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

ComplianceOne Newsletter – February 2022In this month’snewsletter, we will talk about:1 The Decreasing Mar ComplianceOne Newsletter – February 2022 ComplianceOne Newsletter – February 2022 In this month’s newsletter, we will talk about: 1. The Decreasing Market Share of Category C Broker with respect to the Report from HKEX 2. I-Access Investors Limited (一通集團有限公司) Announced its Decision of Business Closure 3. SFC Concludes the Consultation on Regulating Trustees and Custodians of Public Funds [Type 13 Regulated Activity] 4. Proposed regulatory regime for VA service providers 5. SFC issues the Quarterly Report 6. SFC Reprimands and Fines South China Commodities Limited $4.8 million for Regulatory Breaches 7. Court Orders Insider Dealers to Pay $12.9 Million to Investors MARKET NEWS 1. HKEX Exchange Participants’ Market Share Report The Hong Kong Exchanges and Clearing Limited (HKEX) EP’s Market Share Report demonstrated a continual decrease in the daily turnover, recorded with a month-over-month drop of 9.84% to HKD10.85 billion. The total turnover last year was 37.14 trillion, with a monthly average of HKD3.09 trillion. For the EPs, Category A (position 1st to 14th ) accounts for 60.36% of the total market share; Category B (position 15-65) accounts for 33.69; while the lowest Category C (position below 65) accounts only for 5.95%, slightly dropped below 6%. According to data published in JAN 2022, there were 570 securities brokers in CAT C (as compared with a total of 635 securities brokers), it has come to the situation where CAT C brokers are on the verge of struggling to maintain a continuity of business. Significance: With an economy already serious impaired by the lethal epidemic, people at large are generally economizing on the expenses lest to say being sacked; and with the increasing demand for IT technology amid the online trading and Work From Home (“WFH”) with remote access arrangements, coupled with the necessity to cater for the flexibility of duty rotations in case of infected personnel; all are squeezing the already limited availability of resources of the CAT C brokers, particularly with the phenomenon of increasing operating costs far beyond their forecast. A determination of the employees and senior management team to explore more opportunities in other related areas like wealth management, sales of funds is of top priority, not to exclude the possibility to start a new career path in other industries. 2. I-Access Investors Limited (一通集團有限公司) Announces its Decision of Business Closure According to the formal announcement, I-Access Investors Limited (I-Access) will terminate all online investment services on 31 March (Thursday) this year. I-Access is famous as a discounted securities broker, which charges only HK$5 per trade. The reasons are that as the number of infected staff increases, it poses a shortage in human resources which adversely affects the daily normal operations of the company. Therefore, the Board of Directors of I-Access unanimously decided to close business before the situation gets worse. All clients with outstanding margin loans have to settle the amount by 18 March 2022, while clients with securities holdings have to either take their shares physically, or to give SI to transfer to other brokers. For clients with futures accounts, they can either hold the positions until maturity in March 2022, or to close position anytime beforehand 30 March 2022. Significance: The incidence of I-Access may be just a beginning of a series of business closures of the licensed corporations. The epidemic poses serious uncertainty to the forecast of operation disruption and economic drawdown to a scale where normal business continuity plan is not be able to address. 3. SFC Concludes the Consultation on Regulating Trustees and Custodians of Public Funds and Further Consults on the Implementation Details The Securities and Futures Commission (SFC) recently released consultation conclusions and began a further consultation on a proposal to regulate depositaries (i.e., top-level trustees and custodians) of SFC-authorised collective investment schemes (CIS). Back to 2019, the SFC had launched a consultation proposing to introduce a new regulated activity, Type 13 Regulated Activity ( RA 13 ), to put depositaries of SFC-authorised CIS under the SFC’s direct supervision. Feedbacks from respondents were generally supportive of the proposal, with some seeking clarification of the proposed licensing scope and conduct requirements. Significance: As commented by Mr Ashley Alder, the SFC’s Chief Executive Officer, “ The RA 13 regime will enhance the regulation of public funds in Hong Kong by regulating how depositaries safeguard scheme assets and oversee scheme operations. The new regulatory framework is in line with those in other leading international markets and is an important part of the SFC’s efforts to develop Hong Kong as an international, full-service asset management centre. 4. The HK Government Proposed a Regulatory Regime for Virtual Asset Service Providers Considering the rapidly changing landscape of Virtual Assets ( "VA" ), the FATF has recommended in its guidelines that, for the purpose of regulation, VA should be defined using a functional approach. Accordingly, under the proposed licensing regime for VA service providers, the Government has proposed to define VA having regard the definition adopted by the FATF which will require that the asset must be a medium of exchange accepted by the public for payment, settlement of debts or investment, and that it can be transferred, stored or traded electronically. Any VA, so long as it meets the definition and does not fall into the exempted categories to be specified in the Ordinance (e.g. digital currency issued by central bank, airline miles, credit card rewards, etc. that are closed loop and limited use tokens that cannot be transferred, traded or exchanged), will be covered in the definition of VA. In addition, the Securities and Futures Commission (SFC) has also reminded investors of the risks of trading VA through statements and circulars from time to time, including for instance a statement issued in July 2021, reminding investors that when investing in VA, they should pay attention to the use of unregulated trading platforms. The SFC and the HKMA have also issued circulars to the banking and securities sectors to give guidance on the arrangements for intermediaries in the banking and securities sectors to provide VA-related services. 5. The SFC issues Quarterly Report The Securities and Futures Commission (SFC) announced in the report that the income for the quarter was $535 million, 13% lower than the previous quarter and 27% lower than the same quarter last year. Whereas the average daily turnover in Hong Kong’s securities market was $134 billion, 21% lower than the $170 billion recorded in the previous quarter. The expenditure for the quarter was $461 million, slightly lower than last quarter and the same quarter last year; and with a recorded surplus of $74 million for the quarter. Key figures for the quarter report include: · The number of licensees and registrants totaled 48,657, of which 3,210 were licensed corporations. · The SFC vetted 40 new listing applications, including two from companies with weighted voting rights structures and one from a pre-profit biotech company. · The SFC authorized 45 unit trusts and mutual funds (including 27 Hong Kong-domiciled funds), four mandatory provident fund pooled investment funds and 48 unlisted structured investment products for public offering in Hong Kong. It registered 21 new open-ended fund companies. · 61 in-depth inspections of licensed corporations were conducted to review their compliance with regulatory requirements. · The SFC made 1,284 requests for trading and account records triggered by untoward price and turnover movements. · It issued section 179 