The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Newsletter – January 2026 The topics discussed in this monthly newsletter are as follows: Regulatory Updates SFC and HKMA jointly consult on standard calculation periods under OTC derivative Clearing Rules SFC directs IPO sponsors to promptly conduct internal reviews to rectify serious deficiencies in the preparation of new listing documents Reminder of statutory obligations during SFC inspections to comply with section 180 of the Securities and Futures Ordinance Market News In Memory of David Webb – a corporate governance activist Forum of Speech SFC and UAE’s Capital Market Authority sign milestone MoU to strengthen cross-border digital asset collaboration Writing the Next Chapter for Hong Kong’s REIT Market- New speech by Alexandra Yeong on HK REITS Cross Agency Steering Group announces Strategic Priorities for 2026-2028 Enforcement News - Intermediaries SFC Reprimands and Fines Saxo Capital Markets HK Limited $4 Million for Failures in Distributing Unauthorised VA-Related Products SFC Suspends WONG Chi Fai for 27 Months and CHOI Sau Wai for 7 Months Over Undisclosed Personal Trading in Suspected Ramp-and-Dump Case Regulatory Updates 1. SFC and HKMA jointly consult on standard calculation periods under OTC derivative Clearing Rules The SFC and HKMA issued a joint consultation on standardizing the calculation periods for each year under the Clearing Rules for over-the-counter (“ OTC ”) derivative regulatory regime. Current Approach to accommodate additional Calculation Periods Since 2016, implementation of the mandatory clearing introduced four Calculation Periods (“ CPD ”) within the Clearing Rules at consistent six-month intervals with aims to: ensure timely identification of new dealers entering the OTC derivative market, or any prescribed persons (e.g. a licensed corporation under the SFC) which have met the Clearing Threshold; mitigate the risk of market participants manipulating their positions during the specific CPDs to avoid clearing obligation; following the consultations in 2018 and 2021, sixteen additional CPDs were incorporated in the Schedule 2. Proposed Approach to accommodate additional Calculation Periods beyond 2026 In assessing the need to adjust the three key elements related to CPDs, namely, (i) the three-month duration, (ii) the frequency of CPDs per calendar year, and (iii) the Prescribed Day (which occurs seven months after the end of each CPD); it is indicated in the observations that two CPDs per calendar year with three-month duration prove to be effective; while maintaining the Clearing Thresholds at USD20 billion. A Summary of the Proposed Approach to the Schedule 2 of the Clearing Rule Calculation Period Clearing Threshold Prescribed Day From 1 March 2027 onwards, 1 March to 31 May in a year USD20 billion 1 January in the following year From 1 March 2027 onwards, 1 September to 30 November in a year USD20 billion 1 July in the following year SIGNIFICANCE: This formulaic approach would provides prescribed persons with certainty that future Calculation Periods can be determined based on the established methodology, without reliance on adding new calculation periods to Schedule 2 to the Clearing Rules from time to time; and will not incur any operational changes the prescribed person have to comply relating to Clearing Rules. 2. SFC directs IPO sponsors to promptly conduct internal reviews to rectify serious deficiencies in the preparation of new listing documents The SFC set forth a circular highlighting the issues related to deficiencies in the preparation of listing documents, potential misconduct and significant mismanagement of resources of over-engagement in new listing applications. Some key takeaways of the deficiencies found: in reviewing recent listing applications, the SFC and SEHK found that some sponsors did not have a thorough understanding of their listing applicants, implying due diligence works on the applicants were not sufficient; strained resources status of the sponsors with over-reliance on external professional parties, while the sponsor principals are not capable of supervising their transaction teams, and the staff team involved is not equipped with requisite knowledge, and experience in IPOs arrangement; In the light of the findings, the SFC and SEHK have come up with the following rectification measures: joint letters were sent to 13 sponsors, requiring them to complete comprehensive reviews within three months on the deficiencies identified as well as the resources status to discharge their sponsor work; requiring all sponsors to submit the followings: - within two weeks, the names and number of appointed Principals and the number of active listing engagements; in order to ensure if the sponsors have adequate resources to carry out the duties; - within one week, a list of individuals engaged in IPO sponsor work and also those who have not yet passed the HKSI LE Paper 16 within three years or within six months after their first engagement in such work; onsite thematic inspections are expected on those concerned principals and sponsors; sponsors providing materially incomplete or unsatisfactory responses to the regulators, the vetting process may be suspended; engaged individuals who do not meet the eligibility criteria are now subject to tightened examination requirements; SIGNIFICANCE: The deficiencies findings reveal the facts that licensed corporations are thinning out their resources and straining personnel competence for undertaking business which they are not so well-acquainted or financial capable to handle. In the eyes of the regulators, as Ms. Julia Leung has said, “ The gatekeeping role of sponsors in the listing process is critical to maintaining the quality of Hong Kong’s capital market and sustaining investor confidence in new listings that will hold up through all market cycles. That role may have been eroded in their eager pursuit of deal volume . ” 3. Reminder of statutory obligations during SFC inspections to comply with section 180 of the Securities and Futures Ordinance The SFC found in its routine inspections that some licensed corporations (“ LC ”) engaged in unsatisfactory practices and behaviours which appeared to stem from a misunderstanding of the SFO or a lack of awareness regarding the LCs’ statutory obligations. According to the section 180 of the SFO “ Supervision of intermediaries and their associated entities”, it empowers the SFC to supervise licensed intermediaries and their associated entities by entering premises, inspecting records, and making inquiries to ensure compliance with financial and conduct requirements like onsite inspections. What are the malpractices of the findings by SFC? obstructing inspection arrangements: e.g. intending to postpone and delay; disputing the inspection without good reason: arguing over the areas and scope of samples evading responses: delaying in responses and providing misleading information; submitting false/distorted information: providing information which is ambiguous, inaccurate; actively disrupting the inspection process: intentionally disrupting the inspection process; unprofessional conduct toward inspectors: adopting an uncooperative attitude to take the inquiries seriously. Expected Standards & Statutory Obligations of LCs toward the SFC access to information & answers: LC should provide access to records / documents as required under section 180 of the SFO; maintenance & retrieval of records: maintain proper business records at all times for ready retrieval to SFC as required under Securities and Futures (Keeping of Records) Rules; availability of Responsible Officers (ROs): ensuring two ROs for each regulated activities and their availability during SFC visits; fitness & properness of LCs: adhering to the General Principles stated in the Code of Conduct for licensed persons; engagement of external representative: the LCs should realize their ultimate accountability and responsibilities to SFC for any information provided by outsourced external representatives on their behalf. Consequence of failure to cooperate or non-compliance The SFC takes any breaches of section 180 of the SFO seriously, and will not hesitate to exercise its powers under the SFO to take appropriate regulatory actions, such as: Supervisory interventions, which may include, but not limited to: imposing conditions on the LC to limit its business of regulated activities, e.g. no onboarding of new clients; fully evaluating the fitness and properness of the LC and its management personnel Enforcement actions, which may include, but not limited to: initiating criminal proceedings for contravention of the stipulated requirements; taking appropriate disciplinary actions; SIGNIFICANCE: As a licensed corporation, together with its licensed persons like Responsible Officers, licensed representatives, should bear in mind and get acquainted with not only the codes and guidelines which governing their behaviours to certain expected standards, a cooperative attitude in collaboration with the SFC upon any requests or inquiries should be ascertained to express their competence and fitness to remain licensed. Market News 4. In Memory of David Webb – a corporate governance activist David Webb was a renowned Hong Kong-based corporate governance activist, and an investor, who contributed his long-devoted efforts in advocating transparency in the stocks market, with his valuable research work and findings. David’s Key Roles and Contributions As an activist investor and market watchdog: the most well-known contribution was his publication of a list of " 50 Hong Kong stocks not to own " on 15 May 2026, within which he highlighted some bubble stocks subject to SFC concentration risk warnings, and aroused alerts to investors to stay away from these troubled stocks. His devoted efforts to advocate for greater transparency and improved corporate/economic governance; always known as one of Hong Kong's most vocal activist investors, and his investigations into corporate misconducts triggered regulatory concerns. He always stood out with brave to safeguard the interests of retail investors at large against non-performing managements of the listed stocks. As Founder of Webb-site.com : David moved to Hong Kong in 1991 as an investment banker, taking advantage of his professional insights, he founded the Webb-site.com w hich was a free online platform providing stock market news, data, and analyses for market participants. Appraises to this data base is considered as “second to none”! Later Years and Legacy Diagnosed with metastatic prostate cancer in 2020, David scaled down his research work. He passed away peacefully on January 13, 2026, at age 60 in Hong Kong, survived by his wife and two children. And in February 2026, the closure of Webb-site.com was announced and public release of its database, putting an end to David’s legend. RIP: David's enduring impact lies in his fearless market oversight through Webb-site.com , persistence in upholding the transparency in Hong Kong's financial markets; and most praised for his endeavour to speak for the retail investors! Forum of Speech 5. SFC and UAE’s Capital Market Authority sign milestone MoU to strengthen cross-border digital asset collaboration The SFC has entered into a landmark Memorandum of Understanding ( MoU ), with and the Capital Market Authority (“ CMA ”) of the United Arab Emirates ( UAE ), earmarking a further commitment to promoting international cooperation under its ASPIRes Roadmap . Key takeaways of the comments on the MOU from senior executives in the forum an unprecedented collaboration with overseas regulator with mutual consultation, information exchange to enhance cross-border regulatory cooperation on digital asset-related matters; an industry roundtable on digital asset innovation between the SFC and the CMA senior executives from the digital asset industry to discuss on the digital asset ecosystem; upholding a shared objective to enable responsible innovation while upholding market integrity and strong investor protection; the MoU provides support for responsible financial innovation for HK and UAE in fostering sustainable growth of HK’s vibrant and secure digital asset ecosystem; SIGNIFICANCE: This MoU marks an emblem in transnational financial collaboration, positioning Hong Kong and the UAE as progressive, well-regulated digital asset hubs. It demonstrates a mutual commitment to responsible innovation, enhanced supervisory coordination, and the establishment of global standards that underscore transparency, integrity, and investor confidence in the digital asset ecosystem. 6. Writing the Next Chapter for Hong Kong’s REIT Market- New speech by Alexandra Yeong on HK REITS In as speech delivered in a luncheon by Ms. Alexandra Yeong, Interim Head, Investment Products, at the Hong Kong REITS Association (“ HKREITA ”) provides a comprehensive overview of the future trajectory of Hong Kong’s REIT market, and the roles of the regulator in navigating the development. Some key takeaways for the readers Enhancing market competitiveness and regulation a wide range of new measures have been launched to attract new REIT listings, enhance market liquidity, broaden investor base and facilitate secondary offering with an ultimate aim to fostering the growth of REIT market in HK, including: Grant scheme and stamp duty waiver (i) extend the grant scheme for REITs for three years to MAY 2027 (ii) to waive the stamp duty for the transfer of REIT units since DEC 2024 REIT Connect (i) REIT Connect is expected to significantly increase our REIT market liquidity and broaden investor base, and a number of local and overseas REIT issuers have already expressed interests in launching their REITs in Hong Kong upon the launch of REIT Connect. (ii) Rapid growth and diversification in the China Mainland REIT (“C‑REIT”) market, including an international-sponsored retail C‑REIT; this signified a key milestone in the internationalization and diversification of the C-REIT market and offered a model for greater offshore participation in the massive market. (iii)The SFC further assured that early implementation of this major initiative remains a top priority. New REIT Channel and streamlined measures (i) A dedicated “REIT Channel” be launched in October allowing new REIT applicants to consult the SFC confidentially on listing applications, (ii) The SFC has also streamlined its authorization process so that, under normal circumstances, new REIT applications can be approved within four weeks from take-up. (iii) For secondary offerings, documentary requirements have been streamlined so that documents focus on offer-specific information, without the need for any updated portfolio valuations or accountants’ reports on condition that ongoing disclosure and reporting requirements are already in place, thus shortening preparation time and enhancing time-to-market. Facilitating corporate activities and privatization (i) Following an October 2024 consultation, the proposal of the Government and SFC to introduce a statutory scheme of arrangement and compulsory acquisition mechanism for REITs; with an aim to facilitate Hong Kong REITs to expand through mergers and acquisitions and to conduct privatization and corporate restructuring in a clear and orderly manner, while strengthening investor protection. Strengthening global partnerships and international collaboration Beyond REIT Connect, the SFC has also been engaging with other international markets like Saudi Arabia to explore more potential collaboration opportunities, there were also bilateral meeting on exchanging views on dual listing of investment products such as ETFs and REITS. SIGNIFICANCE: As a concluding remark, Ms. Alexandra Yeong reinstated that “ the SFC will continue to work closely with the Government, industry participants and all stakeholders to foster the growth of the Hong Kong REIT market, and reinforce its position as a trusted platform for capital formation and long-term value creation. ” 7. Cross Agency Steering Group announces Strategic Priorities for 2026-2028 In the 12 th meeting in Jan 2026, the Green and Sustainable Finance Cross‑Agency Steering Group (“ Steering Group ”) set out its strategic priorities for 2026-2028 to further strengthen Hong Kong’s role as a competitive and future‑ready sustainable finance centre. Built on the solid foundation of the 2023-2025 plan, the Steering Group’s strategic priorities for the next three years are anchored around two key pillars : (1) Consolidate and strengthen efforts to solidify Hong Kong as a sustainable finance centre through: strengthening the sustainability disclosure ecosystem, and the effective use of technology; expanding and deepening sustainable finance markets; strengthening external engagement; supporting talent development with capacity building initiatives (2) Develop Hong Kong’s strengths in emerging areas scaling transition finance with practical guidance, using tools and reference to case studies; while encouraging wider industry adoption of transition planning; supporting adaptation finance by building market readiness, identifying capability gaps, and supporting product innovation and development, while strengthening physical risk assessment capabilities. SIGNIFICANCE: Comments from the CEO of SFC, Ms. Julia Leung, and Chief Executive of the HKMA, Mr. Eddie Yue highlighted the significance of these updated 2026-2028 priorities: l underscore the ongoing commitment to ensuring Hong Kong remains globally aligned, forward‑looking, and responsive to market needs. l reinforce the groundwork for building a robust sustainable finance ecosystem, while positioning Hong Kong to capture the emerging opportunities in Asia’s transition to a low-carbon and climate-resilient economy Enforcement News - Intermediaries 8. SFC Reprimands and Fines Saxo Capital Markets HK Limited $4 Million for Failures in Distributing Unauthorised VA-Related Products On 6 January 2026, the SFC reprimanded and fined Saxo Capital Markets HK Limited (CE: AVD061 ) (“ SCMHK ”) $4 million for significant regulatory breaches related to the distribution of virtual asset (“ VA ”) funds not authorised by the SFC and VA-related products (collectively “ VA Products ”) on its online trading platform (the “ Online Platform ”). SCMHK ceased carrying on regulated activities on 28 February 2025* Relevant Period and Key Breaches (1 November 2018 to 25 November 2022) : During this over four-year period, SCMHK permitted retail clients to trade 32 VA Products on the Online Platform, executing 1,446 transactions involving six individual professional investors (“ PIs ”) and 130 retail clients. All products were complex, including 21 exchange-traded derivative VA Products. These VA Products should only have been offered to PIs per the SFC's 2018 Circular (" Distribution of virtual asset funds ") and 2022 Joint Circular (" Joint circular on intermediaries’ virtual asset-related activities "). SCMHK failed to: Assess clients' knowledge of investing in VA Products; Provide sufficient VA-specific information and warning statements; Implement specific product due diligence procedures for VA Products (relying instead on deficient group-level protocols from its parent company that failed to identify VA exposure); Ensure adequate policies and controls to supervise the Online Platform and meet regulatory standards for VA Product distribution; Confirm suitability of complex VA Product transactions for clients; Provide sufficient details on the nature, features, and risks of VA Products, along with appropriate warnings; For 87 clients (82 retail and five individual PIs) trading the 21 exchange-traded derivative VA Products, conduct adequate enquiries or gather sufficient information to assess derivatives knowledge and characterise clients accordingly. For more details of the background, please refer to the Statement of Disciplinary Action . SIGNIFICANCE: In determining the sanction, the SFC considered mitigating factors, including the prolonged nature of the failures (over four years), SCMHK's self-reporting of misconduct, voluntary client compensation for losses from VA Product trading, cessation of regulated activities, full cooperation with the SFC (accepting findings and facilitating early resolution), and its otherwise clean disciplinary record. This action represents a landmark enforcement in Hong Kong's regulation of virtual assets, marking one of the first major fines against a licensed intermediary for breaches in VA Product distribution. It underscores the SFC's strict expectations for robust due diligence, suitability assessments, client knowledge checks, and platform supervision in handling complex and high-risk VA Products, particularly in online environments. Even with remediation and cooperation, the substantial fine highlights zero tolerance for prolonged failures that expose retail investors to unauthorised products, reinforcing the need for intermediaries to align controls with evolving SFC guidance on virtual assets to protect investors and maintain market integrity. 