business, either internally in market making activities, or externally in executing orders on behalf of their clients. 6. SFC reprimands and fines Emperor Securities Limited and Emperor Futures Limited $5.4 million for breaches of AML regulatory requirements The Securities and Futures Commission (SFC) has reprimanded and fined Emperor Securities Limited ( ESL ) and Emperor Futures Limited ( EFL ) (collectively, “ Emperor ”) $5.4 million for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) regulatory requirements. The SFC found that Emperor failed to implement adequate and effective policies and procedures to mitigate the risks of money laundering with third party deposits and payments. In particular, (a) with third party fund transfers with no accompanying explanations yet approved, (b) no further inquiries for supporting documents for verification when these are required. Significance: It was obvious that Emperor adopted a lax attitude towards the clients in handling the third-party fund transfer. As a LC, the message from the SFC is so explicit that it would endeavor to combat any breach of AML regulatory requirements; and the continual connivance with facilitating clients in third party transfers is nothing other than a “one way ticket” to disciplinary action by the SFC! 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 cs@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 are as follows: ComplianceOne Newsletter - October 2023 The topics discussed in this monthly newsletter are as follows: 1. China banned new offshore brokerage accounts to prevent “bypassing” of forex controls 2. SFC/HKMA joint circular on intermediaries’ virtual asset-related activities 3. Circular on distributors providing additional returns and other services or arrangements when marketing SFC-authorised funds 4. SFC consulted on market sounding guidelines 5. SFC expressed support for development of an industry-led voluntary code of conduct for ESG ratings and data products providers 6. SFC banned Ivan Chan Chuk Cheung for seven years for IPO sponsor failures 7. SFC, ICAC and AFRC conducted first tripartite operation against suspected corporate fraud and misconduct MARKET NEWS 1. China banned new offshore brokerage accounts to prevent 'bypassing' of forex controls According to Reuters news on 12 October 2023, China had for the first time issued a notice prohibiting domestic brokerages and their overseas units from taking on new mainland clients for offshore trading; whereas new investments by existing mainland clients are also subject to strict monitoring to prevent investors from bypassing China’s foreign exchange controls. The China Securities Regulatory Commission (CSRC) had made it explicit earlier in September that brokers should cease providing securities trading from offshore accounts such as from Hong Kong to new mainland investors, and activities now considered as illegal include cross-border securities brokerage services, securities lending, fund sales or investment consultancy. The story can be traced back to last December when the CSRC put a ban on the offshore investments through two main online brokers, Futu Holdings Ltd and UP Fintech Holdings Ltd where it was stated that such activities were in breach of the securities laws in China. Despite of the recent tightening measures, institutional investors from mainland China are still able to gain access to the HK stock markets through the Stock Connect, though on a quota-restriction basis. SIGNIFICANCE: The notice and subsequent actions are conceived by many market participants as symbols of restricting capital outflows from mainland, particular amid the weakening of RMB in the foreign exchange market over the past months. This impact from the regulatory regime can be far-reaching and suppressing, especially for brokerage firms with strong mainland backgrounds of which larger portion of offshore retail business was originated from. 2. SFC/HKMA Joint circular on intermediaries’ virtual asset-related activities On 20 October 2023, the SFC and the HKMA published a “ Joint Circular on intermediaries’ virtual asset-related activities ” amid the buoyant interests and enquiries from intermediaries about the distribution of virtual assets-related (VA-related) products, advisory and dealing services as well as asset management services in virtual assets industry. The SFC and the HKMA have been reviewing their existing policies for intermediaries contemplating to engage in virtual assets-related industry in the light of the ever-changing and fast-growing VA activities. This Joint Circular incorporated FOUR main categories of VA-related activities with relevant Appendices, providing guidance and “terms & conditions” in details for intermediaries