directions to gather additional information in 14 cases and wrote to detail its concerns in one case as part of its review of corporate disclosures. · Five licensed corporations and nine individuals were disciplined, resulting in total fines of over $23 million. ENFORCEMENT NEWS 6. SFC Reprimands and Fines South China Commodities Limited $4.8 million for Regulatory Breaches The Securities and Futures Commission (SFC) has reprimanded and fined South China Commodities Limited (SCCL) $4.8 million for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) and other regulatory requirements between June 2017 and October 2018. The SFC’s investigation found that SCCL did not conduct any due diligence on the Customer Supplied Systems (CSSs) used by 19 clients for placing orders during the material time. As a result, SCCL was not in a position to properly assess and manage the money laundering and terrorist financing (ML/TF) and other risks associated with the use of such CSSs by its clients. In addition, the SFC identified that the amounts of deposits made into four client accounts were incommensurate with their declared financial profiles. SCCL claimed that it was not aware of these anomalies which in view of the SFC that SCCL failed to demonstrate that it had conducted proper enquiries on the deposits. The SFC further found that SCCL’s failure to put in place an effective ongoing monitoring system to detect suspicious trading patterns in client accounts resulted in its failure to detect 3,783 self-matched trades in nine client accounts. Significance: This is the third brokers that was reprimands by the SFC because of failures to monitor trading activity via Customer Supplied Systems (CSSs) in the past several months. The licensed corporations ("LC") should be more prudent in granting the right to their clients for using their own CSS instead of the BSS provided by the LC itself. The due diligence process and the detection/monitoring of orders placed through these CSS used by the clients could not be effectively implemented; particularly with the co-incidence of large deposits incommensurate with the declared wealth status of the clients concerned. The findings of large amount of self-matched trades further exemplify the risk of identifying the ultimate persons who placed the orders as well as the ultimate beneficial owners behind the CSS. 7. Court Orders Insider Dealers to Pay $12.9 million to Investors The Court of First Instance has ordered that illicit profits of insider dealing in shares of TeleEye Holdings Limited (TeleEye) of $12,949,875 made by Ms Wei Juan and Mr Huang Yi, associates of Ms Yik Fong Fong, be paid to 63 investors. The funds will be paid out to court appointed administrators, Mr. Tsui Chi Chiu and Mr. Leonard Chan King Wai of Ernst & Young Transactions Limited, and distributed to the affected investors in proportion to the number of shares they sold to Wei or Huang between 29 February and 12 April 2016. The Securities and Futures Commission (SFC)’s Executive Director of Enforcement, Mr. Thomas Atkinson, said: “The broad effect of the orders will be to restore investors who transacted with Wei and Huang to their pre-transaction positions to the extent possible…. This case sends a clear message that the consequences of wrongdoing, including the costs of restoration or remediation, should be met by wrongdoers and not be borne by innocent investors or the market.” Significance: It demonstrates to the practitioners in the financial industry of the determination of the SFC and its zero tolerance to insider dealings which severely undermine the pillars of Hong Kong as an international financial center; more explicitly, the paramount philosophy that the wrong-doers should bear the costs and consequences of their wrong-doings, not the innocent investors at large. For more details please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================== The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to cs@complianceone.hk or call us at (852) 39550277. Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk To unsubscribe, please simply reply with “ I don’t like to know more about Compliance

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – January 2026 The topics discussed in this monthly newsletter are as follows: Market News HKFI Reports Interest from Insurers in Re-domiciling to Hong Kong IA Reports High Claims Settlement Progress for Wang Fuk Court Fire Incident (宏福苑火災) with 85% of Claims Processed IA Hosts Panel Discussion on Marine Insurance Opportunities as Hong Kong Strengthens Its Maritime Hub Status IA Statistics Show 32.5% Growth in Total Gross Premiums in first three quarters of 2025 Enforcement News Hong Kong Police Arrest Four Suspects in Connection with 22 Suspected Staged Traffic Accidents Involving Insurance Fraud Market News 1. HKFI Reports Interest from Insurers in Re-domiciling to Hong Kong On 15 January 2026, the Hong Kong Federation of Insurers (“ HKFI ”) indicated that around three insurance companies, primarily those registered in Bermuda, have expressed interest in re-domiciling to Hong Kong under the company re-domiciliation regime introduced in May 2025. This follows successful precedents set by major insurers. The legislation for implementation of company re-domiciliation regime, passaged on 14 May 2025, and gazetted on 23 May 2025 (See Companies (Amendment (No.2) Bill 2024 – Progress of the bill ) Manulife International Life Insurance (Hong Kong) Completed its re-domiciliation from Bermuda to Hong Kong in December 2025, becoming the first insurer to do so. Notice of Re-domiciliation Completion - Manulife AXA China Region Insurance Company (Bermuda) Limited Announced its successful re-domiciliation to Hong Kong on 26 January 2026, effective immediately, and was renamed AXA China Region Insurance Company (Hong Kong) Limited (安盛金融保險（香港）有限公司). The process aligned with the regime, reinforcing AXA's long-term commitment to the Greater China region. AXA plans to update its Macau branch name in the week starting 2 February 2026. Notice of Re-domiciliation Completion - AXA SIGNIFICANCE: The re-domiciliation benefits include streamlined regulatory compliance (e.g., avoiding dual Bermuda and Hong Kong requirements), simplified financial reporting, and enhanced alignment with Hong Kong's stable regulatory environment. The growing interest from approximately three additional insurers, combined with completed re-domiciliations by Manulife and AXA, demonstrates Hong Kong's increasing attractiveness as a domicile for international insurance groups amid global economic shifts. 2. IA Reports High Claims Settlement Progress for Wang Fuk Court Fire Incident (宏福苑火災) with 85% of Claims Processed On 3 February 2026, the Insurance Authority (“ IA ”) announced that around 85% of insurance claims arising from the fire at Wang Fuk Court have been successfully settled. The IA has been actively coordinating with insurers and monitoring the claims handling process since the incident to support affected policyholders. Key statistics: Total claims processed 1,032 (representing 85% of all claims), involving nearly HK$510 million in settlements. General insurance claims 1,030 total claims; 863 settled (84%), amounting to approximately HK$450 million. Long-term insurance claims 188 total claims; 169 settled (90%), amounting to approximately HK$60 million. The remaining unsettled claims primarily require on-site inspections and detailed damage assessments. The IA continues to follow up closely with the Hong Kong Federation of Insurers to ensure fair and efficient resolution in line with the principle of treating customers fairly. Mr Clement Cheung, Chief Executive Officer of the IA, stated: “The IA is aware that a majority of claims have been successfully settled based on the principle of treating customers fairly, and the remaining claims call for on-site inspections and damage assessments. We will continue to follow up actively with the Hong Kong Federation of Insurers.” 