9. SFC Suspends WONG Chi Fai for 27 Months and CHOI Sau Wai for 7 Months Over Undisclosed Personal Trading in Suspected Ramp-and-Dump Case On 26 January 2026, the SFC announced disciplinary actions against two licensed representatives involved in serious breaches related to undisclosed personal securities trading. The cases are interconnected, arising from an SFC investigation into a suspected Ramp-And-Dump Scheme (唱高散貨). Participants of the Case Mr WONG Chi Fai (Principal Offender) Mr WONG Chi Fai (" WONG "), a former licensed representative for Type 1 and Type 2 regulated activities, suspended for 27 months from 23 January 2026 to 22 April 2028. WONG’s actions circumvented staff dealing policies, prevented effective monitoring of frequent day trading and short-term margin trading, and demonstrated wilful and dishonest conduct. Ms CHOI Sau Wai (Facilitator) Ms CHOI Sau Wai (" CHOI "), a former licensed representative for Type 1 and Type 2 regulated activities, suspended for seven months from 23 January 2026 to 22 August 2026. CHOI’s conduct exposed the client to risks from WONG’s personal trading, exposed GSSL to potential liability if the client disputed the trades, and hindered the firm’s compliance obligations. Key Breaches Name Timeline Key Breach Remarks WONG Chi Fai July 2019 to January 2022 At Fulbright Securities Limited and Fulbright Futures Limited : Conducted approximately 1,300 securities transactions worth $670 million in a securities account held in the name of his relative at Glory Sun Securities Limited (“ GSSL ”, formerly China Goldjoy Securities Limited), without disclosure or approval. Repeatedly falsely declared to Fulbright that he had no beneficial interest in external securities accounts. January 2015 to December 2018; with concealment from May 2011 At Open Securities Limited (OSL, formerly TC Concord Securities Limited): Executed approximately 10,000 personal trades worth $2.8 billion through another relative-held account without required approval, making false declarations to conceal his financial interest and control. CHOI Sau Wai October 2019 to January 2022 Knowingly allowed and facilitated WONG to operate and execute personal trades in a client’s securities account at GSSL without the client’s written authorisation or written consent from WONG’s employer (“ Fulbright ”). This enabled the 1,300 transactions worth $670 million over more than two years, breaching GSSL’s internal policies and the Code of Conduct for Persons Licensed by or Registered with the SFC. For more details of the background, please refer to the: Statement of Disciplinary Action - WONG Chi Fai ; and Statement of Disciplinary Action - CHOI Sau Wai . SIGNIFICANCE: These linked enforcement actions underscore the SFC’s strong commitment to addressing undisclosed personal trading and unauthorised account access, especially when such conduct may facilitate market manipulation schemes like ramp-and-dump. WONG’s multi-firm, long-term misconduct and CHOI’s knowing facilitation in a client account highlight critical lapses in staff dealing controls, disclosure obligations, and intermediary supervision. The differentiated suspension periods, longer for the primary actor and shorter for the facilitator, reflect a proportionate yet firm response, reinforcing that licensed persons must strictly comply with authorisation requirements, accurate declarations, and employer policies. This serves as a clear deterrent to dishonest behaviour that jeopardises client protection, firm compliance, and overall market integrity. [End of ComplianceOne Newsletter – January 2026] 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 Newsletter – July 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES Implementation of regulatory regime for stablecoin issuers Itinerant Professional are allowed to stay longer each calendar year SFC will amend the FRR to foster market developments for OTC derivatives and other products Anti-Scam Consumer Protection Charter 3.0 MARKET NEWS Latest SFC Report shows growing AUM and net fund inflow to Hong Kong SFC hosts meeting to promote industry collaboration in Hong Kong’s digital asset sector HKEX launched Order Routing Service on its Integrated Fund Platform ENFORCEMENT NEWS SFC and ICAC Launch Joint Operation "Leverage" Against Suspected Market Manipulation Syndicate The court-appointed administrator distributed $19 million in assets to clients of Hong Kong Wan Kiu Investment MMT Rules Former Dan Form Company Secretary and Associate Guilty of Insider Dealing Regulatory Updates 1. Implementation of regulatory regime for stablecoin issuers The Hong Kong Monetary Authority (“ HKMA ”) announced the implementation of the regulatory regime for stablecoin issuers which has come into effect on 1 August 2025 (the commencement date). A bundle of documentations has been published as below: Consultation conclusions on the Guideline on Supervision of Licensed Stablecoin Issuers and the finalized Guideline on Supervision of Licensed Stablecoin Issuers ; Consultation conclusions on the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Stablecoin Issuers) and the finalized Guideline on AML & CFT (For Licensed Stablecoin Issuers) ; Explanatory Note on Licensing of Stablecoin Issuers on various aspects of the licensing regime and application process; Explanatory Note on Transitional Provisions for Pre-existing Stablecoin Issuers As we are just on the inception stage of the stablecoin licensing regime, and no license has been granted yet, we will focus more on the initial transitional period where interested parties : are encouraged to contact the HKMA before 31 August 2025 , showing their intention to apply for a license; and the HKMA will communicate with the applicants, conveying to them the regulatory expectations and provide feedbacks as appropriate; which consider themselves sufficiently ready and wish to be considered early should submit an application to HKMA by 30 September 2025 . Key takeaways of the “ Explanatory Note on transitional provisions for pre-existing Stablecoin Issuers ” (“Note”): The Stablecoin Ordinance (SO) effective 1 August 2025 defines Regulated Stablecoin Activities (RSA), including issuing specified stablecoins in Hong Kong or those pegged to the Hong Kong Dollar from outside. Transitional provisions under Schedule 7 of the SO, detailed in this Explanatory Note, apply specifically to Pre-existing Issuers (PEIs). PEIs are entities that substantively carried on RSA in Hong Kong before 1 August 2025; mere "shell" operations do not qualify. These provisions give PEIs time to either apply for a license or wind down their operations. PEIs wishing to continue must submit a formal license application, a written declaration of prior RSA activity, and a written undertaking to comply with regulations to the HKMA by 31 October 2025. Meeting this deadline grants "Application Submitted and Acknowledged" (APSA) status, allowing continued RSA operation until 31 January 2026. During this period, the HKMA assesses APSA entities and may grant a Provisional License, a Full License, issue a Rejection Notice, or refuse the application. PEIs that miss the 31 October deadline, or whose application is rejected, refused, or withdrawn, must enter a closing down period. These entities have one month from the trigger event (e.g., rejection date or 1 November 2025 for non-applicants) to cease RSA activities, operating only to effect an orderly shutdown. SIGNIFICANCE: The RSA licensing process of the HKMA looks alike to that of the VA licensing regime adopted by the SFC, starting with transitional period, provisional license, mutual and interactive communication with the applicants by the regulatory body, with assessment and final determination of license approval. It demonstrates the effectiveness of such pragmatic approach with interactive adjustment through bilateral communication and feedback, and the applicants are given the entire roadmap whether to go or to quit! 2. Itinerant Professional are allowed to stay longer each calendar year The SFC is joining regulators across the globe to curb activities of unlawful financial influencers (“ finfluencers ”) who are putting millions of social media users at risk by touting financial products or services illegally. To achieve this aim, the SFC and the other members of the International Organization of Securities Commissions (“ IOSCO ”) are participating in the “Global Week of Action Against Unlawful Finfluencers” during the week of 2 June 20The SFC post a circular in July 2025 which enhanced measure to facilitate visiting professionals to conduct regulated activities or provide virtual asset service (VA service) in Hong Kong. Current arrangement visiting professionals from an overseas group company of a licensed corporation or licensed provider can choose to apply for a representative licence to be an itinerant professional (“ ITP ”) for providing services in Hong Kong for a short period of time each year to (a) conduct regulated activities on behalf of the licensed corporation; or (b) provide VA service on behalf of a licensed provider, under company of a licensed person at all times; the ITPs are only allowed to stay not more than 30 days each calendar year, and the license is imposed with a condition to this effect ( existing ITP condition ). Revised measure to facilitate and provide more flexibility to visiting professionals to conduct these activities in Hong Kong, the SFC is now extending the period to 45 days each calendar year; it should be noted that the application process, and any exemptions for ITPs remain unchanged; the new condition of extended period is applicable to all existing licensed ITPs, and the SFC will replace their existing ITP condition with a 45-day period accordingly. 3. SFC will amend the FRR to foster market developments for OTC derivatives and other products The SFC launched a public consultation on draft amendments to the Securities and Futures (Financial Resources) Rules (FRR) and related guidelines for implementing a set of internationally comparable capital requirements for licensed corporations (LCs) engaging in over-the-counter derivative activities (“ OTCD capital requirements ”) Under the current proposal, and after a couple of consultations papers & conclusions in 2015 and 2017 respectively before, the OTCD capital requirements previously proposed have been fine-tuned with reference to recent changes to Hong Kong’s Banking (Capital) Rules and the Basel Framework. Some key takeaways from the public consultation (please refer to original for details) the capital requirements for inter-dealer brokers will also be significantly lowered, and the introduction of OTCD in various licenses as below with substantial reduction in capital requirements (reference to APPENDIX 2 regarding details of the proposed minimum capital requirements): (i) LCs conducting OTCD dealing under Type 1, 2, 3 or 11 regulated activity; (ii) LCs conducting OTCD clearing under Type 12 regulated activity; (iii) LCs operating OTCD platform under Type 7 regulated activity; (iv) LCs conducting OTCD advising under Type 4, 5 or 11 regulated activity; (v) LCs conducting OTCD asset management under Type 9 regulated activity Some major incidental and technical changes with respect to: (i) minimum capital requirements (ii) market risk (iii) counterparty credit risk (iv) sundry requirements some substantial amendments to the Securities and Futures (Financial Resources) Rules as compared with the previous 2017 version proposed exemption of capital requirements for centrally-cleared repurchase transactions (repos) to promote central clearing in Hong Kong and the development of the city’s inter-dealer repo market SIGNIFICANCE: As Dr. Eric Yip, the SFC’s Executive Director of Intermediaries, has said, “ To reinforce Hong Kong’s status as an international financial centre, it is crucial to align our OTCD capital requirements with global standard .” Licensed corporations which are keen to engage in OTCD business are strongly advised to take a look and assess if they can fulfil the capital and regulatory requirements with the facilitations proposed. 4. Anti-Scam Consumer Protection Charter 3.0 The Hong Kong Monetary Authority (“HKMA”), the Securities and Futures Commission (“SFC”), the Insurance Authority (“IA”) and the Mandatory Provident Fund Schemes Authority (“MPFA”) together announced the launch of the Anti-Scam Consumer Protection Charter 3.0 (the Charter 3.0) which is fully supported by the Consumer Council, the Hong Kong Association of Banks, the Hong Kong Police Force, and the Office of the Communications Authority. Leveraged with success of previous versions, the Charter 3.0 is enhanced in anti-scam actions by collaboration with the financial regulators, technology firms and telecommunications firms in combatting financial scams. Six principles focused of the Anti-Scam Consumer Protection Charter 3.0 are: (1) Reporting Functions for Users. (2) Reporting Channels for Financial Regulators. (3) Checking of Advertisers. (4) Internal Monitoring Processes. (5) Enforcement of Terms of Service, (6) Collaboration on Public Awareness. During the launch event, executives from various sectors engaged in productive discussion on the latest trends of financial frauds/scams and their collaborative efforts for the common purpose of combatting such frauds and scams. SIGNIFICANCE: Mr Eddie Yue, Chief Executive of the HKMA, said, “ The fight against financial frauds and scams and to protect the public requires a united front, …. The Charter 3.0 represents a significant milestone in this endeavour, harnessing the collective strength of the financial, technology, and telecommunications industries to better safeguard the public .” Ms Julia Leung, Chief Executive Officer of the SFC, added, “ This initiative not only echoes global governments and regulators’ call to action but also positions Hong Kong as a leader in safeguarding the financial world’s digital future. Together, we are building a safer, more responsible online landscape that prioritises vigilance, collaboration, and public trust .” And Mr Clement Cheung, Chief Executive Officer of the IA, said, “ The IA will leverage on this platform to strengthen public education and empower policy holders so that they can safeguard effectively against the increasingly sophisticated plots concocted by swindlers. ” Finally, Mr Cheng Yan-chee, Managing Director of the MPFA, said, “ We urge the working population to stay vigilant and join hands with us by proactively reporting suspected scams to safeguard their MPF interests. ” Though the executives represent interests in their own fields, the Charter 3.0 really achieves concerted efforts by spearheading towards a common goal of combating frauds and scams. Market News 5. Latest SFC Report shows growing AUM and net fund inflow to Hong Kong A growth in Hong Kong's asset and wealth management sector, as revealed in the SFC 2024 Asset and Wealth Management Activities Survey . Released on 16 July 2025, the report underscores Hong Kong's rising prominence on the global stage amid evolving market dynamics. Hong Kong continues to solidify its position as a leading international asset and wealth management center, with assets under management (“ AUM ”) climbing 13% year-on-year to HK$35.1 trillion (US$4.53 trillion) by the end of 2024. This surge was fuelled by net fund inflows of HK$705 billion (US$91 billion), marking an 81% increase from the previous year. Noteworthy Developments Private Banking and Wealth Management Growth The AUM in this segment rose 15% to HK$10.4 trillion (US$1.3 trillion), highlighting strong investor confidence. SFC-Authorized Funds Shine Hong Kong-domiciled funds saw their net asset value (“ NAV ”) jump 22% to HK$1.64 trillion (US$211 billion) by year-end 2024, with further growth of 21% to HK$1.99 trillion (US$256 billion) by May 2025. Net inflows reached HK$163 billion (US$20.9 billion) in 2024, followed by an impressive HK$237 billion (US$30.5 billion) in the first five months of 2025. The number of such funds also expanded to 954 in 2024 and 987 by May 2025. Fund Inflows Surge The asset management and fund advisory business recorded a staggering 571% increase in net inflows to HK$321 billion (US$41.3 billion). Open-Ended Fund Companies (OFCs) Registrations soared 93% in 2024, as managers leveraged Hong Kong's corporate fund structures and government grants. Mainland-Related Firms Thrive Their AUM grew 15% to HK$3.1 trillion (US$397 billion), with net inflows up 68%, marking five consecutive years of outperformance. Licensed Firms Expansion The number of firms licensed for asset management (Type 9 regulated activity) increased 4% to 2,212. Asset managers in Hong Kong are increasingly diversifying their portfolios, allocating 59% of assets outside Mainland China and Hong Kong. Non-equity investments have grown by 13 percentage points over the past five years, now comprising 59% of holdings, as firms adapt to global shifts. These findings align with the Boston Consulting Group's (BCG) Global Wealth Report 2025 , which ranks Hong Kong alongside Switzerland as one of the world's top two cross-border wealth centers. In 2024, Hong Kong achieved the highest absolute growth in cross-border wealth at US$231 billion, with a 9.6% year-on-year increase outpacing the global average. It is on track to surpass Switzerland as the leading global hub for offshore asset management by 2028. SIGNIFICANCE: Ms. Christina Choi, SFC's Executive Director of Investment Products, commented: " Hong Kong is gaining more clout than ever as a leading international hub for asset and wealth management, propelled by strong fund inflows, financial innovation, and a growing talent pool. The SFC is committed to supporting Hong Kong’s continued advancement as a full-service international financial centre and a leading offshore renminbi hub through fixed income and currency market developments. " The survey, which included 1,237 participating firms, covers asset management, fund advisory, private banking, private wealth management, SFC-authorized real estate investment trusts, and assets under trusts. Note that it excludes entities like single family offices, sovereign wealth funds, and government direct investments. 