engaging the following categories: A. Distribution of VA-related products B. Provision of virtual asset dealing services (VA dealing services) C. Provision of asset management services in respect of virtual assets D. Provision of virtual asset advisory services SIGNIFICANCE: Intermediaries with intention to engage in VA-related business or dealing services are strongly recommended to take notes of the relevant Appendices which serve as regulatory guidelines to ensure intermediaries themselves of being in compliance while conducting their VA-related activities or VA brokerage services. Please be reminded the prevailing Joint Circular supersedes the previous versions, and intermediaries have the obligations to keep abreast of the changing VA regulatory regime in collaboration with the ongoing concerted efforts of the law-enforcing counterparts like the SFC and the HKMA in order to develop and consolidate a sound regulatory landscape. 3. Circular on distributors providing additional returns and other services or arrangements when marketing SFC-authorised funds On 24 October 2023, this circular was published in the light of the recent observations of licensed corporations’ practice in offering and promoting SFC-authorised funds. It was noticed that intermediaries have been offering additional returns or other incentives that may divert the client’s focus from properly considering the risks and features of the underlying funds. In some observed cases, “guaranteed returns” and “lock-up period” are the common features. Guaranteed returns The “guaranteed returns” typically comprise: (i) the actual return of the relevant fund(s) invested by the investor (i.e., fund return); and (ii) a top-up return to make up the difference between the fund return and the guaranteed rate of return offered by the distributor. Moreover, the guaranteed returns offered by some distributors may be considered as a “gift” which may contravene paragraph 3.11 of the Code of Conduct that “distributors should not offer any gifts (other than a discount of fees or charges) in promoting a specific investment product or a particular type of investment product to a client", lest investors may be distracted from the unique features and risks of such particular fund per se. Lock-up period and dealing frequency When distributing SFC-authorised funds, some distributors imposed a lock-up period on their clients’ investments or lowered the funds’ dealing frequency. It is reminded that distributors should act fairly and in the best interests of their clients in providing services in accordance with General Principle 1 (Honesty and fairness) of the Code of Conduct that clients should not be restricted to redeem his investment in a fund which interferes with his timely investment decisions. SIGNIFICANCE: SFC-authorised funds without guaranteed features are required to highlight in their offering documents that they do not have these features and that investors may not get back the principal of their investment. For this reason, any guaranteed returns provided by distributors may create a misleading impression to the investors that these returns are provided by the underlying funds which is not a factual presentation indeed! As for the lock-up period, the SFC has made its expectation expressly that distributors should use their best endeavours to adhere to a fund’s dealing frequency as stipulated in the offering documents despite the need to achieve any administrative efficiency in setting any cut-off times. 4. SFC consulted on market sounding guidelines On 11 October 2023, the SFC launched a consultation on proposed guidelines for market soundings which highlighted the general principle of honesty, fairness and best interests to the clients while conducting the regulated activities. Under the proposals, intermediaries would have to implement robust governance and effective policies and internal control procedures to prevent the misuse and leakage of non-public information they are entrusted with. As Ms Julia Leung, the SFC’s Chief Executive Officer, has said: “ both sell-side brokers and buy-side participants have obligations to uphold market integrity by keeping in strict confidence non-public information entrusted to them and not abusing that information. ” SIGNIFICANCE: This consultation follows a thematic review of market soundings the SFC commenced in early 2022. In developing the proposed guidelines, the SFC took into consideration local and overseas market practices and regulatory requirements, related cases as well as information gathered and feedback from intermediaries in the thematic review. 