3. IA Hosts Panel Discussion on Marine Insurance Opportunities as Hong Kong Strengthens Its Maritime Hub Status On 26 January 2026, the IA organized a panel discussion at the Asian Financial Forum (“ AFF ”) titled "Charting Future Seas: Hong Kong's Maritime Development Opens New Blue Oceans for the Insurance Industry." The session, held during the AFF, explored how Hong Kong's development as an international maritime hub creates opportunities for marine insurance. The AFF serves as Asia's premier exchange platform, bringing together global leaders from government, finance, and business to discuss the global economy from an Asian perspective. The discussion was moderated by Mr. LIU Zhongjian, Executive Director (Policy and Legislation) of the IA. He emphasized that marine insurance is an indispensable element supporting Hong Kong's status as an international financial, shipping, and trading center. In the context of a complex and changing global trade landscape, Hong Kong's marine insurance sector needs to adopt a more strategic and forward-looking approach. Panel experts identified three key elements for promoting sustainable development in marine insurance: Cultivating talent to ensure a stable and continuous supply of professionals in marine risk management. Addressing technological innovations in shipping and digitalization of global supply chains to maintain competitiveness. Enhancing synergies among diverse services within Hong Kong's marine insurance ecosystem. For more details on the AFF agenda and the IA's panel are available on the Asian Financial Forum website . SIGNIFICANCE: This panel underscores the IA's proactive role in positioning Hong Kong as a leading maritime and marine insurance hub amid evolving global trade dynamics. By focusing on talent, technology, and ecosystem collaboration, the initiative aims to unlock new growth avenues for the insurance industry, enhance risk management capabilities in shipping and trade, and align with national strategic priorities. It reflects Hong Kong's commitment to diversifying its financial services beyond traditional sectors and capitalizing on its strategic location to attract international marine insurance business. 4. IA Statistics Show 32.5% Growth in Total Gross Premiums in first three quarters of 2025 On 23 January 2026, the IA published the provisional statistics for the first three quarters of 2025 (January to September 2025). The data reflects robust performance across both long-term and general insurance sectors, with total gross premiums reaching HK$6,370 billion, representing a significant year-on-year increase of 32.5%. Long Term Business (excluding retirement scheme business) : New office premiums surged 55.9% to HK$2,645 billion, driven primarily by non-linked individual business at HK$2,515 billion (up 55.2%). Within this, participating business rose 60.1% to HK$2,263 billion. Linked individual business increased 75.7% to HK$127 billion. Approximately 50,000 qualifying deferred annuity policies were issued, contributing HK$32 billion (1.2% of individual business total). In-force long-term business revenue premiums totaled HK$5,541 billion (up 36.6%), with claims and benefits paid amounting to HK$2,794 billion (up 3.4%). Total long-term assets grew to HK$52,841 billion, with net assets at HK$7,317 billion. General Business : Gross premiums reached HK$829 billion (up 10.5%), net premiums HK$560 billion (up 8.3%). Claims paid totaled HK$380 billion (down 0.9%). Overall operating profit stood at HK$101 billion (up 50.5%), supported by underwriting profit of HK$35 billion (up 63%). Direct business and reinsurance segments both showed positive growth and profitability trends. For more details, please refer to the summary of the provisional statistics is at Annex . SIGNIFICANCE: These provisional figures demonstrate the resilience and strong momentum of Hong Kong's insurance sector in 2025, with substantial growth in new business premiums and overall premiums. The performance highlights increasing demand for protection-oriented and participating products, reinforcing Hong Kong's position as a leading insurance hub in Asia. The data also provides valuable insights for insurers, intermediaries, and policyholders on market trends ahead of full-year 2025 results. Full details, including annex summaries, are available on the IA website. Enforcement News 5. Hong Kong Police Arrest Four Suspects in Connection with 22 Suspected Staged Traffic Accidents Involving Insurance Fraud Hong Kong Police have arrested four individuals (three men and one woman, aged 37 to 69) on suspicion of conspiracy to defraud related to 22 staged or falsified traffic accidents. The arrests occurred in early February 2026 as part of an investigation into a multi-year "crash-for-cash" insurance fraud operation. (Source: South China Morning Post) Key details of the Case Among the arrested are a married couple alleged to be central to the scheme, who reportedly posed variously as drivers, passengers, or pedestrians struck by private cars or taxis over a period of four to five years. Two local doctors were also detained in connection with the case, suspected of involvement in facilitating false claims. A taxi registered to the wife was impounded during the operation. All four suspects remain in custody while investigations continue. Police have linked these incidents to broader concerns over organized insurance fraud, including exaggerated or fabricated injury claims submitted to insurers for compensation payouts. The Stage Traffic Accidents Scheme in Hong Kong This development coincides with a recent surge in reported traffic-related scams, with over 100 suspected cases now under review (including referrals from the insurance industry and public reports). Some involve minor bumps, no collisions, or delayed high-value civil claims, often involving repeated claimants, shared law firms, or medical providers. Authorities, including the HKFI have warned drivers and insurers to remain vigilant and report suspicious patterns promptly. SIGNIFICANCE: Staged traffic accidents represent a persistent and evolving threat to Hong Kong’s insurance sector, contributing to inflated motor insurance claims, higher premiums for honest policyholders, and erosion of market trust. This recent crackdown demonstrates proactive law enforcement collaboration to disrupt organized syndicates, which often involve coordinated roles across drivers, medical professionals, and claimants. Insurers are encouraged to strengthen fraud detection through enhanced verification of claims (e.g., reviewing patterns in injury reports, late filings, or repeat participants), internal controls, and referral of suspicious cases to police. The arrests underscore the financial and reputational risks of such misconduct, reinforcing the need for robust anti-fraud measures amid rising "new-generation" variants of crash-for-cash schemes. [End of ComplianceOne Insurance 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. 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2022年5月26日，政信產業聯盟與中國政信國際開發集團有限公司聯合舉辦的「跨境投融資實務操作系列講座之香港金融牌照優勢解析」在線上成功 聚焦出海之路|「跨境投融資系列講座之香港金融牌照優勢」線上成功舉辦 2022年5月26日，政信產業聯盟與中國政信國際開發集團有限公司聯合舉辦的「跨境投融資實務操作系列講座之香港金融牌照優勢解析」在線上成功舉辦。 本次講座特別邀請天匯合規顧問有限公司合夥人王陶浚先生為大家解析香港金融牌照優勢，帶來更多創富靈感和投資機會。 王陶浚先生畢業於美國堪薩斯大學工商管理與金融學系，曾任職海通國際十餘年，有全方位牌照公司運營管理經驗，並專業為客戶設計策略性規劃、提供量身企業服務方案、申請相關金融牌照服務等，具備專業、豐富的金融實操經驗。 香港作為中資企業出海的橋梁，在公開交易市場完善度、經營環境成熟度以及金融產品豐富度等層面，都處在國際金融市場的優勢地位。隨著中國經濟的快速發展，不少中資企業通過赴港開展金融業務，獲得了參與國際金融活動的機會。而後疫情時代，眾多投資者希望通過香港作為跳板投資海外市場。 王陶浚先生分別從香港金融牌照「申請概況」「申請要求」等環節，介紹了香港主要金融監管機構、金融牌照的基本情況，重點闡述了香港金融牌照的優勢。他表示，香港金融牌照具備成本低、國際背書效果強、可承接承做更多國際業務、背靠全球頂尖的資本市場的優勢。 最後，結合具體案例講解，王陶浚先生進一步講解，如何通過香港的美元債券市場，為各省市的基建項目籌集到低成本的資金；如何通過香港的金融市場，為國內高凈值的客戶進行海外資產配置及家族顧問服務等，通過對案例進行分析拆解，讓與會嘉賓對跨境投融資業務有了更加直觀具體的認識，為企業開展境外發債、拓展跨境融資渠道提供了經驗分享和專業建議。 當下，隨著「走出去」步伐加快，跨境融資是眾多中資企業拓寬融資渠道、降低融資成本、優化境內外兩個市場資源配置的「新藍海」。作為政信投資集團海外業務中心，中國政信國際開發集團有限公司，以香港地區為戰略支點，依托政信面向全球開展國際開發，發揮香港節點作用，促進「外循環」，為內地政信項目構建基金融資平臺，對接海外機構投資者，致力實施集團國際化戰略。 未來，中國政信國際開發集團有限公司也期待與更多合作夥伴積極溝通交流，探索多樣化的活動形式，共同賦能更多中資企業出海。