6. SFC hosts meeting to promote industry collaboration in Hong Kong’s digital asset sector On 7 July 2025, the SFC held the second meeting of the Digital Asset Consultative Panel (“ DACP ”), highlighting progress in regulatory innovation and industry collaboration. The SFC convened the meeting with licensed virtual asset trading platforms (“ VATPs ”), fostering dialogue on key market and regulatory advancements in Hong Kong's digital asset sector. Discussions centered on initiatives under Pillars A (Access) and P (Products) of the SFC’s ASPIRe roadmap , including proposals for new regulatory frameworks for virtual asset dealing and custodian providers, as well as enhancements in market accessibility and product offerings. This engagement underscores the SFC's commitment to building a sustainable, competitive digital asset environment while prioritizing investor protection. “A-S-P-I-Re” Roadmap: Pillar A (Access) Streamline market entry through regulatory clarity Pillar S (Safeguards) Optimising compliance burdens without compromising security Pillar P (Products) Expand product offerings and services based on investor categorisation Pillar I (Infrastructure) Modernise reporting, surveillance and cross-agency collaboration Pillar Re (Relationships) Empower investors and industry through education, engagement and transparency SIGNIFICANCE: Dr Eric Yip, the SFC’s Executive Director of Intermediaries and chair of the DACP, stated: “ Today’s DACP meeting is constructive and insightful, underscoring the importance of engagement with licensed VATPs in nurturing a sustainable and competitive digital asset ecosystem. The SFC remains committed to maintaining global competitiveness while ensuring robust investor protection and local safeguards within the digital asset sector .” 7. HKEX launched Order Routing Service on its Integrated Fund Platform On 3 July 2025, the SFC welcomed the rollout of HKEX's Order Routing Service on the Integrated Fund Platform (“ IFP ”) , marking a pivotal step in enhancing Hong Kong's retail funds ecosystem. This service streamlines communication among market participants, fostering greater collaboration within the fund distribution network. What is the Integrated Fund Platform (IFP)? IFP is a business-to-business fund services platform developed with the support of the Hong Kong Special Administrative Region (HKSAR) Government and the SFC. Key features and services include: Fund Repository : An online database featuring all SFC-authorized fund products, providing transparency and helping investors make informed decisions. Launched in 13 December 2024 . Order Routing Service : Connects distributors, fund houses, and transfer agents to facilitate subscriptions and redemptions, improving operational efficiency. Upcoming Services : Platform and Nominee Services are expected to be rolled out subject to regulatory approvals. SIGNIFICANCE: Ms Christina Choi, the SFC’s Executive Director of Investment Products, remarked: “ By enhancing the connectivity between various market participants, the Order Routing Service can help significantly improve the efficiencies of the fund distribution ecosystem. This is expected to contribute to cost optimisation in the fund sales chain, which will also strengthen the overall competitiveness of the Hong Kong retail funds marke t.” The SFC expressed gratitude for industry support and pledged ongoing collaboration with HKEX and stakeholders to ensure the IFP's full implementation. Enforcement News 8. SFC and ICAC Launch Joint Operation "Leverage" Against Suspected Market Manipulation Syndicate On 25 July 2025, the SFC and Independent Commission Against Corruption (“ ICAC ”) announced the results of a joint operation conducted on July 23, codenamed " Leverage " targeting a sophisticated syndicate accused of manipulating shares of a listed company and engaging in corrupt practices. The operation involved searches at 14 locations, including the listed company's offices and SFC-licensed brokers. Key details from the investigation include: Arrests : The ICAC arrested a former chairman and a former executive director of the listed company under the Prevention of Bribery Ordinance. Alleged Scheme : The syndicate is suspected of using false documents, such as internal records and public announcements, to fabricate a share subscription agreement and joint venture with a Mainland company worth over HK$20 million. They allegedly created a false market appearance through nominee accounts. Additional Misconduct : The former executive director, who was also a responsible officer and director of a broker, is accused of accepting advantages from the former chairman and misappropriating client shares valued at approximately HK$9 million. Detection and Collaboration : The SFC initially identified suspicious trading, referring corruption aspects to the ICAC while handling market misconduct under the Securities and Futures Ordinance (“ SFO ”). The operation follows the Memorandum of Understanding between the SFC and ICAC. SIGNIFICANCE: The listed company's shares have been suspended since March 2025 due to a court-ordered liquidation. Suspected offenses include bribery, using false documents, handling proceeds of crime under the Organized and Serious Crimes Ordinance, and market manipulation under the SFO. 9. The court-appointed administrator distributed $19 million in assets to clients of Hong Kong Wan Kiu Investment On 23 July 2025, the SFC reported that court-appointed administrators have distributed around $19 million worth of assets as compensation to impacted clients of Hong Kong Wan Kiu Investment Company Limited (“ HKWK ”), a corporation licensed by the SFC for Type 1 regulated activity. This distribution, completed this month, follows the Court of First Instance's approval in January 2025 and stems from final court orders granted in November 2022 under section 213 of the Securities and Futures Ordinance (SFO). HKWK investigation Case Recap The SFC's actions originated from an investigation uncovering financial irregularities at HKWK. Findings revealed that HKWK and its sole director and shareholder, Connie Sham Khi Rose, had unauthorizedly sold client securities, misappropriated proceeds totalling about $58 million between 2011 and 2019, and falsified statements to hide the activities. The case was referred to the Police, leading to criminal prosecution by the Department of Justice. In the High Court, Sham, aged 88, pleaded guilty and was sentenced on 3 July 2025, to 160 hours of community service, considering her remorse and personal compensation efforts via family and friends. The court orders included a restoration directive for clients and the appointment of administrators—Mr Fok Hei Yu and Mr Chow Wai Shing Daniel of FTI Consulting (Hong Kong) Limited—to recover and manage HKWK's assets. HKWK's license for Type 1 regulated activity (dealing in securities) was revoked in March 2024. SIGNIFICANCE: Prior steps included a restriction notice in November 2019 prohibiting HKWK's operations and asset dealings, followed by an interim injunction in February 2020 to freeze assets. Mr Christopher Wilson, SFC’s Executive Director of Enforcement, stated: “ The SFC is firmly committed to safeguarding market integrity and protecting investors. The actions taken by the SFC in this case highlights the SFC’s strong stance against dishonest practices by intermediaries and its dedication to maintaining public trust in the financial markets .” 10. MMT Rules Former Dan Form Company Secretary and Associate Guilty of Insider Dealing On 17 July 2025, the Market Misconduct Tribunal (“ MMT ”) determined that Ms Cynthia Chen Si Ying, ex-company secretary of Dan Form (now Asiasec Properties Limited) (HKEX: 00271), and her Mainland associate, Mr Wen Lide, engaged in insider dealing related to the company's shares. The tribunal ordered them to disgorge over $1 million in illicit profits and imposed additional sanctions. Case Recap: The case revolves around inside information about the sale of Dan Form's controlling stake. On 22 September 2016, Dan Form, Tian An China Investments Company Limited, and its subsidiary Autobest Holdings Limited announced a conditional agreement for Autobest to acquire 36.45% of Dan Form’s shares from then-chairman Mr Dai Xiaoming at $2.75 per share. Key findings: Chen possessed the inside information by 2 September 2016, and disclosed it to Wen, knowing he might use it for trading. Wen, aware of the information, purchased 1,250,000 Dan Form shares between September 5 and 19, 2016, via his Shenwan Hongyuan Securities account, plus 250,000 shares on September 6 and 50,000 on September 12 through his and his wife's accounts at Grand Investment (Securities) Limited. Chen had an interest in Wen’s dealings through the Shenwan Hongyuan account. The MMT deemed Chen’s actions particularly grave due to her role as company secretary, her managerial responsibilities entrusted by Dai, her encouragement of Wen’s trades, and efforts to obscure profits via layered accounts. Sanctions imposed: Chen and Wen to jointly disgorge $794,347; Wen to disgorge an additional $206,067, plus compound interest from October 26, 2016. Four-year disqualification for Chen from managing Asiasec or any listed Hong Kong corporation without court approval; recommendation for disciplinary action by the Hong Kong Chartered Governance Institute. Four-year cold shoulder orders banning both from dealing in Hong Kong securities, futures, leveraged forex, or collective schemes. Cease and desist orders against future market misconduct. Payment of government and SFC costs. For prior context, see SFC press releases from 23 April 2024 , and 21 January 2025 . [End of ComplianceOne Newsletter – July 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

香港海關根據《打擊洗錢及恐怖分子資金籌集條例》(第615章)，對四間持牌金錢服務經營者違規行為進行了紀律處分。其中三間經營者受到公開譴責，顯示違規行為的嚴重性。 海關對四間找換店違反反洗錢條例進行紀律處分 香港海關根據《打擊洗錢及恐怖分子資金籌集條例》(第615章)，對四間持牌金錢服務經營者違規行為進行了紀律處分。其中三間經營者受到公開譴責，顯示違規行為的嚴重性。 案例一 決定日期: 2024年8月12日; 紀律處分: 公開譴責及糾正行動。 違規事項: 未就匯款交易備存相關文件記錄（包括內地銀行帳戶匯款明細）。 未設立程序以識別客戶或實益擁有人是否為政治人物。 未在指定時間內向海關報告銀行帳戶變更詳情。 案例二 決定日期: 2024年8月12日; 紀律處分: 公開譴責及糾正行動。 違規事項: 未備存六宗匯款交易的文件記錄（包括客戶盡職審查篩查文件）。 進行匯款交易前，未識別及核實匯款人及實益擁有人身份。 進行匯款交易前，未識別代表客戶行事的人的身份及授權。 案例三 決定日期: 2024年8月12日; 紀律處分: 公開譴責及糾正行動。 違規事項: 未在與客戶建立業務關係前執行客戶盡職審查措施。 進行匯款交易前，未記錄收款人地址及指示時間。 未在指定時間內向海關報告營業處所的停業日期。 案例四 決定日期: 2024年8月12日; 紀律處分: 糾正行動。 違規事項: 未在指定時間內向海關報告提供金錢服務的銀行帳戶變更詳情。 海關執法行動焦點 這四間店鋪中，有三間的違規行為與 客戶盡職審查 和 文件備存 有關。這些行動強調了客戶盡職審查和文件備存在反洗錢合規中的重要性。 根據香港海關執行反洗錢和打擊恐怖融資的紀錄，從2014年到2024年，大部分的執法行動涉及 客戶盡職審查 和 文件備存 的規定。這些規定包括： 第5條: 就客戶作盡職審查及備存紀錄： 這是指金錢服務經營者在與客戶建立業務關係前，必須進行客戶盡職審查，並保存所有與交易有關的文件記錄。 附表2: 就客戶作盡職審查及備存紀錄： 這是對上述規定的具體應用，強調在進行交易前，必須確保客戶的身份和交易活動的合法性。 總計 2024年 2023年 2022年 2021年 2014-2020年 第5條: 就客戶作盡職審查及備存紀錄 23 0 2 1 6 14 第29條: 經營金錢服務的限制 21 0 0 0 2 19 第35條: 擬任持牌人董事需獲關長批准 1 0 1 0 0 0 第37條: 擬成為持牌人合夥人的人需獲關長批准 2 0 2 0 0 0 第38條: 加入新的營業處所 2 0 0 2 0 0 第40條: 持牌人有責任向關長具報詳情改變 19 3 7 8 0 1 第41條: 持牌人有責任向關長具報停業 3 0 1 2 0 0 附表2: 就客戶作盡職審查及備存紀錄 10 0 2 2 2 4 資訊來源 ComplianceOne - 香港海關對金錢服務經營者的執法和刑事調查案件資訊： https://eservices.customs.gov.hk/MSOS/common/enforcenew 客戶盡職審查 指在與客戶建立業務關係前，金錢服務經營者需要採取措施來識別和核實客戶及其實益擁有人的身份，並確保他們不涉及任何非法活動。這包括檢查客戶的身份證明文件、收集相關信息，並在必要時進一步核實。 文件備存 則要求金錢服務經營者保存所有與交易有關的文件記錄至少五年，以確保在監管機構要求時可以提供完整的交易記錄。這不僅有助於防止洗錢活動，還能提高業務透明度，保護金錢服務經營者免受潛在的法律風險。 這些行動展示了海關對維護金融系統完整性及嚴格執行反洗錢法規的承諾。公開譴責提醒所有金錢服務經營者，遵守反洗錢要求的重要性。金錢服務經營者應審查其反洗錢政策及程序，以確保符合要求，避免面臨類似處分。 立即試用「東查查反洗錢/ 客戶管理系統」

This article delves into the ongoing obligations of LCs under the SFC, focusing on AML requirements, the pivotal role of ongoing monitoring, and the severe consequences of non-compliance. Ongoing AML Obligations of SFC Licensed Corporations In Hong Kong, the Securities and Futures Commission (“ SFC ”) is the cornerstone of financial regulation, overseeing the securities and futures markets to ensure their integrity and stability. Licensed Corporations (“ LCs ”), which are entities authorized by the SFC to conduct regulated activities, face stringent compliance obligations to uphold these standards. Among these, Anti-Money Laundering (“ AML ”) requirements are particularly critical, given the global emphasis on combating financial crimes. This article delves into the ongoing obligations of LCs under the SFC, focusing on AML requirements, the pivotal role of ongoing monitoring, and the severe consequences of non-compliance. 1. AML Requirements for Licensed Corporations AML encompasses a set of laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income. In Hong Kong, the SFC enforces these standards through the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations and SFC-licensed Virtual Asset Service Providers) , which outlines comprehensive requirements for LCs to mitigate money laundering and terrorist financing (“ ML/TF ”) risks. The following table summarizes the core AML obligations for LCs: Requirement Description AML/CFT Systems LCs should implement systems and controls proportionate to identified ML/TF risks, approved by senior management, and regularly reviewed. Customer Due Diligence (“CDD”) Before establishing business, relationships or conducting transactions above HK$120,000 (or HK$8,000 for wire transfers), LCs must verify customer identities, understand their business, and assess the purpose of establishing the business relationship. Suspicious Transaction Reporting LCs should report transactions suspected of involving ML/TF to the Joint Financial Intelligence Unit ("JFIU”). Record-Keeping Records of CDD, transactions, and related documents must be maintained for at least five years after the business relationship ends or transaction completes. Risk-Based Approach (“RBA”) LCs should assess institutional and customer risks to tailor their AML/CFT measures, ensuring higher scrutiny for high-risk scenarios. 2.1 Ongoing Monitoring Functions Ongoing monitoring is a cornerstone of AML compliance, ensuring that LCs can detect and respond to potential ML/TF activities in real time. The SFC mandates that LCs continuously monitor their business relationships and transactions to ensure consistency with their knowledge of customers, their business activities, and risk profiles. The following table outlines the key ongoing monitoring obligations: Continuous Review Regularly update customer information to ensure it remains relevant and accurate. Transaction Scrutiny Monitor transactions for consistency with customer profiles, flagging complex, unusually large, or unusual patterns lacking apparent economic or lawful purpose. CDD Record Reviews Conduct periodic reviews of CDD records, with annual reviews (or more frequent) for high-risk customers like PEPs. Systematic Monitoring Implement systems to monitor transactions, tailored to the LC’s size, complexity, and risk profile, providing timely data to relevant staff. System Effectiveness Regularly review and validate transaction monitoring systems, including parameters and thresholds, to ensure adequacy. 2.2 Enhanced Monitoring for High-Risk Customers For high-risk customers, LCs must apply enhanced measures, including obtaining senior management approval, establishing the source of wealth and funds, and conducting more frequent monitoring. SFC also requires LCs to use reliable data sources, such as publicly available information or commercial databases, to identify PEPs, while acknowledging the limitations of such databases. 3.1 Penalties for Non-Compliance with AML Guidelines Non-compliance with AML regulations carries significant consequences, reflecting the SFC’s commitment to maintaining a robust financial system. The Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (“ AMLO ”) and SFC’s Disciplinary Fining Guidelines outline the penalties for violations. The following table summarizes the consequences of AML non-compliance: Fines: Up to HK$10 million or three times the profit gained from non-compliance, whichever is higher. Regulatory Actions: Restrictions on business activities, license suspension, or revocation. 