5. SFC expressed support for development of an industry-led voluntary code of conduct for ESG ratings and data products providers On 31 October 2023, the SFC announced that it would support and sponsor the development of a code of conduct for voluntary adoption by environmental, social and governance (ESG) ratings and data products providers providing products and services in Hong Kong. The Voluntary Code of Conduct (VCoC) will be developed via an industry-led working group, namely the Hong Kong ESG Ratings and Data Products Providers VCoC Working Group (VCWG). And The SFC also welcomed the International Capital Market Association (ICMA) to act as the Secretariat of the VCWG. The proposed VCoC would align with international best practices as recommended by the International Organization of Securities Commissions (IOSCO) and relevant expectations introduced in other major jurisdictions, with the SFC, HKMA and the Insurance Authority (IA) as observers to the VCWG. As Ms Julia Leung, the SFC’s Chief Executive Officer, has said: “ the Voluntary Code of Conduct will help strengthen the transparency, quality and reliability of ESG information used by licensed corporations in their investment decisions; this is an important initiative to mitigate the risk of greenwashing in investment products .” The initiative is the culmination of the SFC’s fact-finding exercise and industry outreach conducted since mid-2022, the key observations from the exercise and proposed way forward for these providers were summarised in a report published by the SFC that date. ENFORCEMENT NEWS 6. SFC banned Ivan Chan Chuk Cheung for seven years for IPO sponsor failures An announcement made on 11 October 2023, the SFC had prohibited Mr Ivan Chan Chuk Cheung (Chan), a former responsible officer (RO) of Changjiang Corporate Finance (HK) Limited (CJCF), from re-entering the industry for seven years from 10 October 2023 to 9 October 2030 for failing to discharge his supervisory duties as a sponsor principal in charge of five listing applications The disciplinary action followed the earlier sanctions against CJCF for serious and extensive failures in discharging its duties as the sponsor in six listing applications, five out of which were attributable to neglect on the part of Chan. SIGNIFICANCE: Given a ban of such long duration of seven years, Chan had failed in his role as the sponsor principal to: (i) exercise due skill, care and diligence in handling the Five Listing Applications; (ii) diligently supervise the transaction teams in carrying out the sponsor work; and (iii) ensure the maintenance of appropriate standards of conduct by CJCF. 7. SFC, ICAC and AFRC conducted first tripartite operation against suspected corporate fraud and misconduct On 19 October 2023, the SFC, the Independent Commission Against Corruption (ICAC), and the Accounting and Financial Reporting Council (AFRC) have conducted the first tripartite operation involving two Hong Kong-listed companies on suspicion that they falsified corporate transactions totalling HK$193 million. In the joint operation, three persons, including an executive director of a listed company, were arrested by the ICAC for suspected offences of agent using documents with intent to deceive his principal under the Prevention of Bribery Ordinance. The investigation revealed that the management of the two companies listed on the SEHK had allegedly conspired with members of the syndicate to falsify corporate transactions, resulting in overstatements of HK$83.9 million in their revenue and misstatement of assets in the sum of HK$109.2 million. Such overstatements and misstatement of assets might lead to disclosure of false or misleading information in the interim results and/or annual reports of the two listed companies. The SFC’s Executive Director of Enforcement, Mr Christopher Wilson, said: “ Directors of listed companies are entrusted to govern truthful and accurate financial disclosures which serve as the bedrock of our capital markets. The tripartite operation, and the first with the AFRC, underscores our shared commitment to holding accountable those who abuse that trust and defraud investors .” Meanwhile, Deputy Commissioner and Head of Operations of the ICAC, Mr Ricky Yau Shu-chun, and Ms Janey Lai, Acting Chief Executive Officer of the AFRC, separately expressed their appreciation of the tripartite operation in upholding the integrity of the financial market in Hong Kong. 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 . 