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

Review of Custody of Virtual Assets Compliance Impact Alert: Custody of Virtual Assets Aug 2025 Disclaimer: Contents contained in this document including should not be regarded as a substitute legal and / or compliance advice in any circumstances and shall not be reproduced (in whole or in part), distributed or otherwise passed on to any other person without our prior written consent. Language: English version only I. INTRODUCTION Overview The Securities and Futures Commission (“ SFC ”) has issued a guidance on expected standards for the safe keeping of client’s virtual assets held by SFC-licensed virtual asset trading platform (“ VATP ”) operators and their associated entities (collectively, “ VA Operators ”). Compliance with the guidance will address potential vulnerabilities exposure and provides good market practices to VA Operators. General We do not accept or assume responsibility for the ongoing update of the contents of this Compliance Impact Alert document in accordance with the applicable regulatory requirements nor to any person reliance upon the contents of this document. For the avoidance of doubt, the information contained in this document is for reference only and should not be considered as a complete set of regulatory requirements. In case there is any conflict regarding contents or understanding between this document and the Full Circular, the Full Circular shall prevail. For all purposes, the English version of this document shall be original. In the event of any subsequent translation into any other language, this English language version shall prevail. Construction Unless the context otherwise requires, all terms used in this document shall bear the same meaning as in the Guidelines for Virtual Asset Trading Platform Operators (“ VATP Operator Guideline ”), Management, Supervision and Internal Control Guidelines for Persons Licensed by or Registered with the Securities and Futures Commission (“ Internal Control Guidelines ”).All singular terms and expressions shall have the same meanings in plural forms, and vice versa. A reference to any gender also denotes to other genders. II. OVERSEAS INCIDENTS ON VA PLATFORMS Below highlights the reported cybersecurity incidents affecting overseas virtual asset platforms which resulted in substantial financial losses. 1. Compromised third-party wallet solutions – attackers injected malicious code which altered platform user interface. 2. Inadequate access control – allowed unauthorized access to approval devices. 3. Insufficient systematic and independent verification of transactions – failed to prevent fraudulent activities. 4. Blind approval of transactions - signers approved forged transactions without verifying the details of the content. These incidents highlight critical vulnerabilities in virtual asset custody and offer actionable lessons for institutions, exchanges, and individual users. The SFC conducted a targeted review of VA Operators’ custody control measures to assess their resilience against similar vulnerabilities. Based on its findings, the SFC determined that key control measures implemented by VA Operators were insufficient. To address these gaps, the SFC established minimum requirements as a guide aiming to foster a standardized framework and promoting best practices in virtual asset custody. III. SFC EXPECTED STANDARDS The following standards elaborate on the SFC’s guidance in its VATP Operator Guideline and related FAQs and thematic guidance. Scope Expected Standards 1. Senior Management Responsibilities Ensure effective policies, procedures and internal control are in place. Suitable, qualified and experienced individuals are appointed to oversee the daily operation of the business. At least, one Responsible Officer or Manager-in-Charge to oversee the daily operation related to VA custody. 2. Client Cold Wallet Infrastructure Establish and implement strong internal controls and governance procedures for private key management to ensure all cryptographic seed and private keys are securely generated, stored and backed up. Perform appropriate due diligence on Hardware Security Modules (“ HSM ”) provider before engagement and an ongoing basis. Conduct proper due diligence to ensure that HSM vendor is capable of continuous and committed in maintaining HSM security. 3. Client Cold Wallet Operation Using air-gapped devices for seed and private key generation and safeguarding. Conduct a regular review on any material changes or modifications to processes, systems or authorized personnel before implementation. Implement a robust systematic control to prevent unauthorized transactions from the cold wallet. Using a dedicated device with restricted functionality and limited connectivity for transaction approval, with integrity checks and physical access restrictions. Displaying transaction details in a clear, human-readable format allowing signers to review the information before proceeding. 4. Use of Third-party Providers Maintain continuous oversight, evaluating security controls, incident reporting, and disaster recovery capabilities. Strict segregation of duties and oversight mechanisms for wallet system code management. Establish emergency procedures and conduct regular Business Continuity Plan (“ BCP ”) drills. 5. Ongoing Real-time Threat Monitoring Real-time reconciliation of on-chain client assets with the ledger balance. Ensure alert thresholds are effectively calibrated for timely detection of potential issues. Robust mechanisms to detect unauthorized intrusions to critical wallet infrastructure. Monitoring processes should cover both custody system and its dependencies. Security Operations Centre (“ SOC ”) or equivalent function should ensure 24/7 monitoring on its security processes. Develop a structured framework for handling security alerts and managing incidents according to severity and risk levels. 6. Training and Awareness Transaction signers must undergo comprehensive training to fully understand verification requirements and appropriate handling procedures. Effective manual transaction review or approval to prevent blind signing. These expected standards apply to VA Operators only. However, VA custody expectations tend to be replicated across regulated sectors in Hong Kong. Therefore, it is recommended that anyone providing custody services or custody technology solutions consider these requirements and expected standards to mitigate associated risks. IV. KEY ACTIONS AND RECOMMENDATIONS VA Operators must continuously update their systems and process. Below are the key actions recommended in custody of client’s virtual assets. 1. Evaluate custody framework: Strengthen custody controls aligning with the SFC’s guidance for VA Operators. 2. Conduct regular compliance reviews: Integrate expected standards into periodic evaluations. 3. Monitor developments: Stay updated on evolving best practices and regulatory changes, especially as new threats and vulnerabilities surface. 4. Engage with regulators: Consult the SFC when considering adjustments to existing approaches. The ongoing consultation on virtual asset custodian services presents a timely opportunity for such engagement. V. How We Can Help Our team comprises experienced professionals with deep expertise in compliance, risk management, and policy review and development in identifying gaps between the regulatory expectations in the circular and your current policies and procedures. We understand the complexities of regulatory requirements and provide tailored solutions to meet your specific needs and close any material gaps. Our expertise ensures adherence to regulatory standards and enhances overall compliance practices. If you have any questions, please feel free to reach out to your manager-in-charge or our Compliance Support, or Contact Us .