3.2 Enforcement Examples SFC recently took disciplinary action against CSC Futures (HK) Limited (“ CSC ”) and its former responsible officer (“ RO ”), highlighting critical failures in AML compliance, including ongoing monitoring obligations. SFC’s investigation, covering the period from January 2017 to December 2018 (the Relevant Period), uncovered two primary areas of non-compliance by CSC, with ongoing monitoring being a significant focus: Inadequate Due Diligence on Customer Supplied Systems Failure in Ongoing Monitoring of Client Accounts Disciplinary Action For LC: A HK$4.95 million fine and a public reprimand, signaling reputational damage and financial loss. For RO: A six-month industry ban, reflecting personal accountability for oversight failures. SFC emphasized that such lapses undermine market integrity and public confidence, necessitating strong deterrence. For more details of the case, please refer to SFC – Enforcement News 4.1 Our Solution for Ongoing Monitoring Effective ongoing monitoring relies heavily on technology to process large volumes of data and identify risks promptly. It is recommending LCs to implement systems that can integrate with existing infrastructure, provide real-time updates, and support holistic monitoring across multiple accounts and business lines. This is where Screen-X AML/CRM Solutions excel. We recognize the complexities faced by licensed corporations in meeting the continuous monitoring requirements of SFC. Screen-X AML/CRM Solutions — supported by data from the globally authoritative database Acuris Risk Intelligence and developed with input from and ComplianceOne Consulting Limited — provides a set of efficient and compliant AML solutions. It also supports API connections, is easy to operate, and offers seamless API integration, flexibly adapting to the compliance needs of institutions of different sizes. 4.2 Key Features of Screen-X AML/CRM Solutions The following table highlights how our solution supports ongoing monitoring: Feature Benefit Global Blacklist Matching Automatically checks customers against over 1.4 million PEPs and 5 million high-risk records, ensuring comprehensive risk identification. Real-Time Updates Sanctions updated within 30 minutes, PEPs within 24 hours, keeping data current. Adverse Media Monitoring Curated articles in native languages using advanced technology and human intelligence to detect reputational risks. Company Credit Reports Provides credit reports on approximately 200 million limited companies to assist in due diligence. API Integration Seamless integration with existing systems for real-time monitoring and data exchange. High Data Growth Adds up to 40,000 high-risk profiles monthly, ensuring coverage of emerging risks. Historical Data Access 16 years of historical data for in-depth risk analysis. Screen-X AML/CRM Solutions provide a powerful tool for LCs to navigate this regulatory landscape. With features like real-time blacklist matching, adverse media monitoring, and seamless API integration, our platform enables LCs to meet SFC requirements efficiently while focusing on their core business activities. By leveraging advanced technology, LCs can not only ensure compliance but also enhance their risk management capabilities, safeguarding their operations and reputation in Hong Kong’s dynamic financial market. 5.2 Conclution The ongoing obligations of LCs, particularly in the realm of AML compliance, are both complex and critical. Implementing effective AML/CFT systems, conducting thorough CDD, and maintaining rigorous ongoing monitoring are essential to prevent financial crimes and uphold regulatory standards. The severe penalties for non-compliance—ranging from substantial fines to license revocation—emphasize the need for LCs to prioritize these obligations. Screen-X AML/CRM Solutions provide a powerful tool for LCs to navigate this regulatory landscape. With features like real-time blacklist matching, adverse media monitoring, and seamless API integration, our platform enables LCs to meet SFC requirements efficiently while focusing on their core business activities. By leveraging advanced technology, LCs can not only ensure compliance but also enhance their risk management capabilities, safeguarding their operations and reputation in Hong Kong’s dynamic financial market. For more information on how our solutions can support your AML compliance needs, visit EDON website . Any further assistance with other Compliance inquiries, please visit: https://www.complianceone.hk/ongoingcompliancesupportservice

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Newsletter – March 2026 The topics discussed in this monthly newsletter are as follows: Regulatory Updates SFC drives Asia-Pacific regulatory consensus to strengthen market resilience through collaboration and new technology Uncertificated securities market regime – targeted for launch in November 2026 Market News HKMA, SFC, IA and MPFA Launch GenA.I. Sandbox++to foster A.I. innovation across financial services SFC publishes review on SEHK’s performance in regulating listing matters Strategic innovation drives growth of Hong Kong’s listing and digital asset markets: SFC Quarterly Report Earnings and transaction value surge to five-year highs for Hong Kong’s securities industry in 2025 Enforcement News - Intermediaries SFC and ICAC joint operation in alleged insider dealings and corruption involving senior executives of licensed corporations SFC bans KUO Che-jung for four and a half years and fines him HKD 1 million for executing match trades that are advantageous to his beneficial interest SFC bans LUI Pak Tong for life and fines him HKD 17.43 million involving a conflict of interest of five unsecured loans to a company under his control Enforcement Reporter: No Safe Harbour: Holding Intermediaries to Account Regulatory Updates 1. SFC drives Asia-Pacific regulatory consensus to strengthen market resilience through collaboration and new technology On 05 March 2026, the Securities and Futures Commission (“ SFC ”) led discussions at key International Organization of Securities Commissions (“ IOSCO ”) Asia-Pacific Regional Committee (“ APRC ”) meetings in Sydney, Australia. SFC CEO Ms Julia LEUNG chaired the main APRC meeting, fostering consensus on critical regional capital market pathways. The discussion focused on public/ private markets, regional supervisory/enforcement priorities, combating online scams, and regulatory implications of tokenisation and artificial intelligence. In a keynote speech by Ms LEUNG, she outlined a strategic response to global fragmentation. The approach emphasises: Building market resilience by broadening regional markets. Responsible adoption of technology. Enhancing cross-border partnerships for efficient capital flows. Strengthening regional cooperation to jointly tackle online scams, financial digitalization, and sustainable finance amidst technological and climate-related challenges. * Please refer to Ms LEUNG’s speech for more details. SIGNIFICANCE: The regulators have essentially outlined what is expected to come. The key now is how relevant companies prepare in advance to seize the opportunities. The companies poised for future success will be those that deliberately pursue digital transformation, proactively foster cross-border partnerships, and consistently advance sustainable finance initiatives. 2. Uncertificated securities market regime – targeted for launch in November 2026 On 30 March 2026, the SFC announced a clear implementation timeline for Hong Kong’s new Uncertificated Securities Market (“ USM ”) regime. The regime is targeted to be launched on 16 November 2026. Market participants will be invited to participate in testing the USM-related systems and processes in the coming months. Details and Implementation Arrangements Item Timeline/Phase Description Legislative Process Second Quarter of 2026 A commencement notice to bring the USM legislation into effect will be tabled before the Council. Implementation for New Listings Upon launch (post-legislation) All newly listed securities will be required to issue paperless form from the time of listing. Transition for Existing Listings Gradual integration over a five-year period starting from launch For securities already listed before the launch date, issuers will be gradually integrated into the USM regime. Investor Flexibility Post-launch, with advance notice Investors holding physical share certificates will have flexibility to decide when to convert to paperless form. Issuers and the market will receive advance notice of specific arrangements. How to prepare for the USM regime? Intermediaries are encouraged to work closely with Hong Kong Exchanges and Clearing Limited (“ HKEX ”) to prepare for the USM launch. While the existing nominee structure in Central Clearing and Settlement System (“ CCASS ”) will be retained, there will be changes, most notably to the process for depositing securities into and withdrawing them from CCASS. These changes may require adjustments to intermediaries’ business models, operational process, and client documentation. The SFC urges intermediaries to progress their preparation work quickly to be ready for the November launch. SIGNIFICANCE: The USM launch is not just a market infrastructure update but a direct operational mandate. It necessitates proactive internal preparation, system update, process redesign, cost structure review, and client communication to ensure a smooth transition and ongoing compliance by the November 2026 deadline. Market News 3. HKMA, SFC, IA and MPFA Launch GenA.I. Sandbox++to foster A.I. innovation across financial services On 5 March 2026, the Hong Kong Monetary Authority (“ HKMA ”), SFC, Insurance Authority (“ IA ”) and Mandatory Provident Fund Schemes Authority (“ MPFA ”), in collaboration with the Hong Kong Cyberport Management Company Limited (“ Cyberport ”), jointly announced the launch of the Generative Artificial Intelligence (“ GenA.I. ”) Sandbox++ initiative. Building on the success of the original GenA.I. Sandbox launched in 2024, the expanded Sandbox++ now covers multiple financial sectors, including banking, securities and capital markets, asset and wealth management, insurance, mandatory provident fund (“ MPF ”) schemes, and stored value facilities. The initiative continues to prioritise three high-impact application areas: i) Risk management ii) Anti-fraud measures iii) Customer experience enhancement It further advances “A.I. vs. A.I.” strategies — using A.I. technologies to identify, monitor and mitigate risks arising from A.I. adoption itself. Participating financial institutions will benefit from Targeted supervisory guidance from the four regulators; Technical support; and Complimentary access to graphics processing unit (“ GPU ”) computing resources at Cyberport’s A.I. Supercomputing Centre. This risk-controlled environment enables institutions to develop, pilot and refine generative A.I. use cases more efficiently. The Sandbox++ encourages both sector-specific and cross-sector applications, including but not limited to: A.I.-driven insurance underwriting and claims processing Automated suitability assessments for investment product distribution Intelligent compliance tools for regulatory requirements Advanced fraud detection systems Enhanced customer service via intelligent chatbots Broader industry-wide solutions Key Statements from Regulators Mr Eddie YUE, Chief Executive of the HKMA Mr YUE described the launch as a significant milestone under the “Fintech 2030” strategy, aimed at unlocking A.I.’s potential to drive growth, efficiency and customer-centricity while reinforcing Hong Kong’s position as a leading international financial centre. Ms Julia LEUNG, Chief Executive Officer of the SFC Ms LEUNG highlighted the expansion as a collective commitment to responsible market innovation, urging licensed corporations to participate actively to enhance operational efficiency, resilience and growth through A.I. Mr Clement CHEUNG, Chief Executive Officer of the IA Mr CHEUNG noted that the initiative fosters an accountable, inclusive and prudent environment for A.I. innovation, aligning with the IA’s AI Cohort Programme and supporting talent attraction to strengthen Hong Kong’s regional A.I. hub status. Mr CHENG Yan-chee, Managing Director of the MPFA Mr CHENG encouraged MPF trustees and intermediaries to explore advanced fintech solutions, including A.I., to improve operational efficiency and service quality for scheme members. SIGNIFICANCE: The GenA.I. Sandbox++ represents a landmark cross-regulatory collaboration that significantly broadens the scope for responsible generative A.I. adoption across Hong Kong’s entire financial services ecosystem. By providing supervisory guidance, technical resources and a safe testing ground, including powerful GPU computing access the initiative lowers barriers to innovation while maintaining strong focus on risk management, fraud prevention and customer protection. The emphasis on “A.I. vs. A.I.” approaches and cross-sector applications positions Hong Kong at the forefront of A.I.-enabled financial services in Asia, fostering deeper partnerships between regulators, financial institutions and technology providers. This coordinated effort not only accelerates practical deployment of high-impact use cases in insurance, securities, banking and MPF, but also enhances the competitiveness, resilience and customer-centricity of Hong Kong’s financial sector, reinforcing its status as a global leader in fintech and responsible innovation. 4. SFC publishes review on SEHK’s performance in regulating listing matters On 18 March 2026, the SFC released a review report that summarizes its key findings and recommendations on the performance of The Stock Exchange of Hong Kong Limited (“ SEHK ”) in its listing matters during 2024. Main Scope of Review : 1) Vetting of Internal Control Reviews by Listed Issuers : Primarily examining how the SEHK required and reviewed independent internal control reviews conducted by issuers, mostly in cases of long suspensions and small number of disciplinary cases. 2) Vetting of Listed Issuers’ Handling of Late Auditor Resignations : Reviewing how the SEHK supervised and reviewed the process and disclosures of issuers and their audit committees when auditors resigned close to the financial results announcement deadline. Findings and Recommendations : 1) Regarding internal control reviews, the SFC recommends the SEHK should more consistently identify cases requiring such reviews, ensure the review scope is adequate, place greater reliance on independent consultants and external auditors for verification, and enhance assessment of the independence and qualifications of internal control consultants. 2) Regarding late auditor resignations, the SFC recommends the SEHK should take steps to reduce their frequency, enhance scrutiny of the disclosed reasons for resignation, and strengthen supervision of how audit committees fulfil their duties when a late resignation occurs. SIGNIFICANCE: The industry market can extract clear signals on rising standards for internal controls, a more interventionist approach to audit committee oversight, a push for greater transparency in auditor changes, and more structured processes for remediating certain listing rule breaches. Relevant listed companies should review their policies and procedures in these areas in anticipation of the SEHK implementing the SFC’s recommendations. 5. Strategic innovation drives growth of Hong Kong’s listing and digital asset markets: SFC Quarterly Report On 19 March 2026, the SFC issued a report outlining how Hong Kong’s capital market achieved breakthroughs in multiple areas, including Initial Public Offerings (“ IPOs ”), digital assets and asset management, by the end of 2025 through institutional innovations and product innovations, while also strengthening regulation to consolidate its position as an international financial centre. The report highlights: World’s Leading IPO Market : Hong Kong became the world’s top venue for IPOs in 2025, raising over USD 280 billion. The newly established Technology Enterprise Channel performed notably well, attracting a large number of listing applications from pre-profit biotech and specialist technology companies. Thriving Digital Asset Ecosystem : The scale of tokenized retail money market funds, newly introduced in 2025, grew steadily. The market capitalization of Asia’s first batch of virtual asset spot ETFs, launched in 2024, increase significantly. Robust Growth in Asset and Wealth Management: Hong Kong domiciled funds saw substantial year-on-year growth in net-inflows, asset under management, and total number in 2025. The overall market size expanded markedly driven by the ETF sector. Regulatory Measures : To ensure market quality, the SFC has issued a circular addressing deficiencies in IPO application documents and sponsor conduct, and will conduct thematic inspections. Licensing Activity : A 17% year-on-year increase in license applications indicates a growing and competitive marketplace. Licensed Corporations should be prepared for this evolving competitive landscape. * For more details, please refer to the SFC Quarterly Report SIGNIFICANCE: Hong Kong’s capital markets saw a strong finish to 2025, as a wave of strategic innovation drove breakthroughs for the listing and digital asset markets. Licensed Corporations should use this information on strategic market and regulatory update to calibrate their business focus and ensure their compliance frameworks are attuned to these highlighted areas. 