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The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - June 2024 The topics discussed in this monthly newsletter are as follows: 1. HKEX to implement severe weather trading in securities and derivatives markets 2. SFC marks its 35-year history as the guardian of Hong Kong financial markets 3. SFC’s deficit nearly tripled to 298 million ending in March 2024 4. SFC enforcement report shows 175 completed cases in 2023-2024 5. SFC suspends PICC’s former licensed representative for seven months for failures in managing a private fund 6. WONG Ming Chung was convicted for providing investment advice on Telegram without a licence 7. SFC disciplined WU Chao for circumventing personal dealings MARKET NEWS 1. HKEX to implement severe weather trading in securities and derivatives markets Hong Kong Exchanges and Clearing Limited (HKEX) announced on 18 June 2024 that the Severe Weather Trading (SWT) will commence on 23 September 2024 in both securities and derivatives markets, the consultation conclusions received from market participants showed strong support for the implementation. The SWT covers Stock Connect, derivatives holiday trading, and after-hours trading, during severe weather events; and to ensure safety, remote working and the use of online services are strongly encouraged. Some adjustments are also required to ensure the market’s operational resilience as certain services may not be available during SWT day. As HKEX Chief Executive Officer, Bonnie Y Chan, had said: “ This is an important step that will make Hong Kong's markets always available to regional and international investors during trading hours, whatever the weather, and underscores HKEX’s commitment to supporting the resilience and competitiveness of Hong Kong as a world-class financial centre. ” Besides, the Hong Kong Association of Banks and the Hong Kong Interbank Clearing Limited have confirmed that, during SWT days, banking services, such as electronic money transfer channels, will be available from designated banks and settlement banks of relevant clearing houses of HKEX to facilitate the operations and settlement process. To allow small-and-medium-sized brokers adequate preparation time, HKEX plans to offer special arrangements to eligible participants requiring assistance, for example by temporarily fulfilling margin payment or settlement obligations for these participants on a SWT day. The above special arrangements will be in place from the SWT effective date until the end of 2024. SIGNIFICANCE: During the SWT day, HKEX's trading, clearing, settlement and market data systems will be fully accessible via remote networks; and HKEX has made enhancements to its infrastructure and operational arrangements to reduce the need for physical access among participants, and will arrange testing sessions before the launch of SWT to ensure readiness of market participants. Severe Weather Trading is no doubt a bold step of the HKEX to achieve a seamless trading environment uninterrupted by any unfavourable weather conditions, thus providing more opportunities and protections to investors to manage their risks and exposures along with the global market conditions. 2. SFC marks its 35-year history as the guardian of Hong Kong financial markets SFC issued an Annual Report on 19 June 2024 which highlighted various initiatives to promote the resilience and sustainable growth of Hong Kong’ s capital markets as well as laying out the roadmap to prepare the capital markets for future opportunities and challenges. As SFC’s CEO Ms Julia Leung has said: “ To remain a world-class regulator and lead Hong Kong’ s capital markets to new heights in decades to come, the SFC must strengthen its dual role as protector and enabler , by staying agile and vigilant as well as harnessing new opportunities from sustainability and new technologies, without compromising investor protection. ” Also, cherishing to enhance the super-connector role of Hong Kong has been one of the top initiatives, the SFC has been endeavouring to collaborate with the China Securities Regulatory Commission (CSRC) to deepen the mutual market access. The flagship Stock Connect scheme has recorded a 20-fold advance in average daily trading since 2014; together with the ETF Connect, the Swap Connect, which strengthen the role of HK as an offshore risk management hub. To lead financial market transformation via technology, the SFC has pioneered in launching the VA licensing regime to facilitate the trading of VAs and its VA-related spot ETFs accessible to retail investors. More details in other areas are delineated in the Annual Report 2023-24 for public interests. 