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – November 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES IA Issues Circular on Reference Checking Schemes for Licensed Insurance Intermediaries ENFORCEMENT NEWS IA Imposes Restrictive License Conditions on Mighty Divine Insurance Brokers Limited Associated with Prince Group (太子集團) ICAC Secures Jail Sentences for Last Batch of Defendants in $52 Million Dummy Agents Commissions Fraud ICAC Issues Arrest Warrants for Two Individuals Implicated in $3 Million Insurance Commissions Fraud Regulatory News 1. IA Issues Circular on Reference Checking Schemes for Licensed Insurance Intermediaries On 20 November 2025, IA Issues further Circular on the Reference Checking Scheme (the “ Scheme ”) for Licensed Insurance Intermediaries. Addressing the “rolling bad apples” phenomenon “One bad apple spoils the whole barrel” so the old adage goes. In the context of the Scheme, the phenomenon of “rolling bad apples” refer to licensed individuals attempt to evade the consequences of past misconduct by moving principals without proper disclosure. To address the issue of “rolling bad apples”, the Scheme was launched by the Hong Kong Federation of Insurers (“ HKFI ”) by its circular dated 5 July 2025 to be used by its members which are authorized insurers carrying on long-term business from 1 September 2024 onwards. The IA then issued the Circular on 5 July 2024 to endorse and support the Scheme. The Scheme then expanded in Phase 2, jointly launched by the HKFI, the Hong Kong Confederation of Insurance Brokers (“ CIB ”) and Professional Insurance Brokers Association (“ PIBA ”), covers all licensed long-term individual intermediaries to protect policyholders, maintain market confidence, and prevent misconduct from spreading. Effective Date With effect from 1 January 2026 , the Scheme will be expanded to cover all appointment of all individuals licensed intermediaries carrying on long term insurance business. Non-compliance may lead to supervisory scrutiny or disciplinary action by the IA. Scope and Application Applies to appointments of prospective intermediaries (the “ Candidates ”), including: licensed individual insurance agents; technical representatives (agent); or technical representatives (broker) (collective as “ TRs ”); for regulated activities in long-term business . As a Recruiting Principal, conduct reference checks on candidates with past 7 years of relevant experience. Check only the THREE most recent appointments if multiple. Excludes agencies that are authorized institutions under Banking Ordinance (potential integration with banking scheme ongoing). Summary of the Scheme Making a Reference Checking Request (as Recruiting Principal) Before appointing for long term activities, conduct reference checks on THREE most recent appointments within Past 7 years. · Use Annex 1A template to request info from responding principals. · Obtain written consent from candidates via Annex 2A form , authorizing checks, disclosure, and exempting contractual limits. If candidates refuse to provide consent or withdrawn the provided consent, should NOT appoint. For group companies, one entity can conduct checks for reliance, but each remains accountable with access to results. Responding to a Reference Checking Request (as Responding Principal) Upon received the Reference Checking Request from Recruiting Principal: · Complete and return info within 15 days; · If delayed, send interim reply with reason and expected final (max 2 months , exceptional only, approved by * KPIM/RO or delegate). *KPIM - key person in control function for intermediary management; RO - Responsible Officer. After submitting the first round of reference checking requests, respond to any further clarification requests within 15 days, if applicable. Recruiting Principal may assume that no further clarification to be provided by Responding Principal. Assessment by the Recruiting Principal (as Recruiting Principal) Discretion in Decisions : Recruiting principal has full discretion to appoint based on all info, including references. Evaluate adverse info considering nature, timing, explanations, and recurrence risk. Responding principals may voluntarily add material facts. Opportunity to Be Heard : For fairness, provide candidates chance for representations if adverse info may block appointment; share reference copy. No need to reopen investigations or seek more from responders. Proceeding with Adverse Records : Document assessment and justification for appointing despite issues; endorsed by KPIM/RO. Ongoing Assessment : If Responding Principal declare further information to provide, the reference process may consider complete once the Recruiting Principal assesses available information and decides on appointment ( must document the justification with KPIM/RO endorsement ). Pre-Appointment & Post-Appointment (as Recruiting Principal) Pre-Appointment If the Recruiting Principal decides to appoint despite adverse records from reference checks, they must document the assessment and justification, which requires endorsement by KPIM/RO. Post-Appointment If additional information arrives after appointment, the Recruiting Principal has full discretion to use it for ongoing evaluation, including potential actions like terminate the appointed candidate. Records and Communications (All Principals engaging Long-term business) Record Keeping For Insurance Broker Company engaging Long-Term Business: · Maintain records of resigned TRs for at least 7 years (or per internal policy, not longer than necessary under PDPO). · For unsuccessful application, retain max 2 years unless reason or consent. IIC Centralized Contact Database IA will maintain centralized contact database contain all participating principals via IA’s e-portal - Insurance Intermediaries Connect (“ IIC ”). As a safeguard, responding principals are not required to reply to reference check requests unless sent from the valid designated email address recorded in the contact database. Reference Checking Schemes Materials The Circular attached with relevant materials including: I. Main Paper – Details of the Schemes and Procedures II. Annex 1A – Template III. Annex 2A – Consent Form IV. FAQ for Licensed Entities V. FAQ for Licensed Individuals Attachment: Reference Checking Schemes Materials 附件: 保險中介人背景查核計劃資料 SIGNIFICANCE: This Scheme reinforces the IA's commitment to maintaining high standards of conduct and integrity in Hong Kong's insurance sector by preventing the recirculation of unfit intermediaries. By mandating structured reference checks, it enhances policyholder protection, reduces risks of misconduct, and promotes a more transparent and accountable industry. Insurers and intermediaries should review their hiring processes promptly to ensure compliance, as this could mitigate potential regulatory risks and foster greater trust in the market. Enforcement News 2. IA Imposes Restrictive License Conditions on Mighty Divine Insurance Brokers Limited Associated with Prince Group (太子集團) The Prince Group (太子集團) founded by Chen Zhi (陳志), has been implicated in operating telecom fraud parks in Cambodia, with Chen Zhi facing US prosecution and sanctions, including the freezing of approximately HK$120 billion in Bitcoin assets. On 28 October 2025, IA Imposes Restrictive License Conditions on Mighty Divine Insurance Brokers Limited (“ Mighty Divine ”) - Associate Company with Prince Group. The conditions prohibit the company from conducting, or representing itself as conducting, any regulated activities as defined under the Insurance Ordinance (Cap. 41) . Details of the Licensed Corporate: Name (EN) Mighty Divine Insurance Brokers Limited Name (CN) 美迪保險經紀有限公司 Licence No. FB1329 License Type Insurance Broker Company Line(s) of Business General & Long Term Business (excluding Linked Long Term Business) Business Address FLAT/RM 803, 8/F, 68 KIMBERLEY ROAD, TSIM SHA TSUI, KL Responsible Officer(s) Nill (as of 28 Oct 2025) For more details, please refer to Register of Licensed Insurance Intermediaries Conditions of the License 1) The licensee is restricted from carrying on, or holding out to carry on, any regulated activities under the Insurance Ordinance (Cap. 41) (“IO”); 2) Without prejudice to the generality of condition (1) above, and subject to condition (3) below, the licensee shall not receive, hold, or deal with any monies as specified in section 71(2) of the IO (i.e. (a) monies received by the company from or on behalf of a policy holder or potential policy holder for or on account of an insurer in connection with a contract of insurance; and (b) monies received by the company from or on behalf of an insurer for or on account of a policy holder or potential policy holder.) (“Client Monies”); and 3) The licensee may be involved in arranging the transfer, remittance or payment of, or otherwise deal with, Client Monies in accordance with the requirements under the IO and the Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules (Cap. 41L), provided that (i) it acts in compliance with all applicable laws and regulatory requirements; and (ii) it has obtained the prior written consent of the Insurance Authority. 