6. Earnings and transaction value surge to five-year highs for Hong Kong’s securities industry in 2025 On 31 March 2026, the SFC issued its comprehensive report on the performance of Hong Kong securities sector, covering licensed securities dealers and securities margin financiers. The report primarily uses financial data to benchmark the industry’s health and growth. The industry achieved a record-breaking performance of net profits and total value of transactions in 2025. Financial Performance Highlights of Hong Kong’s Securities Industry (2024 vs 2025) Metric 2024 2025 Change (HKD) Change (%) Net profits (Securities Dealers & Margin Financiers) 44.4 billion 71.7 billion +27.3 billion +62% Total Value of Transactions (Securities Dealers & Margin Financiers) 144.1 trillion 219.0 trillion +74.9 trillion +52% Hang Seng Index (HIS) Closing level (as of 31 Dec) 20,024* 25,631 +5,607 +28% Average Daily Turnover (SEHK) 131.8 billion 249.8 billion +118.0 billion +90% Key Income Streams (Securities Dealers & Margin Financiers) Income Category 2024 2025 Change (HKD) Change (%) Net Commission & Gross Interest Income 65.2 billion 75.5 billion +10.3 billion +16% Net Securities Commission Income 20.2 billion 30.2 billion +10.0 billion +50% Advisory & Underwriting Income 23.6 billion 29.9 billion +6.3 billion +27% Asset Management Fee Income 37.5 billion 48.6 billion +11.1 billion +30% Other Income (including Proprietary Trading) 96.3 billion 113.5 billion +17.2 billion +18% Market Structure & Client Data (as of 31 Dec) Category 2024 2025 Change Number of Securities Dealers & Margin Financiers 1,397 1,475 +78 Total Active Clients (Securities Dealers & Margin Financiers) 4.4 million 5.1 million +0.7 million (+17%) Asset Under Management (AUM) 11.8 trillion 14.9 trillion +3.1 trillion Outstanding Margin Loans 177.2 billion 216.4 billion +39.2 billion (+22%) The report depicts a Hong Kong securities industry that experienced exceptionally strong growth in 2025, marked by record transaction volumes, surging profitability across all business lines and a significantly expanding client base and asset base. Enforcement News - Intermediaries 7. SFC and ICAC joint operation in alleged insider dealings and corruption involving senior executives of licensed corporations On March 10 and 11, 2026, the SFC and the Independent Commission Against Corruption (ICAC) conducted a joint operation targeting senior executives of two licensed corporations and a hedge fund management company. The ICAC arrested six men and two women who were then the senior executives of a licensed securities firm who accepted over HKD 4 million bribe from the owner of the licensed hedge fund management firm to disclosure of confidential, material non-public information concerning the share placements of several Hong Kong-listed companies prior to their public announcements. Following receipt of the material non-public information, the implicated hedge fund management company established short positions in the relevant stocks. Subsequent to the public announcement of the share placements, these positions generated illicit profits of approximately HKD 315 million. As this case remains an active investigation, no further comments will be provided by the SFC or the ICAC at this time. SIGNIFICANCE: This incident serves as a critical wake-up call to licensed corporations. It necessitates an immediate re-evaluation of culture, controls, ethics training and practical enforcement of compliance measures to prevent insider dealing and bribery. 8. SFC bans KUO Che-jung for four and a half years and fines him HKD 1 million for executing match trades that are advantageous to his beneficial interest On 19 March 2026, the SFC has prohibited Mr KUO Che-jung, a former responsible officer of Yuanta Securities (Hong Kong) Company Limited, from re-entering the securities industry for four and a half years, from 19 March 2026 to 18 September 2030, and has fined him HKD 1,000,000. This action follows findings that between 02 July 2020 and 24 November 2020, Mr KUO engaged in market misconduct by executing 25 matched trades in Hang Seng Index options between Yuanta’s proprietary trading account and a securities account held in his wife’s name at an external broker. These trades were executed at prices systematically favourable to his wife’s account and disadvantageous to Yuanta’s account. Furthermore, Mr KUO failed to disclose his beneficial interest in his wife’s account and two other personal trading accounts, a direct violation of Yuanta’s staff dealing policies. This non-disclosure prevented the firm from monitoring his personal trading activities and managing the resultant conflicts of interest. * For more details of the background, please refer to the Statement of Disciplinary Action . SIGNIFICANCE: This case serves as a clear reminder to all licensed corporations and licensed individuals that robust personal account dealing policies are not merely administrative but also essential for market integrity and effective supervision. Staff dealing policies must be strictly implemented and abide by the relevant individuals. 9. SFC bans LUI Pak Tong for life and fines him HKD 17.43 million involving a conflict of interest of five unsecured loans to a company under his control On 24 March 2026, the SFC imposed a lifetime prohibition from re-entering the securities industry on Mr LUI Pak Tong, a former licensed representative of Thunder Capital Limited. The action follows findings of egregious misconduct. It was determined that between September 2017 and June 2022, a company under Mr LUI’s control entered into five unsecured loan agreements, securing a total of HKD 22.5 million from segregated portfolios managed by Thunder Capital. This arrangement yielded illicit financial benefits of approximately HKD 17.43 million for his company. Crucially, Mr LUI intentionally failed to disclose his involvement in the borrowing company to Thunder Capital’s Investment Committee, thereby concealing the material conflicts of interest. This deliberate non-disclosure constituted a severe breach of fiduciary duty, as it prevented the firm from taking necessary steps to ensure fair treatment for the investors in the affected portfolios. * For more details of the background, please refer to the Statement of Disciplinary Action . SIGNIFICANCE: A lifetime prohibition is the most severe individual sanction available, reserved for cases involving dishonesty, fraud, misconduct that causes substantial investor loss. This case signals that the misappropriation of client funds and intentional concealment of conflicts for personal enrichment will be met with the ultimate career-ending penalty, underscoring the zero-tolerance for acts that strike at the heart of investors’ confidence . 10. Enforcement Reporter: No Safe Harbour: Holding Intermediaries to Account On 31 March 2026, the SFC published its 7 th Edition of Enforcement Reporter themed as “No Safe Harbour: Holding Intermediaries to Account”. This is the official enforcement recap of the SFC that sends a clear message to licensed corporations and its senior management that fund mismanagement, conflict of interest, client-asset misuse, window-dressing of financial resources and provision of false information will attract serious regulatory action, including revocation of license, lifetime industry bans, substantial fines and operational restrictions. This issue spotlights significant cases in the asset-management sector. Fund Manager Misconduct Cases Entity Name Misconduct SFC Action Agg Asset Management Limited Two former responsible officers engaged in serious misconduct such as window-dressing liquid capital, investing fund assets in conflicted related-party debentures, misappropriating investor subscriptions, and failing to manage conflict of interest and risks. Revocation of license of the company Lifetime industry ban and HKD 1.7million fine on the sole director/ responsible officer Suspension of 12 months for the other involved responsible officer Nerico Brothers Limited and Amber Hill Capital Limited Misuse and misappropriation of client funds and provision of false information to the SFC, investors, and auditors. Revocation of license for both company and lifetime industry ban of three responsible individuals. Sponsor Misconduct Cases Entity Name Misconduct SFC Action RaffAello Capital Limited Failed to properly investigate red flags in the applicant’s retail sales data and its dealings with key suppliers, relying excessively on untested management representations during due diligence. Reprimanded and fined the company HKD 4 million. Sponsor principal given a two-year industry re-entry ban Changjiang Corporate Finance (HK) Limited Serious and extensive failures that includes Inadequate prospectus disclosures, misapplication of Listing Rules, systemic record-keeping failures. Reprimanded and fined the company HKD 20 million. One year suspension from new SEHK sponsor work Former responsible officer banned from re-entering the industry for seven years. SIGNIFICANCE: The 7 th Edition of Enforcement Reporter illustrates the SFC’s heightened enforcement stance as warned in its circular in 09 October 2024 where there will be zero tolerance for dishonesty, imposing severe penalties like license revocation, suspension and lifetime bans for serious misconducts involving misappropriation and fabrication. Licensed Corporations should conduct a compliance gap analysis to mitigate similar risk. [End of ComplianceOne Newsletter – March 2026] 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 1605, 16/F, West Tower, Shun Tak Centre,168-200 Connaught Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The SFC issued a circular highlighting the observed unsatisfactory behaviours of licensed corporations (“LCs”) and the expected statutory obligations and standards of conduct throughout the inspection process. Statutory Obligations during SFC Inspection (February 2026) On 29 January 2026, the Securities and Futures Commission (“ SFC ”) issued a circular stating the observed unsatisfactory practices and behaviours of Licensed Corporations (“ LCs ”) and reminding the LCs on their statutory obligations and expected standards of conduct throughout the inspection process. LCs Unsatisfactory Practices and Behaviours Obstructing Inspection Arrangements Attempting to postpone, delay, or reject, the SFC’s notices to conduct inspections or interviews with relevant staff. Disputing the Inspection without Good Reason Challenging the SFC’s inspection scope, review areas or selected samples, or the necessity of inspection inquiries, without a valid legal basis. Evading Responses Delay in providing responses or providing evasive, misleading, intentionally incomplete or partial responses to inspection enquiries. Submitting False/Distorted Information Withholding information from the SFC, or submitting documents, information or responses which were ambiguous, illegible, inaccurate, incomplete, inconsistent, false, misleading or even forged. Actively Disrupting the Inspection Process Arranging affairs or manipulating circumstances to delay, disrupt or obstruct the SFC’s inspection efforts. Unprofessional Conduct Toward Inspectors Engaging in unprofessional, uncooperative or antagonist conduct towards an authorized person, or treating inspection inquiries as an inconvenience. Expected Standards/ Statutory Obligations Key Requirements & Notes Access to Information & Answers s Must provide access to records/ documents and answer questions as required under SFO section 180. s Criminal Offence : Failure to comply (without reasonable excuse)/ providing false. misleading information, fraudulent non-compliance. s Confidentiality is generally not a valid reason for non-compliance s Inspection matters are themselves confidential under SFO section 378. Maintenance & Retrieval of Records s Must maintain proper business records at all times for ready retrieval without undue delay as stated under Securities and Futures (Keeping of Records) Rules and Management, Supervision and Internal Control Guidelines for Persons Licensed by or Registered with the Securities and Futures Commission (Internal Control Guidelines). s Contravention of the Keeping of Records Rules is an offence. Availability of Responsible Officers (ROs) s ROs are responsible in ensuring LC’s compliance. s Must have at least one RO available at all times to supervise regulated activities. s During inspections, ROs are expected to be available. Unavailability is generally not a reasonable excuse for non-compliance with SFO section 180. s An SFC inspection notice is an official notice, not an appointment. Fitness & Properness of LCs s Must comply with all requirements and cooperate with the SFC. s Must adhere to Code of Conduct General Principles (honesty, fairness, due care, compliance, senior management responsibility. s Non-compliance with SFO section 180 or other codes/guidelines constitutes misconduct and may affect licensed status. Engagement of External Representative s LC remains fully responsible and accountable to the SFC for the conduct and information provided by authorized external representative (e.g. consultants, lawyers). Key Implications for Senior Management 1. Personal Liability and Discipline – Under Part IX of the SFO, the SFC can sanction any person involved in the management for misconduct or being “not fit and proper”. This applies to all senior managers, even if they are not licensed. 2. Attributed Misconduct – If an LC commits misconduct due to a manager’s consent, connivance, or neglect, that individual is also personally guilty of misconduct. 3. Fitness & Properness Assessment – The SFC will look into a manager’s past and present conduct. Failure to ensure LC compliance rules can directly undermine an individual's deemed fitness and properness to hold their position. 4. Designated Oversight Duty – The MIC of the Overall Management Oversight function, supported by the MIC of Compliance is now explicitly called upon to exercise proactive leadership to ensure full LC compliance during SFC inspections. Actions and Recommendations 1. Senior Management Must Take Ownership – Recognize that accountability for inspection outcomes extends beyond the firm to you personally. 2. Ensure Readiness & Cooperation – Proactively ensure all records are accessible, ROs must be available, and the firm is prepared to comply fully and promptly with SFC information requests under Section 180 of the SFO. 3. Clarify Roles – The MICs for Overall Management Oversight and Compliance should explicitly confirm and align their roles and process for overseeing and guiding the firm’s response to regulatory inspections. [End of ComplianceOne's Impact Analysis – Statutory Obligations during SFC Inspection (February 2026) ] 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 – June 2025 The topics discussed in this monthly newsletter are as follows: 1. CPD Compliance Reporting Guidelines for 2024/2025 2. IA Conducts Undercover Inspections of Un-Licensing Activities 3. IA Enforces Retrospective Compliance with Broker Companies under SROs Regime 4. IA Bans Two Intermediaries for Fabricating Policies Regulatory News 1. CPD Compliance Reporting Guidelines for 2024/2025 The IA has released comprehensive guidelines in a circular dated 6 June 2025, outlining the Continuing Professional Development (“ CPD ”) compliance reporting procedures for individual licensees and appointing principals for the Assessment Period 2024/2025 (1 August 2024 to 31 July 2025). This newsletter highlights the essential details. Key Deadlines Deadline What to do before the deadline 31 July 2025 Individual licensees must complete their required CPD hours 30 September 2025 Individual licensees must submit CPD Declarations to the IA via Insurance Intermediaries Connect (“ IIC ”) or to their appointing principals 31 October 2025 Appointing principals must report the CPD compliance status of their appointed licensees to the IA How to accessing CPD Information via IIC Individual Licensees : Log into IIC > select "CPD Requirement and Compliance Status" from the left menu to check required CPD hours and compliance status. Appointing Principals : Use IIC Supervisor or Admin accounts to search individual licensees’ CPD status or download CPD Lists under the "Report" option, selecting "CPD hours required for the Assessment Period 2024/2025." Reporting Procedures Individual licensees can submit CPD Declarations in two ways: 1. Direct Submission via IIC: Deadline : 30 September 2025. Before 31 July 2025 : Submit only if CPD hours are fully completed (status: "Yes"). 1 August to 30 September 2025 : Submit regardless of compliance status ("Yes" or "No"). 1 October to 15 November 2025 : Update submissions for those initially reporting shortfalls ("No") with rectified status. 2. Submission via Appointing Principals: Licensees submit CPD Declarations to principals by 30 September 2025 . Principals verify and report to the IA via IIC by 31 October 2025 . CPD Requirements and Penalties Minimum CPD Hours : 15 hours, including 3 hours on "Ethics or Regulations," except for travel agents with restricted scope licenses (3 hours total). Penalties : Shortfall < 8 hours : $600 fine per hour, must be rectified by 31 October 2025, or face a 3-month suspension (continuing until resolved) and potential license revocation. Shortfall ≥ 8 hours : $600 fine per hour, immediate 3-month suspension (continuing until resolved), with possible revocation if unresolved. Non-submission by 30 September 2025 : May trigger an IA investigation for fitness and propriety; false declarations risk license revocation and a 12-month ban. SIGNIFICANCE: The IA notes a rise in CPD compliance from 90% (2021/2022) to 99% (2023/2024) and urges full compliance in 2024/2025 to uphold professional standards in Hong Kong’s insurance market. For further assistance, email cpd@ia.org.hk (general inquiries) or licensing@ia.org.hk (IIC-related matters). Market News 2. IA Conducts Undercover Inspections of Un-Licensing Activities The IA has recently taken proactive measures to protect the interests of policyholders and uphold the integrity of the insurance industry. Ms. Maria Tsui, Head of the Enforcement Department, highlighted the IA’s increased focus on street sales activities in Tsim Sha Tsui, which have raised concerns due to a surge in the number of sales personnel conducting promotional activities in the area. On a weekend in early June 2025, the IA conducted a targeted surveillance operation in Guangdong Road, Tsim Sha Tsui. Undercover officers, acting as mystery shoppers, engaged with sales personnel to gather detailed information about these street sales practices. The findings from this operation have been shared with the relevant insurance companies to address any identified issues and prevent future non-compliance. Passersby witnessed suspected IA’s Undercover Inspections ( Source: Social Media – 3 May 2025 ) IA’s Guidelines related to MCV Unlicensed referrers In May 2024, IA issued Circular which outlines key principles to regulate referral business models for licensed insurance broker companies. This circular focuses particularly on long-term insurance products and clients from Mainland China, referred to as Mainland China Visitors (MCV). Its primary goal is to prevent unlicensed selling practices within the insurance industry. Unlicensed referrers are restricted to introducing potential clients to licensed insurance brokers. They are explicitly prohibited from providing regulated advice, explaining insurance products, or engaging in any sales activities related to insurance products. Such sales activities must only be conducted by individuals or entities holding a valid license from the IA. Undertaking these actions without proper licensing is illegal and carries significant consequences. Violations of these regulations can lead to criminal charges, especially in regions like Mainland China, where insurance laws are strictly enforced. Furthermore, non-compliance with the IA’s guidelines may result in severe disciplinary measures for licensed entities. These measures include, but are not limited to, suspension of licenses, substantial fines, and public reprimands. SIGNIFICANCE: Ms. Maria Tsui emphasized that the Enforcement Department is strengthening its monitoring capabilities to collect intelligence and detect any misconduct or harmful practices that could affect policyholders or tarnish the industry’s reputation. The IA is committed to early intervention, using public education and regulatory actions to deter wrongdoing before it escalates into systemic issues that could lead to severe disciplinary measures or criminal prosecution. In addition to on-the-ground surveillance, the IA is leveraging technology and data tools to monitor online activities and social media platforms for intelligence gathering. Recognizing the value of industry collaboration, the IA is also working closely with industry organizations to encourage the sharing of information and knowledge, further enhancing its monitoring effectiveness. Enforcement News 3. IA Enforces Retrospective Compliance with Broker Companies under SROs Regime On 2 July 2025, the IA has taken disciplinary action against two licensed broker companies for failing to comply with essential regulatory standards aimed at protecting policyholders. These cases highlight the importance of maintaining separate client accounts and securing adequate professional indemnity insurance. These violations breached guidelines under the three Self-Regulatory Organizations (“ SROs ”) and the current Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules (Cap. 41L) . Case 1: Century Investment Planning Limited Century Investment Planning Limited, a former licensed insurance broker company, received a public reprimand for the following breaches (incident occurred from April 2019 to March 2020): Failure to deposit client monies into a separate account on multiple occasions. Misuse of client funds. Delayed settlement of premiums payable to an insurer. Case 2: Unnamed Broker Company A second broker company was fined $12,000 for inadequate professional indemnity insurance (Incident took place in 2019): Miscalculation of required coverage under the SROs. Resulting in a shortfall of $11.8 million in coverage. No policyholders were harmed in either case, and both companies fully cooperated with the IA during the disciplinary proceedings. SIGNIFICANCE: The IA stresses that segregating client monies and maintaining sufficient professional indemnity insurance are non-negotiable requirements for insurance intermediaries. These safeguards are critical to ensuring policyholder security. The authority has made it clear that failure to comply will lead to proportionate disciplinary measures. 