3. SFC’s deficit nearly tripled to 298 million ending in March 2024 With reference to the Annual Report posted on 19 June 2024, the SFC recorded a deficit of HK$298 million for the year ending in March 2024 as over the past three years, staff costs were up 8% and total expenses up 5% (page 142); the recorded loss in the previous fiscal year was HK$101 million. The total income for the year was HK$1835 million, down 6% from HK$1942 million last year, owing to decrease in securities market turnover with resulting levy income went down 19% from last year to $1,390 million. Apart from the above, the SFC still has to complete the transaction for acquiring nine office floors as its permanent office, and HK$2.3 billion form the property acquisition reserve has been utilized. As of 31 March 2024, the reserves still stood at $7.6 billion, of which $1.2 billion has been set aside to support the acquisition of three additional floors and future principal bank loan repayments. SIGNIFICANCE: Despite of the above financial figures, the SFC remains as the robust regulatory body in Hong Kong with irreplaceable role as regulator and facilitator in maintaining the integrity and governing regime of this international financial centre. 4. SFC enforcement report shows 175 completed cases in 2023-2024 In the Annual Report 2023-2024 of the SFC, 183 investigation cases had been launched with 175 cases completed, and 24 cases were brought to criminal proceedings. A landmark of investigation cases in 2023 was the highly organized, large scale and sophisticated market manipulation case with several individuals involved and charged with various criminal offences at the High Court in May last year. Moreover, following the investigation by the SFC, cases of two suspects of the key members of a "ramp-and-dump" syndicate were transferred to the District Court. As Mr Tim Lui, Chairman of the SFC, had stated the SFC had gained valuable experiences and achieved remarkable results in the past years, and would continue to ensure the integrity, stability and resilience of the financial markets in Hong Kong amid the emerging challenges over the world. ENFORCEMENT NEWS 5. SFC suspends PICC’s former licensed representative for seven months for failures in managing a private fund On 20 June 2024, the SFC has suspended Mr Shum Wai Nap, former licensed representative of PICC Asset Management (Hong Kong) Company Limited (PICC), for seven months from 20 June 2024 to 19 January 2025 for fund management failures. The investigation found that Shum was the investment manager of a Cayman-incorporated fund (the “Fund”) under PICC between May 2018 to April 2020, and he failed to: (i) properly manage the Fund in line with its investment objectives and restrictions; and (ii) properly manage the risks of the Fund with PICC’s policies. Taking a thorough scrutiny of the Statement of Disciplinary Action of what Shum had done, it serves as a negative example to illustrate how funds should be properly managed ! (1) Failure to adhere to the Fund’s investment strategy, objectives and investment restrictions: the memorandum of the Fund was capital preservation with steady capital appreciation in a diversified portfolio; SHUM only held 1 to 3 stocks with highly concentrated positions, including a Stock X which was NOT in the approved stock pool under the internal policies of PICC’s Investment Committee with respect to the investment mandate. (2) Failure to mitigate the risks associated with the Fund’s holding of an unsuitable stock: Shum continued with several requests to add the Stock X to the stock pool despite repeated rejections from the Investment Committee with “SELL” only restriction to him, and Shum declined to follow. (3) Failure to manage liquidity risks: under the guideline of illiquid assets (ie, assets that required more than 30 days to sell), holding of illiquid assets should not exceed 20% of a Fund’s portfolio; under Shum’s management, the ratios were as high as 80.7 % and 91.69%! (4) Failure to manage concentration risks: according to PICC’s policies, holding of a single stock should not exceed 20% of the Fund’s total NAV; and the holding of Stock X and others under Shum far exceeded 20%. (5) Failure to comply with PICC’s stop loss procedure: there is a guideline for stop-loss of more than 50% of a particular single stock; and Shum did not follow the instructions to execute forced sales of the Stock X within three trading days as required. SIGNIFICANCE: Shum’s repeated failure to properly manage the Fund and his deliberate intention NOT to comply with PICC’s risk management policies was in breach of General Principle 2 (diligence) of the Code of Conduct which requires a licensed person to act with due skill, care and diligence, in the best interests of his clients and the integrity of the market in conducting business activities. The mal-practices of Shum are typical incidences a licensed corporation in asset management should endeavour to avoid as remedial measures to mitigate potential regulatory breaches! 