3. ICAC Secures Jail Sentences for Last Batch of Defendants in $52 Million Dummy Agents Commissions Fraud On 21 November 2025, the Hong Kong District Court sentenced the final six defendants in a major corruption case investigated by the Independent Commission Against Corruption (“ ICAC ”), involving a $52 million fraud scheme (the ” Scheme ”) orchestrated through dummy insurance agents at: FWD Life Insurance Company (Bermuda) Limited (富衛人壽保險(百慕達)有限公司) (“ FWD ”); and Sun Life Hong Kong Limited (香港永明金融有限公司) (“ Sun Life ”). Case Summary The scheme, masterminded by LO Yin-wa (“ LO ”), a former FWD branch manager who was earlier sentenced to 46 months' imprisonment, involved recruiting dummy agents who falsely represented themselves as handlers of 478 high-commission insurance policies between February 2016 and November 2020. This deception led to the release of over $52 million in commissions, incentives, bonuses, and allowances, most of which were funneled back to LO through laundered bank accounts. The majority of the policies lapsed due to non-payment of subsequent premiums. FWD and Sun Life provided full cooperation during the ICAC investigation, which stemmed from a corruption complaint. Enforcement Act and Court Order The last six defendants, aged 25 to 39 and acting as purported insurance agents were convicted or pleaded guilty to charges of conspiracy to defraud and conspiracy to deal with property known or believed to represent proceeds of an indictable offense, with sentences ranged from 12 to 21 months' imprisonment. i. LEUNG Tsz-wing (梁紫穎) ii. MO Wing-han (毛詠嫻) iii. WOO Kin-leung (胡健良) Entered Guilty Pleas iv. LO Nga-wing (羅雅穎) v. NGAN Tsz-ting (顏梓定) vi. KONG Tsz-ying (江梓瑩) Convicted After Trial A total of 17 defendants faced 20 charges in the case, with 10 other dummy agents previously sentenced to terms ranging from 11 to 22 months. SIGNIFICANCE: The ICAC continues to prioritize integrity in the insurance sector, offering training and resources like the Corruption Prevention Guide for Insurance Companies to mitigate such risks. The judge also reprimanded the defendants for breaching professional conduct standards, noting they were lured into the offenses by the main culprit. This case highlights the severe consequences of integrity breaches in the insurance industry, emphasizing the need for robust internal controls, agent verification processes, and anti-fraud measures to prevent dummy agent schemes that erode public trust and cause financial harm. 4. ICAC Issues Arrest Warrants for Two Individuals Implicated in $3 Million Insurance Commissions Fraud The ICAC has issued arrest warrants for NG Ho-lun (吳浩麟) (“ NG ”) and Kuzca CHIK Sin-deon, formerly known as Pan CHIK Ka-tung (戚善惇, 前稱戚加彤) (“ CHIK ”), two key figures in an alleged insurance fraud scheme that defrauded: Sun Life Hong Kong Limited (香港永明金融有限公司) (“ Sun Life ”); and China Taiping Life Insurance (Hong Kong) Company Limited (中國太平人壽保險(香港)有限公司) (“ Taiping Life ”); of approximately $3 million in commissions, bonuses, and allowances through bogus policies and false representations. Case Summary The case, which involves recruiting family members, friends, and police officers as dummy agents and policyholders, stems from corruption allegations and has led to charges against eight individuals total, with six already charged and appearing in court. On 6 November 2025, the case against the six charged defendants were transferred from the Eastern Magistrates’ Courts to the District Court for plea on 27 November 2025. The defendants face 21 charges. See below table for the Six Charged Defendants Details: Role/Relationship Name Police Sergeant LAM Hin-ho (林顯豪) LAM Hin-ho’s brother LAM Chun-pong (林振邦) LAM Hin-ho’s sister-in-law YU Xiaodan (余曉丹) LAM Hin-ho’s friend LAU Chun-yee, formerly known as LAU Man-yee (劉臻頤, 前稱劉敏儀) Solicitor Osbert HUI Yee (許懿) Police Constable SZE Hong-chak (施匡澤) For more details of the case, please refer to Topic 4 of ComplianceOne Insurance Newsletter – October 2025 Details of Two Wanted Individuals Name Former Positions Role in Fraud Fraud Conducted NG Ho-lun Regional Director of Sun Life; Senior Branch Manager of Taiping Life Central role in orchestrating the fraud Recruited individuals (including LAM Hin-ho’s family, friends, and police colleagues) as dummy downline agents and policyholders; Took out 20 insurance policies, paying premiums while falsely claiming they were settled by genuine policyholders; Ensured false claims of agent interviews; Conspired with LAM Hin-ho and LAU Chun-yee to create false academic qualifications for LAU's recruitment. Kuzca CHIK Sin-deon (formerly Pan CHIK Ka-tung) Insurance Agent of Sun Life Participated in recruitment and posed as a dummy agent Contributed to false representations to insurers; Deceived insurers into believing applications were legitimate and interviews occurred, leading to fraudulent commissions. SIGNIFICANCE: This case underscores the vulnerabilities in the insurance sector to internal fraud schemes involving unlicensed or dummy intermediaries, particularly when intertwined with public servants like police officers, potentially eroding public trust in both law enforcement and financial institutions. The ICAC's proactive investigation and pursuit of fugitives highlight the importance of robust verification processes for policy applications, agent qualifications, and commission payouts to prevent such exploitation. Insurers are urged to enhance anti-fraud measures, including cross-verification of applicant interviews and premium sources, while collaborating with regulators to maintain industry integrity and protect policyholders from systemic risks. [End of ComplianceOne Insurance Newsletter – November2025] 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

Considering the amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Chapter 615), a new registration regime for Dealers in Precious Metals and Stones (“DPMS”) on 1 April 2023. Online Training Program for - Dealers in Precious Metals and Stones (DPMS) 貴金屬及寶石交易商 (DPMS) - 線上持續培訓課程 Considering the amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Chapter 615), a new registration regime for Dealers in Precious Metals and Stones (“DPMS”) on 1 April 2023. The Hong Kong Customs and Excise Department (the “Customs”) is responsible for implementing this system and supervising the compliance of registered dealers with anti-money laundering and counter-terrorist financing (“AML-CFT”) regulations. To help regulated cooperate (including DPMS) stay updated on the latest regulatory requirements, we have launched a series of online courses. These courses are designed to ensure that dealers can grasp and adhere to the latest compliance standards, with content that is continuously updated and revised. Click Thinkific platform link - About the Precious Metals and Stones Dealers Training 根據《打擊洗錢及恐怖分子資金籌集條例》（第615章）的修訂，香港於2023年4月1日引入了貴金屬及寶石交易商（DPMS）的註冊制度。香港海關負責該制度的執行，並監管註冊交易商在打擊洗錢及恐怖分子資金籌集方面的合規性。 為了幫助貴金屬及寶石交易商持續了解最新的法規要求，我們特別開設了一系列在線課程。這些課程旨在確保交易商能夠掌握並遵守最新的合規標準，並會持續更新及修訂内容。 