4. IA Bans Two Intermediaries for Favrucating Policies On 12 June 2025, the IA announced the ban of two insurance intermediaries, Ms. LEUNG Wai Mei (“ LEUNG ”) and Ms. Ip Ka Ying (“ IP ”), from acting as insurance intermediaries for 12 months and 21 months respectively. This disciplinary action was taken due to their unethical practice of creating bogus policies to meet sales targets. Details of the Misconduct Ms. LEUNG Wai Mei: Fabricated two policy applications by misusing a client’s personal information. She certified a fake proof of identity for her son and attempted to conceal her actions by changing her correspondence address. Ms. IP Ka Ying: Fabricated eight policy applications using personal details from clients and friends. Additionally, she fraudulently accepted exclusions of personal liabilities related to premises owned by two applicants. The IA has described these actions as "iniquitous and premeditated," highlighting that such misconduct severely damages the trust and professionalism expected of insurance intermediaries. SIGNIFICANCE: The IA stresses that segregating client monies and maintaining sufficient professional indemnity insurance are non-negotiable requirements for insurance intermediaries. These safeguards are critical to ensuring policyholder security. The authority has made it clear that failure to comply will lead to proportionate disciplinary measures. [End of ComplianceOne Insurance Newsletter – June 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Newsletter – April 2026 The topics discussed in this monthly newsletter are as follows: Regulatory Updates SFC unveils new regulatory framework to allow secondary trading of tokenized SFC-authorized investment products = Market News Granting of stablecoin issuer licenses SFC joins global regulatory effort again to combat unlawful activities of finfluencers New speech by Kelvin Wong: Keynote speech at Deloitte's Hong Kong CFO Forum Enforcement News - Intermediaries SFC sanctions Impression Investment Limited and its former responsible officer over staff trading activities SFC reaches agreement with PricewaterhouseCoopers for shareholder compensation of HK$1 billion regarding false financial statements of China Evergrande Group for 2019 and 2020 Enforcement News - Listed Companies SFC commences legal proceedings against former senior executives of China Automotive Interior Decoration Holdings Limited and its subsidiary Regulatory Updates 1. SFC unveils new regulatory framework to allow secondary trading of tokenized SFC-authorized investment products On 20 April 2026, the SFC has introduced a new regulatory framework to pilot secondary trading of tokenized SFC-authorized investment products. The SFC will primarily facilitate secondary trading of tokenized open-ended funds on licensed virtual asset trading platforms (“ VATPs ”), expanding access for retail investors. In a keynote speech by Ms LEUNG, she mentioned “Our new framework marks another major milestone on Hong Kong’s journey to build out a fully integrated, innovative and scalable digital asset ecosystem with robust investor safeguards. This initiative allows a traditional securities product, once tokenized, to be traded in the evening and on weekends, and supported by the use of regulated stablecoins and tokenized deposits to facilitate round-the-clock liquidity, satisfying demand of investors reacting to an increasingly fast-moving and uncertain market environment.” Below highlights the requirements for secondary trading of tokenized SFC-authorized investment products in Hong Kong. Category Key Requirements Scope and Objective The circular sets out requirements for allowing public secondary trading of tokenized SFC-authorized investment products in Hong Kong. Its goals are to enhance product tradability and integrate them in the Web3.0 ecosystem. The initial focus is on SFC-authorized open-ended funds. Permitted Trading Channel Secondary trading for retail investors is to be conducted via on-platform trading provided by SFC-licensed VATPs operators. The trading must follow existing VATP guidelines for virtual asset trading. Fair Pricing Controls SFC-licensed VATPs must implement controls to ensure fair pricing, including: Price Deviation Alert : Alert investors if the execution price significantly deviates from the product’s real-time indicative Net Asset Value (“ NAV ”). Primary Market Alternative : Inform investors of the option to subscribe/redeem in the primary market instead. System Controls : Implement pre-trade and post-trade monitoring to prevent excessive price fluctuations and market manipulation. Liquidity Provision Product Providers : Must use best endeavours to arrange for at least one market maker per product, monitor liquidity, appoint distributors, and facilitate transfers between primary and secondary markets. SFC-licensed VATPs : Responsible for conducting due diligence on and regularly monitoring the performance of market makers on their platforms. All parties : (Product Providers, VATPs, Distributors, Market Makers) must ensure compliance with all applicable laws and regulations. Investor Disclosure Offering documents and trading platforms must clearly disclose: Risks : Liquidity risk, price deviation risk, price fragmentation risk, and market maker resilience risk. Trading & Market Making Details : Operational flow, settlement process, fee ranges, and market making arrangements. Suspension Circumstances : Conditions under which secondary trading may be suspended. Real-time Data : Platforms must provide real-time/near-real-time indicative NAV and the last official NAV. Client Onboarding SFC-licensed VATPs and Connecting Brokers must prominently highlight the associated risks to clients and obtain client confirmation that they understand these risks before onboarding them for secondary trading. Notification Obligations Product Providers : Must give the SFC early alerts of any issues affecting the product’s operations or liquidity and immediately notify the SFC and investors if primary/secondary market dealing or market making activities cease or are suspended. Intermediaries (VATPs, Brokers): Must notify and discuss their proposals with their SFC case officers before engaging in secondary trading business for the first time, and for any subsequent material changes. * For more details, please refer to the circular on secondary trading of tokenized SFC-authorized investment products. SIGNIFICANCE: The new regulatory framework introduces new pathways to operate but also imposes specific investor protection and operational obligations to those that choose to engage in the business of secondary trading for tokenized SFC-authorized investment products. Market News 2. Granting of stablecoin issuer licenses On 10 April 2026, the HKMA has granted stablecoin issuer licensed to Anchorpoint Financial Limited (a joint venture established by Standard Chartered Bank (Hong Kong) Limited (“SCBHK”), HKT and Animoca Brands) and The Hong Kong and Shanghai Banking Corporation Limited for issuing stable coins in Hong Kong. In a keynote speech by Mr Eddie YUE, Chief Executive of the HKMA, “The granting of stablecoin issuer licenses is an important milestone for the development of digital assets in Hong Kong. The regulatory regime provides an orderly operating environment for stablecoin issuers to apply innovative technologies while ensuring robust user protection and effective risk management, which will foster the development of a healthy, responsible, and sustain#86C6E5able stablecoin ecosystem. We look forward to the issuers launching business according to their plans, exploring growth opportunities while properly managing risks. We hope their promotion of regulated stablecoins will address pains points in financial and economic activities, create values for both individuals and businesses, and support the healthy development of digital assets in Hong Kong”. *Please refer to the List of Stablecoin Issuers granted with license under section 15(1) of the Stablecoins Ordinance to issue specified stablecoins in Hong Kong. SIGNIFICANCE: The licensing of Anchorpoint Financial Limited and The Hong Kong and Shanghai Banking Corporation Limited is not merely news for payment sector; it is a fundamental infrastructure upgrade for Hong Kong’s digital asset market. For SFC-licensed corporations, it provides a credible, regulated bridge between traditional finance and virtual assets. Early engagement and strategic planning around these new assets are strongly advised to capture first-mover advantages, enhance risk profiles, and ensure full regulatory alignment. 3. SFC joins global regulatory effort again to combat unlawful activities of finfluencers On 20 April 2026, the SFC participated in “Global Week of Action Against Unlawful Finfluencers” (“ Global Week ”), a coordinated initiative organised under the support of the International Organization of Securities Commissions (“ IOSCO ”). This year’s Global Week saw participation almost double compared to its inaugural edition in 2025, with a total of 17 IOSCO member jurisdictions joining the initiative. The initiative is designed to disrupt unlawful finfluencer activities through a combination of enforcement actions, supervisory measures, investor education and consumer awareness programs. Finfluencer Definition and Risk Profile Finfluencers are social media influencers who use platforms such as Instagram, YouTube and TikTok to promote financial products, share investment insights and offer various forms of financial advice. A growing subset of influencers are engaged in soliciting financial products or services illegally and without regulatory authorisation, typically using the portrayal of a lavish lifestyle, often falsely depicted, to market investment products to young and retail investors. These individuals may not be licensed by the SFC to provide securities or futures advice in Hong Kong. SFC’s Enforcement Actions in the Past Year Issued a compliance advice letter to a finfluencer in connection with the unlicensed promotion of overseas virtual asset trading platforms to the Hong Kong public Submitted 12 reports concerning 33 suspicious posts or accounts to major social media platforms since July 2025, with over 90% of reported posts or accounts promptly removed by the respective platforms; Deployed SENSOR, the SFC’s in-house artificial intelligence-powered social media monitoring system (launched in Q3 2025), which leverages AI and natural language processing to scan social media platforms for unlawful financial promotions and other red flags; and Conducted coordinated outreach with the Hong Kong Monetary Authority (“HKMA”) and the Chinese Banking Association of Hong Kong, including a fraud prevention and investment education session for Mainland-based university students in Hong Kong in March 2026 and anti-scam awareness activities at a Consumer Council event for senior citizens. SIGNIFICANCE: The Global Week, now in its second year and nearly double in jurisdictional participation, signals that finfluencer regulation is firmly embedded on the global regulatory agenda. For licensed corporations operating in Hong Kong, the SFC’s expanding enforcement toolbox, including AI-powered monitoring, platform takedown requests, compliance advice letters and investor education, creates a heightened compliance environment with direct operational implications. 4. New speech by Kelvin Wong: Keynote speech at Deloitte's Hong Kong CFO Forum On 24 April 2026, Dr Kelvin WONG, the Chairman of the SFC, delivered a speech at Deloitte’s Hong Kong CFO Forum. The speech highlights the following: Governance as a Performance Driver The speech argues that governance must evolve from a box-ticking compliance exercise into a strategic framework that drives corporate performance, accountability, and trust. It is an economic necessity that improves decision-making, lowers risk, and creates long-term value, rather than being merely a regulatory cost. The Central Role of Culture Governance failures are often rooted in human weakness. Therefore, a strong ethical culture is identified as the primary safeguard and a “hard control”. The critical test for an organization’s culture is whether it is genuinely safe for employees to raise concerns. Concentrated Ownership As of March 2026, 40% of Hong Kong’s listed companies have a single shareholder with absolute control. This structure heightens risks like information asymmetry and potential minority shareholder abuse, making robust, targeted regulation essential. Audit Quality and Enhanced Accountability The speech underscores Section 277 of the SFO, which holds all parties involved in financial disclosures accountable, including auditors, for disseminating false or misleading information. Auditors must ensure their work papers fully support their conclusions. Enforcement as a Wake-up Call The recent enforcement actions by the SFC and Accounting and Financial Reporting Council for serious audit failures are noted. This served as a constructive wake-up call to strengthen independence, scepticism, and quality controls. ICAC’s Integrity Compliance Management System (“ ICMS ”) The HKEX has integrated the ICMS into its corporate governance guide. Phase 2, launching in 2026, will provide a practical playbook and digital tools to help embed integrity systems beyond paper compliance. Shared Stewardship The conclusion reaffirms that Hong Kong’s future as an International Financial Centre depends on the quality of leadership, the strength of culture, and the courage of professionals to do the right thing. Integrity is a shared mission where every line of defence must uphold its responsibility. * For more details, please refer to Dr Kelvin WONG speech SIGNIFICANCE: The SFC is explicitly stating that it cannot police the market alone. It calls on licensed corporations, as key intermediaries and gatekeepers, to act as co-stewards of market quality. The speech sets the expectation that licensed corporations must exercise heightened judgement, courage, and professional scepticism to uphold Hong Kong’s reputation as an International Financial Centre, positioning their role as both a commercial and public trust. Enforcement News - Intermediaries 5. SFC sanctions Impression Investment Limited and its former responsible officer over staff trading activities On 09 April 2026, the SFC announced disciplinary sanctions against Impression Investment Limited, a Type 9 licensed corporation, and Mr Liu Shan, a former director, Responsible Officer (“ RO ”) and Manager-in-Charge (“ MIC ”) of the firm. Impression was publicly reprimanded and fined HK$2 million. Liu was prohibited from re-entering the securities and futures industry for eight months, from 2 April to 1 December 2026. SFC Findings Between January 2016 and March 2021, Liu and another staff member engaged in personal securities trading in a manner contrary to regulatory requirements, whilst simultaneously responsible for making investment decisions for funds managed by Impression, the specific failures identified were the following: • Over 2,500 personal transactions executed without pre-clearance approval • Same-day personal trading in the same securities as funds under management, in some instances at more favourable prices than those obtained for investors • Absence of post-trade monitoring of staff personal trading during the relevant period The SFC concluded that Impression’s failures were directly attributable to Liu’s neglect in discharging his duties as RO and member of senior management. SIGNIFICANCE: This case serves as a timely reminder that staff trading controls remain a high priority of SFC supervisory focus. The misconduct persisted for more than five years without detection, reflecting serious governance failures and resulting in both corporate and individual sanctions. 