6. WONG Ming Chung was convicted for providing investment advice on Telegram without a licence On 20 June 2024, the Eastern Magistrates’ Court today convicted Mr WONG Ming Chung (WONG) for providing investment advice on a subscription-based chat group on Telegram he hosted without a licence in a prosecution brought by the SFC. WONG pleaded guilty to the charge and was fined HKD10,000 together with the SFC’s investigation costs. The investigation found that between 2 January 2018 and 21 May 2019, WONG hosted a chat group on Telegram named “ FRANKY - 即市直播谷 ” which was opened to members of the public on a subscription by payment basis. SIGNIFICANCE: Despite that WONG was licensed under the SFC to conduct with Type 1 (dealing in securities) and Type 4 (advising in securities) regulated activities, the CRUX of the conviction was that the Telegram group was not operated on behalf of the licensed corporation WONG was accredited to, but for his own remunerations. 7. SFC disciplined WU Chao for circumventing personal dealings On 26 June 2024, the SFC prohibited Mr WU Chao (“WU”), a former responsible officer, manager-in-charge (MIC) and chief operations officer of DA International Financial Service Limited (DA), from re-entering the industry for three years and seven months from 26 June 2024 to 25 January 2028. The investigation found that between February and April in 2022, WU concealed from DA his beneficial interest in and direct control over a securities margin account held by a third party at DA without obtaining DA’s prior approval. WU’s conduct circumvented DA’s employee dealing policy from being monitored under personal trading activities. In all, the unauthorised transactions conducted in the account at the material time totalled $7.3 million. WU also abused his right as a member of DA’s senior management to make 33 unauthorised adjustments to the margin loan limits of the account and the margin financing ratios to facilitate his trading activities. The SFC considers that WU’s conduct was dishonest and it called into question his fitness and properness to be a licensed person. SIGNIFICANCE: No matter how comprehensive and stringent are the prevailing rules and guidelines, there are always loopholes to be abused, in particular by anyone who is in authority to circumvent and override the existing regulatory framework for his own advantages.” 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

我們非常榮幸能與 MOSS Group 共同舉辦本次環境、社會及管治(ESG)「新常態」：從自願到合規生存關鍵研討會，並感謝近 200 位嘉賓的熱情參與！ 【活動回顧】MOSS Group x 天匯合規共同舉辦 - 環境、社會及管治(ESG)「新常態」：從自願到合規生存關鍵 (2026.03) 我們非常榮幸能與 MOSS Group 共同舉辦本次環境、社會及管治 (ESG) 研討會，並感謝近 200 位嘉賓的熱情參與！ 在研討會中，我們深入探討了 ESG 監管的最新發展。以下是當天的核心洞察分享： 1. 監管環境的根本轉變： 香港正對標 ISSB 國際標準，全面轉向具備全球可比性的披露框架。合規已從「不遵守就解釋」演進為核心監管要求 。 2. 氣候風險管理的實務挑戰： 2025 年新規定要求企業具備評估實體風險與轉型風險的能力。特別是範疇三排放的收集，需要與供應鏈合作夥伴建立有效的協作機制 。 3. 基金經理的合規義務： 證監會要求擁有投資酌情權的基金經理必須在投資流程中系統性考慮氣候風險，並遵循「相稱性」原則建立管治與風險管理體系 。 4. 建立防禦性的紀錄： 在監管趨嚴的背景下，「行動是關鍵，紀錄是證據」。企業應確保所有 ESG 評估與決策過程皆完整留痕，以應對未來的合規審查 。 再次感謝當日講師與嘉賓帶來的精彩討論。在 ESG 全面合規的新時代，ComplianceOne 與 MOSS Group 將繼續為您提供專業導航。 期待在下一次活動中與您再次交流！ We are honored to have co-hosted this seminar with MOSS Group and would like to extend our sincere gratitude to the nearly 200 distinguished guests for their enthusiastic participation. The session provided a deep dive into the latest developments in ESG regulation. Below are the key insights shared during the event: 1. Fundamental Shift in the Regulatory Landscape Hong Kong is rapidly aligning with ISSB international standards, transitioning toward a disclosure framework characterized by global comparability. Compliance has evolved from a "comply or explain" approach into a core regulatory mandate. 2. Practical Challenges in Climate Risk Management New regulations taking effect in 2025 require enterprises to possess the capability to assess both physical and transition risks. In particular, the collection of Scope 3 emissions data necessitates the establishment of effective collaboration mechanisms with supply chain partners. 3. Compliance Obligations for Fund Managers The Securities and Futures Commission (SFC) requires fund managers with investment discretion to systematically integrate climate risks into their investment processes. Furthermore, they must establish governance and risk management systems in accordance with the "proportionality" principle. 4. Establishing Defensive Documentation In an environment of tightening supervision, "action is key, but records are evidence." Companies must ensure that all ESG assessments and decision-making processes are fully documented to create a robust audit trail for future compliance reviews. Once again, we thank our guest speakers and attendees for the insightful discussions. In this new era of comprehensive ESG compliance, ComplianceOne and MOSS Group remain committed to providing professional guidance. We look forward to connecting with you again at our next event!