點擊Thinkific平台連結 - 關於貴金屬及寶石交易商培訓課程 Training Program Each session lasts 1 hour and is conducted through the Thinkific platform. After completing the training and passing a short quiz, participants will receive a certificate of participation. You can also log in to Thinkific at any time to review your training records. Intended Audience: Dealers in precious metals and stones Management personnel Compliance officers Money laundering reporting officers Frontline staff Back-office staff New employees Training Topics Include: Registration Guide for DPMS Overview of the registration background for DPMS Obligations and responsibilities AML-CFT requirement Duties for senior management Joint Financial Intelligence Unit - Reporting Suspicious Transactions How to identify suspicious transactions Reporting process and requirements Protective measures and legal responsibilities Case studies and practical applications Conduct and Ethical Definition and importance of business ethics Conduct and integrity Compliance and ethical decision-making Case discussions and industry best practices 關於培訓課程 每節課程為1小時，透過Thinkific平台參與課堂。培訓結束後，只要通過簡短的測驗，即可獲發參與證書。你亦可隨時登錄Thinkific檢閱培訓記錄。 適用人士 : 貴金屬及寶石交易商 管理人員 合規主任 洗錢報告主任 前線職員 後勤職員 新入職人員 課程的題材範圍包括: 貴金屬及寶石交易商註冊指引 金屬及寶石註冊制度的背景簡介 註冊人的責任 相關法例和法定責任 反洗錢系統/制度/核心要求 各職位的責任 聯合財富情報組 - 舉報可疑交易 如何識別可疑交易 舉報流程及要求 保護措施及法律責任 案例分析與實務操作 商業行為和道德標準 商業道德的定義與重要性 職業操守與誠信 法規遵循與道德決策 實例討論與行業最佳實踐 Why ComplianceOne? Professional : Our courses are specifically designed for DPMS to ensure your acknowledgement of the latest compliance knowledge and skills. Flexible: You can log in to Thinkific platform to start or review your training records, anytime, anywhere. Easy access: The Platform supports multiple devices, no installation needed, all you need is a browser. Certification : After finished the training, certificate will be provided for enhancing your professional credentials and credibility. Payment Method: Convenient payment methods by using Visa credit card or PayPal. Courses are valid for 365 days after purchase. During this period, you can log in to Thinkific platform to take course or print certificates at any time. 為什麼選擇天匯合規的網上持續培訓平台？ 專業培訓 ：我們的課程專為貴金屬及寶石交易商設計，確保您獲得最新的合規知識和技能。 靈活學習 ：您可以根據自己的時間安排進行學習，並隨時登入平台檢閱培訓記錄。 簡單易用 ：網上持續培訓平台支援多種裝置，無需安裝，操作簡單。 獲得認證 ：通過簡短測驗後即可獲得參與證書，提升您的專業認證和可信度。 支付方式 ：接受 Visa信用卡或PayPal方式支付，方便快捷。 課程在購買後365天內有效。在此期間，您可以隨時登入Thinkific平台參加課程或列印證書。

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Newsletter – August 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES IPO and securities trading growth powers Hong Kong ahead as global financial hub: SFC Quarterly Report Latest updates on Stablecoin-related Development MARKET NEWS SFC and HKMA to co-organise Hong Kong Fixed Income and Currency Forum 2025 ENFORCEMENT NEWS SFC Fines HSBC $4.2 Million for Disclosure Failures in Research Reports SFC Fines Deutsche Bank $23.8 Million for Various Regulatory Breaches during 2020 to 2023 Regulatory Action Against Nerico Brothers Limited involving Misappropriation of Client Assets SFC Revokes Amber Hill Capital’s License and Bans Senior Management for Life Due to Misappropriation of Client Funds and Dishonest Fund Management Practices SFC Seeks Court Order to Freeze $62.5 Million in Assets for Investor Compensation in Eggriculture Ramp-and-Dump Case SFC and HKEX Take First-Ever Joint Action Against Former TOMO Directors for Non-Cooperation SFC Bans Zhu Hong for 12 Months and Fines Her $400,000 for Fund Management Failures Regulatory Updates 1. IPO and securities trading growth powers Hong Kong ahead as global financial hub: SFC Quarterly Report The SFC published its second Quarterly Report (April to June 2025) in August with promising figure. Below are key takeaways of the achievements : Hong Kong solidified its global leadership in IPO , with 51 IPOs and total funds raised surging over 60% year-over-year (“yoy”) to HKD128 billion; The securities market demonstrated with resilience against the extreme volatility in April to restore orderly and normal operations; the HSI rebounded and reached 3-year high with average daily turnover up 85% to HKD243.7 billion in the first seven months; The number of license applications increased 16% yoy for the second quarter; For the asset management sector, the HK-domiciled funds recorded with a growth of 39% in AUM, and the number of open-ended fund (OFC) was up 56%; For virtual asset (“VA”) , the number of SFC-authorized VA spot ETF increased from six to nine, with further steps forward for approval of three VA spot ETF to engage in staking service with investor safeguards; and the number of SFC-licensed VATP increased to 11 together with 57 licensed corporations approved to provide VA dealing service; SIGNIFICANCE: The SFC plays a proactive role as a regulatory institution to provide full-fledged obligations in monitoring and revitalizing the regulatory regime in Hong Kong, balancing the drive for innovation and the indispensable mission of investor protection. 2. Latest updates on Stablecoin-related Development Reminder from Regulatory Institutions in the joint statement Regulatory bodies like SFC and the HKMA issues a joint statement on the recent market movements in relation to stablecoins. Investors are advised to pay attention to the following reminders in making an informed investment decision when encountered with a corporation/ entity which: demonstrates its intention to explore the feasibility of stablecoin issuance; indicates an interest to apply for stablecoin license; claims to have any ongoing communication with the HKMA; Investors should remain cautious that the above procedures are merely part of the licensing process, and the granting of license will be determined by the fulfilment of the licensing requirements of the entity where uncertainties of the final outcome remain. The SFC and HKMA further urge the public to exercise caution and refrain from making irrational investment decision based on the recent euphoria over movements in the market. Recent Updates Since the Stablecoin Ordinance came into effect on 1 st August 2025, all issuers of stablecoin are required to obtain licenses from the Hong Kong Monetary Authority (“HKMA”) in accordance with the “Explanatory Note on Licensing of Stablecoin Issuers”. This regulatory requirement poses a hurdle for the OTC (Over-the-Counter) crypto shops which would find it difficult to comply; yet transactions through the OTC play a significant role as well, particular in providing liquidity of stablecoins like USDT and USDC. There is a common belief that OTC crypto shops are not allowed to “offer” stablecoins, either to retail or professional investors. And the meaning of offering stablecoin is also subject to ambiguities in interpretation. According to the Ordinance, between two individuals, person A communicates with person B and presents sufficient information on all of the following matters enabling person B to acquire the stablecoins; namely: the stablecoins to be offered; the terms on which the stablecoin will be offered; the channels through which the stablecoin will be offered; then the action of person A will be constituted as “ making an offer ” (“要約提供”) to person B. To avoid the action of “making an offer”, some OTC shops do not explicitly display the quotes of the stablecoins, whereas the making of offer is initiated by the clients; it is still considered as a “breach” for reason that the Ordinance does not specify whether person A is the services provider or the client. Ambiguities in comprehending the ordinance pose more uncertainties to market participants. Conditions where the requirement for a stablecoin license is triggered Engaging in “regulated stablecoin activity” means: issuing a specified stablecoin in HK in the course of business; issuing a specified stablecoin in a place outside HK and the specified stablecoin derive its value with reference to HK dollars ; holding out itself as carrying a regulated stablecoin activity, including marketing to HK public, either in or outside HK. Please be noted that only specified stablecoins issued by stablecoin licensees can be offered to retail investors. And a licensee can engage a “ permitted offeror ” to offer specified stablecoins, currently, a permitted offeror can be: (i) a licensee itself; (ii) an authorized institution; (iii) an SFC type 1 licensed corporation (iv) a licensed virtual asset trading platform (“VATP”); (v) a Stored Value Facilities licensee (“SVF”) SIGNIFICANCE: Alike the virtual asset regime, development and evolution of the stablecoin regime is no exception, more mutual communication and interaction at inception stage is indispensable while regulations and guidelines are being finetuned to navigate and rectify any deviations throughout the process. Market News 3. SFC and HKMA to co-organise Hong Kong Fixed Income and Currency Forum 2025 The Hong Kong Fixed Income and Currency (“FIC”) Forum 