6. SFC reaches agreement with PricewaterhouseCoopers for shareholder compensation of HK$1 billion regarding false financial statements of China Evergrande Group for 2019 and 2020 On 23 April 2026, the SFC announced an agreement with PricewaterhouseCoopers Hong Kong limited (“ PwC HK ”) requiring the firm to pay HK$1 billion into a dedicated compensation fund for eligible independent minority shareholders of China Evergrande Group (“ Evergrande ”). In a concurrent action, the Accounting and Financial Reporting Council (“ AFRC ”) imposed a HK$300 million fine and a six-month practice restriction on PwC HK – prohibiting the firm from accepting or performing audit engagements for new listed clients during that period. The AFRC additionally issued public reprimands and fined two PwC partners HK$10 million each. The combined sanctions across both regulators total HK$1.3 billion. For more details, please refer to AFRC – Press Releases on 23 April 2026 . The SFC’s investigation concluded that Evergrande’s audited annual reports for financial years 2019 and 2020 contained materially false or misleading financial information. Revenue was artificially inflated by prematurely recognizing income from property sales before the completion and delivery of the relevant properties to buyers. SUMMARY OF MISSTATEMENT Financial Year Revenue Overstatement Reported Profit Actual Result FY2019 RMB 213.9 billion (overstated 44.79%) RMB 33.5 billion RMB 7.12 billion loss FY2020 RMB 350.2 billion (overstated 69.03%) RMB 31.4 billion RMB 19.9 billion loss Whilst not admitted by PwC HK, the SFC considers that PwC HK, as auditor of Evergrande: · was involved in disclosing false or misleading information; · failed to maintain auditor independence in the FY2019 and FY2020 audits; · failed to apply adequate professional scepticism in planning, procedures, and handling irregularities; · did not design and perform effective site inspections to verify property completion and revenue recognition; · acquiesced to Evergande management’s manipulation of audit samples and site inspections, concealing premature revenue recognition; and · failed to verify the authenticity of supporting documents and records Ms Julia LEUNG stated that this marks the first time that auditors of a defunct company have been required to provide compensation to independent minority shareholders harmed by false and misleading financial statements, and that outcome sends an unequivocal message of accountability to the audit profession and investing public alike. SIGNIFICANCE: The Evergrande/PwC HK enforcement outcome is one of the most consequential in the SFC’s history, establishing a new precedent for auditor’s accountability and investor compensation in the context of market misconduct. Its implications extend well beyond the accounting profession. Enforcement News - Listed Companies 7. SFC commences legal proceedings against former senior executives of China Automotive Interior Decoration Holdings Limited and its subsidiary On 29 April 2026, the SFC has file legal proceedings in the Court of First Instance against two former executives of China Automotive Interior Decoration Holdings Ltd. (“ China Automotive ”) (stock code: 00048 ) and its subsidiary Giant Faith Holdings Ltd. The case centres on alleged misappropriation of funds disguised as trade payments. Between December 2019 and January 2020, WONG Ho Yin, former director of China Automotive and its subsidiary, allegedly signed cheques for three payments totalling HKD 14.6 million. These were recorded as payments to a Mainland company for purchasing food products. However, the SFC alleges these were fictitious transactions causing loss to the listed company. The proceedings were commenced under Section 214 of the Securities and Futures Ordinance. If the court rules in the SFC’s favour, the defendants could face disqualification from corporate management for up to 15 years, in addition to the financial restitution sought. SIGNIFICANCE: While this case directly targets a listed company’s directors, it serves as a critical warning signal for all SFC-licensed corporations. The enforcement action underscores that the regulator views fictitious transactions and misappropriation as severe breach of the fit and proper test, with direct implications of a firm’s internal controls and senior management accountability. [End of ComplianceOne Newsletter – April 2026] 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 1605, 16/F, West Tower, Shun Tak Centre,168-200 Connaught 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 – March 2026 The topics discussed in this monthly newsletter are as follows: Regulatory Updates HKMA, SFC, IA and MPFA Launch GenA.I. Sandbox++to foster A.I. innovation across financial services Market News IA Might Reviews Definition of Mainland China Visitors (MCV) Marine Risk Pool Now Operational and Providing War Risk Cover Amid Middle East Tensions Regulatory Updates 1. HKMA, SFC, IA and MPFA Launch GenA.I. Sandbox++to foster A.I. innovation across financial services On 5 March 2026, the Hong Kong Monetary Authority (“ HKMA ”), Securities and Futures Commission (“ SFC ”), Insurance Authority (“ IA ”) and Mandatory Provident Fund Schemes Authority (“ MPFA ”), in collaboration with the Hong Kong Cyberport Management Company Limited (“ Cyberport ”), jointly announced the launch of the Generative Artificial Intelligence (“ GenA.I. ”) Sandbox++ initiative. Building on the success of the original GenA.I. Sandbox launched in 2024, the expanded Sandbox++ now covers multiple financial sectors, including banking, securities and capital markets, asset and wealth management, insurance, mandatory provident fund (“ MPF ”) schemes, and stored value facilities. The initiative continues to prioritise three high-impact application areas: i) Risk management ii) Anti-fraud measures iii) Customer experience enhancement It further advances “A.I. vs. A.I.” strategies, using A.I. technologies to identify, monitor and mitigate risks arising from A.I. adoption itself. Participating financial institutions will benefit from Targeted supervisory guidance from the four regulators; Technical support; and Complimentary access to graphics processing unit (“ GPU ”) computing resources at Cyberport’s A.I. Supercomputing Centre. This risk-controlled environment enables institutions to develop, pilot and refine generative A.I. use cases more efficiently. The Sandbox++ encourages both sector-specific and cross-sector applications, including but not limited to: A.I.-driven insurance underwriting and claims processing Automated suitability assessments for investment product distribution Intelligent compliance tools for regulatory requirements Advanced fraud detection systems Enhanced customer service via intelligent chatbots Broader industry-wide solutions Key Statements from Regulators Mr Eddie YUE, Chief Executive of the HKMA Mr YUE described the launch as a significant milestone under the “Fintech 2030” strategy, aimed at unlocking A.I.’s potential to drive growth, efficiency and customer-centricity while reinforcing Hong Kong’s position as a leading international financial centre. Ms Julia LEUNG, Chief Executive Officer of the SFC Ms LEUNG highlighted the expansion as a collective commitment to responsible market innovation, urging licensed corporations to participate actively to enhance operational efficiency, resilience and growth through A.I. Mr Clement CHEUNG, Chief Executive Officer of the IA Mr CHEUNG noted that the initiative fosters an accountable, inclusive and prudent environment for A.I. innovation, aligning with the IA’s AI Cohort Programme and supporting talent attraction to strengthen Hong Kong’s regional A.I. hub status. Mr CHENG Yan-chee, Managing Director of the MPFA Mr CHENG encouraged MPF trustees and intermediaries to explore advanced fintech solutions, including A.I., to improve operational efficiency and service quality for scheme members. SIGNIFICANCE: The GenA.I. Sandbox++ represents a major collaborative step by Hong Kong’s financial regulators to accelerate responsible generative A.I. adoption across the entire financial ecosystem. For the insurance sector, this creates a supervised platform to test innovative applications such as faster claims handling, improved underwriting accuracy, enhanced anti-fraud capabilities, and better customer interactions while ensuring strong governance, risk controls, and policyholder protection. By providing free access to high-performance computing resources and cross-sector collaboration opportunities (including with technology partners), the initiative lowers barriers to entry and promotes practical, high-impact A.I. deployment. This positions Hong Kong as a leading regional hub for A.I.-enabled financial services, supporting competitiveness, innovation, and long-term resilience in a rapidly digitizing industry. Markets News 2. IA Might Reviews Definition of Mainland China Visitors (MCV) On 16 March 2026, the Insurance Authority (“IA”) announced a review of the definition of Mainland China Visitors (“MCV”) used in insurance business statistics. Mr. LUI Yu-kwok, Executive Director (Long-term Business), indicated that individuals entering Hong Kong through talent admission schemes (such as the Top Talent Pass Scheme) and Mainland residents who permanently reside overseas may no longer be classified as MCV under the revised definition. The IA has suspended publication of 2025 MCV-specific insurance figures. Mr. Clement CHEUNG, Chief Executive Officer of the IA, observed that new life insurance premiums in the first three quarters of 2025 grew 55.9% year-on-year, yet the MCV proportion (under the existing definition) fell below 30%, compared with 32.6% in 2023 and 28.6% in 2024. The historical peak stood at 39% in 2016. The IA plans to collect more granular data on clients’ place of usual residence to better analyse and promote business from non-local, non-MCV segments, including Southeast Asia and the Middle East. Background of the Current Definition The existing MCV definition: “Mainland residents entering Hong Kong as visitors holding the Two-way Permit (往來港澳通行證 / 雙程證) or a Chinese passport” has been applied since 1 April 2005. This definition originated from a 2004 regulatory measure by the Office of the Commissioner of Insurance (the predecessor of the IA), which required Mainland persons to purchase insurance policies in person in Hong Kong to prevent unauthorised cross-border sales. The IA intends to launch a formal industry consultation in the second quarter of 2026, with updated guidelines on the new client definition and related regulatory requirements (including identity documents and sales processes) to be issued within 2026. Period Event(s) Content and Source(s) 1 April 2005 Current MCV definition introduced Applied by the Office of the Commissioner of Insurance (“OCI”) for insurance statistics. (Source: Market Performance of the Hong Kong Insurance Industry for the first half of 2005 ) 2016 Highest MCV proportion recorded upon 2016 2016 Q1-Q3: Reached 37% of new life insurance premiums. (Source: OCI Annual Report 2016 ) 2023 MCV proportion Recorded at 32.6% of total new office premiums for individual business. (Source: IA provisional statistics releases for 2023 ) 2024 MCV proportion and circular Proportion at 28.6%; new business premiums from MCV reached HK$62.8 billion. (Source: IA provisional statistics release for 2024 ) Related IA circular (22 May 2024) on non-compliant referral models for MCV business. 2025 IA announces review and suspends 2025 MCV figures Publication of separate MCV statistics suspended pending review. 23 (Source: IA provisional statistics release for 2025 ) Q2 2026 (planned) Formal industry consultation Stated encouraging Mainland China visitors to purchase long-term life insurance in Hong Kong and providing relevant insurance companies with appropriate assistance. (Source: LC Paper No. CB(1)176/2026(07) ) Within 2026 (planned) Updated guidelines issuance On new client definition, identity documents, and sales processes. (Source: The Standard News on 16 March 2026 ) SIGNIFICANCE: This review reflects the IA’s commitment to refining market data for accuracy and relevance in a changing environment. By potentially excluding talent-scheme entrants and overseas Mainland residents from the MCV category, the IA seeks to avoid data distortion, reduce unnecessary “fly-to-buy” requirements for high-net-worth clients, strengthen policyholder protection and risk management, and support Hong Kong’s strategy to diversify its insurance clientele and develop headquarters economy through talent and overseas capital attraction. The move aligns with broader efforts to enhance Hong Kong’s competitiveness as an international insurance hub while maintaining robust regulatory safeguards. 3. Marine Risk Pool Now Operational and Providing War Risk Cover Amid Middle East Tensions The escalating conflict in the Middle East, triggered by U.S. and Israeli military strikes on Iran beginning late February 2026, has led to heightened tensions in the Persian Gulf, including Iranian threats to close the Strait of Hormuz and retaliatory attacks across the region. Marine Specialty Risk Pool In Press Release dated 17 September 2025 , the IA has welcomed and supported the establishment of the Hong Kong Marine Specialty Risk Pool (also known as the Hong Kong Marine War Risks Insurance Pool ), a commercially operated facility launched in November 2025 to provide stable war risk and specialty marine coverage primarily for Hong Kong and Mainland Chinese shipowners, see below table for further details of the Pool: Launch Date Announced and operational from around 17 November 2025 Founding Members Proposed by Legislative Council Member Honourable CHAN Pui-leung and developed in collaboration with Alliance Risk Transfer Limited as its manager. Founding participants include multiple local insurers such as: China Taiping Insurance (HK); PICC (Hong Kong); CMB Wing Lung Insurance; China Pacific Insurance (HK); and Asia Insurance. Capacity Up to approximately US$130 million (around HK$1.01 billion) Coverage War risks, including vessel hull damage arising from war, piracy, terrorist acts, and related geopolitical events (does not cover cargo) Current Exposure As of early March 2026, the pool has underwritten war risk cover for over 10 mainland Chinese-owned vessels operating in the high-risk Persian Gulf area, with all vessels reported safe and no claims filed to date *Source: S&P Global Market Intelligence (March 2026) , and South China Morning Post (10 March 2026) . SIGNIFICANCE: The Marine Specialty Risk Pool marks a strategic milestone in diversifying Hong Kong’s general insurance sector (currently ~15% of the market versus 85% life insurance) and reduces over-reliance on traditional London capacity for high-risk marine covers. By consolidating local underwriting expertise, the pool delivers tailored, more competitive solutions for Chinese and Hong Kong shipowners, enhances pricing influence on regionally specific risks, and creates new revenue opportunities for participating insurers. This initiative directly supports HKSAR Government policy objectives to position Hong Kong as an international maritime and risk management hub ( The Chief Executive’s 2025 Policy Address – Supplement 6 ), aligning with the Belt and Road Initiative and the National 15th Five-Year Plan . It also opens pathways for further product innovation, such as trade credit insurance to mitigate supply-chain disruptions from geopolitical events. [End of ComplianceOne Insurance Newsletter – March 2026] 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 1605, 16/F, West Tower, Shun Tak Centre,168-200 Connaught Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

ComplianceOne guides client to successful SFC approval for Virtual Asset dealing services and Virtual Asset advisory services 天匯合規協助客戶獲香港證監會批准虛擬資產交易及諮詢服務牌照 天匯合規顧問有限公司(「天匯合規」)近日成功協助一家持牌法團（以下簡稱「該持牌法團」）獲得香港證券及期貨事務監察委員會（以下簡稱"證監會"）批准，取得採用綜合帳戶安排提供虛擬資產交易服務（RA1-VA）及虛擬資產諮詢服務的（RA4-VA）牌照。該持牌法團於2024年12月提交申請，並於2025年8月正式獲證監會批准。 該持牌法團成立於2022年香港金融市場快速增長時期，由一群在證券交易、資產管理和投資銀行領域經驗豐富的資深金融專業人士創立，致力於為零售及企業客戶提供機構級專業金融服務。公司專注於離岸債券發行與承銷業務，提供包括產品結構設計、發行執行、銷售分銷及二級市場交易等一站式服務。 此次拓展香港虛擬資產業務版圖的戰略決策，源於該持牌法團對香港政府積極推動虛擬資產金融創新的深度認同。隨著香港在虛擬資產交易平台、穩定幣發行及Web3.0發展路線圖等領域監管框架的政策日益明確，這片市場正展現出巨大的增長潛力。該持牌法團旨在通過提供完善的虛擬資產解決方案，進一步拓寬現有業務範圍，增強市場競爭力。 天匯合規作為該持牌法團的合規顧問，為此項目提供了全方位的合規服務，包括申請資格評估、合規諮詢、內部控制流程設計，以及協助回應香港證監會對牌照申請的質詢。由合夥人Tao Wong和Tommy Chung帶領的合規諮詢團隊，專注於香港金融牌照申請、反洗錢系統建設及多元合規諮詢服務。過去八年間，天匯合規已成功協助近百間機構取得持牌法團牌照，並為數百家金融持牌法團提供各類合規諮詢服務，奠定了其在香港合規領域的領先地位。 該持牌法團與天匯合規特別感謝香港證監會在申請過程中給予的關注與支援。 ComplianceOne guides client to successful SFC approval for Virtual Asset dealing services and Virtual Asset advisory services ComplianceOne Consulting Limited (“ComplianceOne”) assisted a licensed corporation (the “LC”) in their recent successful application for provision of virtual asset dealing services under an omnibus account arrangement (RA1-VA) and virtual asset advisory services (RA4-VA) from the Securities and Futures Commission of Hong Kong (“SFC”). The LC submitted its application in December 2024 and obtained the approval from the SFC in August 2025. The LC was established in 2022 in Hong Kong during a period of rapid growth in Asia’s financial markets. The company was founded by a group of seasoned financial professionals with extensive experience in securities trading, asset management, and investment banking, aiming to provide institutional-grade service to retail and corporate clients. The LC specializes in offshore bond issuance and underwriting, providing end-to-end services including product structuring, issuance execution, sales distribution, and secondary market trading. The LC was motivated to expand into this new business venture in Hong Kong to strategically capitalize on the government's proactive initiatives fostering virtual asset-related financial activities. With clear regulatory support for developments such as virtual asset trading platforms, stablecoin issuance, and the Web3.0 roadmap, Hong Kong presents a significant growth opportunity. Concurrently, the LC seeks to broaden its existing business lines and enhance its competitive position by offering clients a more comprehensive suite of services, including robust virtual asset (VA) solutions. ComplianceOne served as the compliance consultant for the LC, 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 the LC‘s license application. The compliance advisory team, led by the 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 eight 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. The LC and ComplianceOne express special gratitude to the SFC for their attention and support during the application process.

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – Dec 2024 The topics discussed in this monthly newsletter are as follows: 1. IA Proposes Cap on First-Year Commissions for Savings Insurance Policies 2. Asian Insurance Forum 2024 Concludes with Record Participation and Key Insights 3. Change of Managers for Tahoe Life Insurance Company Limited to maintain stability 4. Stephen Yiu Kin-wah was reappointed as the Chairman of Insurance Authority 5. IA publishes revised Guidelines on Cybersecurity and Guideline on Actuary’s Report IA News Updates 1. IA Proposes Cap on First-Year Commissions for Savings Insurance Policies The IA is consulting the industry on new regulatory measures for the sale of participating savings insurance policies, aiming to address sales malpractices. The IA proposes capping the first-year commissions at 65%, down from the current rates which can exceed 90%. The IA suggests a transition period of 6 to 9 months, with implementation as early as mid-2025 . This change is expected to impact around 100,000 insurance intermediaries in Hong Kong. For more details, please refer to the original source – Stheadline 2024-12-17 Reasons for the Proposal This initiative follows the IA's May 2024 circular and Annex , which highlighted issues such as unlicensed referrers, high first-year commissions leading to "orphan policies" and inadequate after-sales service. The Conduct in Focus – August 2024 also addressed the need for better claims handling and provided guidance on regulatory matters which meant to be a best practice only, but the IA now seeks to formalize these practices into regulatory requirements to ensure better compliance and consumer protection. Industry Reactions and Concerns The proposed cap on first-year commissions has sparked significant reactions within the industry. Currently, commissions for brokers can reach up to 90%, while agents typically receive 30-40%, depending on the policy term and the company. The IA's proposal aims to curb these issues by spreading the remaining 35% of commissions over the second to sixth years for policies with periodic payments. SIGNIFICANCE: The IA's initiative is part of a broader effort to enhance consumer protection and ensure fair treatment of policyholders. The proposed measures also include setting upper limits on projected returns and establishing a comparison platform for dividend realization rates. 2. Asian Insurance Forum 2024 concludes with record participation and key insights The Asian Insurance Forum (“ AIF ”) 2024, themed Rising to the Challenge amidst Global Volatility concluded with over 2,400 attendees. The forum featured insightful speeches and panel discussions by over 20 esteemed speakers, focusing on global supervisory priorities, bolstering the headquarters economy, and insurance solutions in wealth management. Keynote speakers included: Mr. John Lee , Chief Executive of the HKSAR; Mr. Stephen Yiu , Chairman of the IA; Mr. Jonathan Dixon , Secretary General of the International Association of Insurance Supervisors (“ IAIS ”); and Ms. Luo Yanjun , Director General of the Personal Insurance Supervision Department of the National Financial Regulatory Administration (“ NFRA ”). A significant announcement was that Hong Kong will host the 2026 International Association of Insurance Supervisors (“ IAIS ”) Annual Conference. Impact on the Insurance Sector The forum underscored the pivotal role of insurance in mitigating uncertainties and fostering sustained progress. It highlighted Hong Kong's leadership in the insurance sector and the opportunities for regional integration and cooperation, particularly within the Guangdong-Hong Kong-Macao Greater Bay Area. SIGNIFICANCE: The AIF 2024 showcased Hong Kong's strategic position as a global financial center and a hub for asset and risk management, emphasizing the importance of insurance in navigating global volatility and driving future growth. 3. Change of Managers for Tahoe Life Insurance Company Limited to maintain stability The IA appointed new managers for Tahoe Life Insurance Company Limited (“ Tahoe Life ”) due to ongoing financial and governance issues. On 17 December 2024, Mr. Glen Ho and Mr. Ivan Chan of Deloitte Touche Tohmatsu were appointed as Joint and Several Managers, joining Mr. Oliver Cheng of Deloitte Advisory (Hong Kong) Ltd. The IA announced to take full control of Tahoe Life, effective on 26 July 2024. This decision follows a series of supervisory interventions since mid-2020 to protect policyholders' interests. For more details of the Tahoe Life case, please refer to ComplianceOne Insurance Newsletter – Jul 2024 (Topic 8) or IA Enforcement News . Impact on Policyholders These appointments follow the resignation of previous appointed manager Mr. Derek Lai and Mr. Forrest Kam. The change in management will not affect the terms and conditions of existing policies. Policyholders are encouraged to carefully consider their circumstances and avoid making hasty decisions, as life insurance products are long-term commitments. SIGNIFICANCE: The IA's proactive measures aim to maintain stability and trust in Tahoe Life's operations, ensuring policyholders' interests are safeguarded during this transition period. 4. Stephen Yiu Kin-wah was reappointed as the Chairman of Insurance Authority The Government announced new appointments to the IA effective from 28 December 2024. The Chief Executive has reappointed Mr. Stephen Yiu Kin-wah as Chairman of the IA. Additionally, the Financial Secretary has reappointed nine incumbent Non-Executive Directors (“ NEDs ”) and appointed three new NEDs. Mr. Yiu expressed his enthusiasm for the new appointments, highlighting the valuable experience and fresh perspectives the new NEDs will bring. He also conveyed deep appreciation for the contributions of outgoing NEDs Dr. Evelyn Lam, Dr. Ares Leung, and Professor Anna Wong in setting the corporate vision and strategic goals of the IA. SIGNIFICANCE: The reappointments and new appointments bring a wealth of expertise to the IA, ensuring continued strong leadership and effective regulatory oversight. IA Regulatory Updates 5. IA publishes revised Guidelines on Cybersecurity and Guideline on Actuary’s Report The IA has published and revised two important guidelines to enhance regulatory compliance and operational standards within the insurance industry. Both guidelines incorporate feedback from authorized insurers to ensure practical and effective implementation. GL20: Guideline on Cybersecurity Attachment: Revised GL20 Effective from 1 January 2025 , the revised GL20 introduces the Cyber Resilience Assessment Framework (“ CRAF ”) that provides prescriptive guidelines on risk assessment and control principles to assist authorized insurers in implementing their cybersecurity frameworks effectively. The CRAF aims to bolster the cybersecurity resilience of insurers. GL35: Guideline on Actuary’s Report of Investigation in respect of Long Term Business Attachment: GL35 Effective from 31 December 2024 , the GL35 sets out expectations for actuarial reports and introduced in view of the enactment of the Insurance (Submission of Statements, Reports and Information) Rules (Cap. 41S) . It outlines the IA’s expectations for the minimum scope and content of actuarial reports required under section 18 of the Insurance Ordinance (Cap. 41) . [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

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - August 2023 The topics discussed in this monthly newsletter are as follows: SFC’s Consultation Conclusion on Proposed Risk Management Guidelines for Futures Contracts Dealing Activities was released SFC concluded Consultation on Amendments to Enforcement-related Provision of the SFO SFC and CSRC reached Consensus on Introducing Block Trading under Stock Connect HKMA, SFC, and IA jointly Published a New Roadmap to Promote Fintech Adoption in Financial Services Sector Reminder to Intermediaries on the Over-the-counter Securities Transactions Reporting Regime (OTCR) SFC Warned Investors about Improper Practices of Unlicensed Virtual Asset Trading Platforms Changjiang Corporate Finance (HK) Limited was fined $20 million for Serious Sponsor Failures in 6 Listing Applications during 2015 to 2017 China Industrial Securities International Brokerage Limited was fined $3.5 million for failures to monitor Suspicious Trading Activities and record of Client Order Instructions Mayer Holdings Limited ( 1116.HK ) and its Former Senior Management were found misconduct for Late Disclosure of Inside Information MARKET NEWS 1. SFC’s Consultation Conclusion on Proposed Risk Management Guidelines for Futures Contracts Dealing Activities was released The SFC had published the consultation conclusions on its proposed risk management guidelines for the licensed futures brokers. The guidelines provide a very comprehensive risk management approach which covers market risk management, commodity futures trading, client credit risk management, concessionary margining and risk management over executing or clearing agents. Other requirements like the funding of liquidity risk management, safeguarding client assets, trading in futures markets outside Hong Kong and stress testing are also included. As Ms Julia Leung, the SFC’s Chief Executive Officer, had said, “ a robust risk management framework is crucial in ensuring the resilience of futures brokers when the market is volatile .” A prudent risk management approach not only helps futures brokers ensure their continuity in business; it is also crucial for protection of clients’ assets held under the brokers. Futures brokers have a transitional period of six months to comply with the guidelines and an additional 12 months to implement system changes for compliance with requirements relating to the automation of client risk limit controls and stress testing. SIGNIFICANCE: There are some key takeaways futures brokers have to bear in mind in order to maintain themselves compliant with the coming requirements: (i) Responsible Officers (ROs) and Managers-In-Charge (MICs) of the futures brokers are revised to have coordination in the risk management of futures business; (ii) Futures brokers handling physical settlement of commodity futures are required to have sufficient knowledge about the underlying commodity markets; (iii) Futures brokers can follow their internal policies in deciding whether a forced liquidations (“FLQ”) on a client who has triggered the internal policy’s threshold should be executed or not. Waivers can be granted provided that the senior management has a proper justification and be safeguarded that a deviation from FLQ would not have adverse influence on the financial stability of the futures broker ; (iv) The thresholds for applying concessionary margining to clients have been revised to a limit of 50% of the higher of a futures broker’s excess liquid capital (ELC) and its available fundings; (v) For margins maintained with overseas brokers, futures brokers should adopt a prudent approach to manage their exposures to maintain excess clients’ margins and to disclose to clients the relevant risks involved in conducting transactions overseas; (vi) As a minimum requirement, futures brokers have to perform stress tests at least on a weekly basis; further that it is necessary to follow the requirements set by the exchanges or clearing houses in formulating the scenarios for conducting the stress tests; (vii) Last but not least, futures brokers have to observe the transitional period after which they have to ensure that client risk limits have been incorporated in the risk management system, order management system or the trading platforms; and to carry out stress tests using the assumed stress scenarios as designed by the Guidelines. 2. SFC concludes Consultation on Amendments to Enforcement-related Provision of the SFO The SFC published on 8th August 2023 a consultation conclusions on proposed amendments to enforcement-related provisions of the SFO. It was stated that the SFC would proceed with the proposal which was intended to broaden the scope of the SFO’s insider dealing provisions to cover: (i) insider dealing perpetrated in Hong Kong with respect to securities listed on overseas stocks markets; and (ii) insider dealing perpetrated outside of Hong Kong involving stocks listed on a recognised stock market like the SEHK. Having received responses from industry practitioners, and considered the complexities in implementation raised by the respondents, the SFC has decided to put a hold on the other two proposed amendments which concern the professional investors exemption and injunctions and other orders at this stage. SIGNIFICANCE: The proposed amendments consisted of three parts: Part 1: Amendments to section 213 of the SFO: Despite comments on legal and implementation issues from the industry, the SFC reiterated that the policy objective of the proposal was to enhance the remedies to protect the investing public in situations where the SFC cannot directly require the regulated persons in breach of SFC codes or guidelines to compensate the suffered clients. Part 2: Amendments to exemptions in section 103 of the SFO: Many respondents had expressed concerns about the (i) necessities of the amendments and (ii) foreseeable operational difficulties and impact on the marketing process to professional investors. The SFC reiterated that the policy objective of the proposal was to enhance investor protection by limiting retail investors’ exposure to unauthorised advertisements of investment products intended for professional investors and by reducing the risk of the professional investor exemption being abused by advertisements. Part 3: Amendments to the insiders dealing provision of the SFO: Most respondents supported for these proposed amendments and the SFC would proceed with the amendments to the insider dealing provisions of the SFO accordingly. 3. SFC and CSRC reached Consensus on Introducing Block Trading under Stock Connect On 11 Aug 2023, the SFC and the China Securities Regulatory Commission (CSRC) jointly announced that they had reached a consensus on the introduction of block trading (manual trades) under Stock Connect. Block trading provides an alternative trading mechanism to enable market participants to execute large-sized transactions, and such an introduction under the Stock Connect will enable southbound and northbound investors to participate in the block trading facilities currently available in the Hong Kong and Mainland markets respectively. The block trading arrangements for Stock Connect will be developed based on the existing operational models and regulations in each market with appropriate adjustments. SIGNIFICANCE: As Ms Julia Leung, Chief Executive Office of the SFC, had said: “ block trading is an important trading mechanism to achieve best execution of large-sized transactions and minimise the price impact on the market ”. From a markert participant’s point of view, block trading arrangements can help maintain price stabilities by avoiding large orders placed directly to the market which may exhibit substantial influence on the market prices. 4. HKMA, SFC, and IA jointly Published a New Roadmap to Promote Fintech Adoption in Financial Services Sector The Hong Kong Monetary Authority (HKMA), the SFC and the Insurance Authority (IA) jointly published on 25th August 2023 a new Fintech Promotion Roadmap (the “Roadmap”) which contains a series of initiatives to be undertaken by the three regulators over the next 12 months to give further impetus to Fintech adoption in the financial services Sector. HKMA has all along been actively promoting the “ All banks go Fintech ” initiative under the “Fintech 2025” strategy, and a Tech Baseline Assessment was conducted. The assessment highlights substantial potential developments in Fintech areas like Wealthtech, Insurtech and Greentech as well as the Artificial Intelligence (AI) and Distributed Ledger Technology (DLT). To further expedite Fintech adoption in the wider financial services sector, the new Fintech Promotion Roadmap will provide practical recommendations at different stages of the Fintech adoption journey, from sourcing to implementation. These initiatives will present excellent opportunities for financial institutions to share practical insights, exchange innovative ideas across sectors and expand your institution’s Fintech network. SIGNIFICANCE: The Fintech and AI has penetrated into our daily walk of life with the widely used in retail banking and mobile devices, any institutions having intention to develop technology-oriented business must equip themselves with relevant and competent staff to “catch the train” in order not to be left out from the market. 5. Reminder to Intermediaries on the Over-the-counter Securities Transactions Reporting Regime (OTCR) Relevant Regulated Intermediaries (“RRIs”) are reminded that the OTCR will become effective on 25th September 2023. Those that have not yet completed the testing and preparation for reporting under the OTCR are urged to do so before the effective date. RRIs have to submit the OTCR through the OTCR WebApp or the OTCR SFTP submission channels on WINGS depending on their licensed status. RRI are strongly advised to take a look at the quick start for reference to proceed whereas technical details are available from the updated version of the OTCR Technical Information Paper for specifications and configurations. 6. SFC Warned Investors about Improper Practices of Unlicensed Virtual Asset Trading Platforms The SFC has observed some unlicensed virtual asset trading platforms (VATPs) engaging in improper practices recently, and a statement had been published on 7th August 2023 warning VATPs of the potential legal and regulatory consequences of these improper practices and reminded investors to be wary of the risks of trading virtual assets on unregulated VATPs. Some crucial observations as stated as below. Falsely claiming to have submitted an application to the SFC Some unlicensed VATPs claim to have submitted licence applications to the SFC when in fact they have not done so. These untrue and misleading claims give the public a false sense of assurance that the VATP is in compliance with the SFC’s regulatory requirements, and is considered as an offence by the SFC. VATPs which do not comply with the SFC’s requirements The transitional arrangements under the new regime were designed to provide reasonably sufficient time for VATPs which provided virtual asset services in Hong Kong before 1 June 2023 to prepare for compliance with the legal and regulatory requirements applicable to licensed VATPs. Yet, it has come to the attention of the SFC that some unlicensed VATPs set up new entities to provide virtual asset services in Hong Kong where the services and products offered by some of these new entities may not be in compliance with the new regulatory regime. Some examples are advertisements providing virtual assets services to retail investors in the disguise of virtual asset “depost”, “savings” or “earnings” which are not allowed under the new regime. Unlicensed VATPs’ established entities operating in Hong Kong The SFC also reminds that any other established entities of unlicensed VATPs which are operating a business in Hong Kong of providing virtual asset services will also be subject to the new virtual asset service provider regime to be licensed as well. SIGNIFICANCE: The SFC has taken this opportunity to warn investors that some unlicensed VATPs are misleading the public by claiming to have submitted licence applications to the SFC when in fact they have not done so. Some other unlicensed VATPs may have publicly announced an intention to apply for a licence from the SFC. Given the high profile approach of the HKSAR before to advocate itself as a pioneer in virtual assets licensing regime, the protection of investors amid the transitional period is an obligation on priority list to the regulatory bodies. ENFORCEMENT NEWS 7. Changjiang Corporate Finance (HK) Limited was fined $20 million for Serious Sponsor Failures in 6 Listing Applications during 2015 to 2017 On 21st August 2023, the SFC had reprimanded and fined Changjiang Corporate Finance (HK) Limited (CJCF) HK$20 million for serious and extensive failures in discharging its duties as the sponsor in six listing applications. The license of CJCF has been partially suspended to the extent that the firm shall not act as a sponsor for listing applications on the SEHK of any securities, for one year from 18th August 2023 or until the SFC is satisfied with the controls and procedures of CJCF. The investigation of the SFC reveals systemic records keeping failures of CJCF, and thus failed to demonstrate that it had exercised professional scepticism by querying the reliability of information provided by the listing applicants and their experts, and verifying the statements disclosed in their respective Application Proof prospectuses SIGNIFICANCE: The SFC is of the view that CJCF’s conduct fell substantially below the standards expected of it as a sponsor and breached the requirements under Chapter 17 of the Code of Conduct and other regulatory requirements. 8. China Industrial Securities International Brokerage Limited was fined $3.5 million for failures to monitor Suspicious Trading Activities and record of Client Order Instructions It was published on 22nd August 2023 that the SFC had reprimanded and fined China Industrial Securities International Brokerage Limited (China Industrial) HK$3.5 million for internal control failures relating to monitoring of suspicious trading activities and recording of client order instructions. Findings of the SFC investigation showed that China Industrial had failed to effectively implement its internal policy on post-trade monitoring and ensure all unusual transactions flagged by its post-trade surveillance system (Alerts) were properly examined; even worse was that the findings and outcomes thus examined were not adequately documented or to have in place effective compliance procedures to ensure proper implementation of the internal policy on post-trade monitoring during the Relevant Periods. In addition, China Industrial also failed to diligently supervise its account executives and take adequate and timely follow-up actions against those in breach of the internal policy on recording of telephone orders and report immediately to the SFC after it became aware of its account executives’ breaches of the regulatory requirements on recording of telephone order instructions. 9. Mayer Holdings Limited (1116.HK) and its Former Senior Management was found misconduct for Late Disclosure of Inside Information Announced on 9th August 2023, the Market Misconduct Tribunal (MMT) has found that Mayer Holdings Limited (Mayer) and nine of its former senior executives failed to disclose inside information as soon as reasonably practicable as required under the SFO following remitted proceedings after the Court of Appeal allowed appeals by Mayer and its directors against an earlier determination by the MMT. In the remitted proceedings, upon assessing the cumulative impact of the undisclosed pieces of specific information regarding suspicious transactions and the resignation of auditors that would have had on the potential buyers and sellers of Mayer shares at the material time, the MMT was satisfied that the undisclosed information would have been likely to have had a material effect on the share price of Mayer and therefore found that the undisclosed specific information constituted inside information. It was also found by the MMT that Mayer had no written guidelines and/or internal control policies on the statutory requirements to disclose inside information which resulted in the breach of the disclosure requirement imposed on it under the SFO. As for the other nine former senior executives, the MMT also found that they had also breached the disclosure requirement imposed on them under the SFO, in that their intentional, reckless or negligent conduct resulted in the breach of the disclosure requirement by Mayer. The MMT will determine the sanctions against Mayer and its former senior executives in a later hearing on a date to be fixed. 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 To unsubscribe, please click “ unsubscribe ”.