2025, jointly organised by the Securities and Futures Commission (“SFC”) and the Hong Kong Monetary Authority (HKMA), will take place on 25 September 2025. As a leading Asian international bond issuance hub and the 4 th largest global foreign exchange market, Hong Kong is actively exploring ways to solidify and advance its position in the FIC markets. Many FIC market participants, senior executives from financial institutions, senior government official and regulators are invited to join this dynamic and multilateral forum, with the intention to facilitate sharing of strategic insights and vision for development of the FIC markets in HK. Details of the event programme and other relevant information can be accessed via our dedicated webpage and the Event Progromme webpage . Enforcement News 4. SFC Fines HSBC $4.2 Million for Disclosure Failures in Research Reports On 26 Aug 2025, the SFC in collaboration with the HKMA, has reprimanded and fined the Hongkong and Shanghai Banking Corporation Limited (“HSBC”) $4.2 million for failing to comply with disclosure requirements in research reports on Hong Kong-listed securities. The breaches, spanning from 2013 to 2021, highlight significant lapses in HSBC’s data systems and controls. Key Details of the Case Nature of the Breach: Following a self-report by HSBC, an investigation by the SFC and HKMA revealed that HSBC failed to disclose, or made incorrect disclosures about, its investment banking relationships with companies featured in over 4,200 research reports . These reports, published between 2013 and 2021 , covered Hong Kong-listed securities. The issues stemmed from deficiencies in HSBC’s data recording and mapping systems. Regulatory Violation: The breaches violated Paragraph 16.5(d) of the Code of Conduct for Persons Licensed by or Registered with the SFC, which mandates that firms disclose any investment banking relationships with issuers or new listing applicants in their research reports. The SFC found that HSBC did not exercise due skill and care or implement effective systems to ensure compliance and accuracy in these disclosures. Disciplinary Action: The SFC imposed a $4.2 million fine and a reprimand, reflecting HSBC’s failure to meet regulatory standards. For more details of the case, please refer to the Statement of Disciplinary Action . SIGNIFICANCE: In determining the penalty, the SFC considered: No evidence of client losses resulting from the disclosure failures. HSBC’s proactive reviews to identify the root causes and scope of the breaches. Steps taken by HSBC to enhance its systems and controls to prevent future issues. HSBC’s cooperation with the SFC and HKMA during the investigation. This case underscores the importance of robust systems and controls in ensuring accurate disclosures, which are critical for maintaining transparency and investor trust in financial markets. The SFC’s action serves as a reminder to financial institutions to prioritize compliance with regulatory standards to avoid similar penalties. 5. SFC Fines Deutsche Bank $23.8 Million for Various Regulatory Breaches during 2020 to 2023 On 28 Aug 2025, the SFC reprimanded and fined Deutsche Bank Aktiengesellschaft (“ DB ”) $23.8 million for multiple regulatory violations spanning several years. The breaches include overcharging clients on fees, incorrect valuations of debt instruments and funds, failure to disclose investment banking relationships in research reports and incorrect assignment of product risk ratings. These issues, identified through DB’s self-reports between December 2020 and December 2023, highlight significant lapses in compliance and internal controls. Key Details of the Case Between November 2015 and November 2023, DB’s operational shortcomings led to significant overcharges totalling approximately $39 million: Overcharging management fees in Discretionary Portfolio Management accounts: In 39 Discretionary Portfolios managed by DB, the clients were overcharged with management fees due to DB’s failure to apply agreed discounted rates, caused by flawed processes and implementation. Incorrect valuations of floating rate debt instruments: 392 floating rate debt instruments were incorrectly valued using “fixed” interest rates, inflating portfolio valuations and leading to overcharged custodian and management fees for 92 clients. Incorrect valuation of funds: Valuations of 16 private equity funds and three real estate funds were misstated in monthly statements to 233 clients due to an external vendor’s oversight and DB’s lack of controls, resulting in overcharged custodian fees for 32 clients. Failure to disclose investment banking relationships in research reports: Failed to disclose investment banking relationships in 261 single stock company reports and 1,590 industry reports on Hong Kong-listed companies. This was due to deficiencies in DB’s research disclosure system, which did not account for certain investment banking mandates. Incorrect assignment of Product Risk Ratings: From August 2012 to December 2020, DB assigned incorrect lower risk ratings to 40 exchange-traded funds (“ETFs”), affecting 93 clients and 265 transactions. After correcting the ratings, 10 transactions were found to have risk levels exceeding clients’ risk tolerance. For more details of the case, please refer to the Statement of Disciplinary Action . SIGNIFICANCE: The SFC concluded that DB failed to: Act with due skill, care, and diligence in the best interests of clients and market integrity. Ensure accurate and non-misleading representations to clients. Comply with disclosure requirements for research reports. Adhere to regulatory requirements to promote clients’ best interests. The SFC imposed a $23.8 million fine and a reprimand, taking into account: DB’s reviews to identify the root causes and extent of the breaches. Remediation efforts, including strengthened internal controls and systems. Full refunds of overcharged fees to affected clients. The inadvertent nature of the breaches, with no evidence of deliberate misconduct. DB’s cooperation with the SFC and acceptance of the findings and disciplinary action. This case emphasizes the SFC’s commitment to enforcing compliance with regulatory standards, particularly in ensuring accurate client information and transparent disclosures. Financial institutions must prioritize robust systems to prevent similar lapses, which can undermine investor trust and market integrity. 6. Regulatory Action Against Nerico Brothers Limited involving Misappropriation of Client Assets On 28 August 2025, the SFC revoked the licence of Nerico Brothers Limited (“ NBL ”) due to severe misconduct involving the misappropriation of client assets and the provision of false or misleading information. Additionally, the SFC imposed a lifetime ban on NBL’s director, Jerff Lee Cheuk Fung (“Jerff Lee”), prohibiting him from engaging in any regulated activities. Key Details of the Case: Misuse of Client Funds Between June 2020 and January 2021, NBL allegedly misused over US$68 million from a client's account on six occasions. These funds were used to subscribe for shares in two segregated portfolios of a Cayman-incorporated fund for NBL's own benefit. The firm retained profits from these subscriptions and only returned the principal amounts by June 2021—all without the client's knowledge, authorization, or consent, violating the client agreement. Facilitation of Misappropriation NBL is accused of aiding a scheme led by Neo Ng Yu (“Neo Ng”) and his associates, resulting in the misappropriation of approximately US$154 million from the same client's funds starting in January 2021. From January to August 2021, NBL transferred nearly all the client's assets to a sub-fund for the supposed purchase of "liquidity provider units." However, no such units were issued or held by the sub-fund. Instead, a large portion of the funds was diverted to Neo Ng and his entities. To cover this up, NBL used fabricated transaction documents and account statements. False Information to Regulators During the SFC's inquiry, NBL provided two conflicting explanations about the funds' usage, supported by fabricated documents. Both narratives were proven false, confirming that the funds were misappropriated rather than invested as claimed. Senior Management Accountability The SFC attributes NBL's misconduct directly to Jerff Lee, who was the key figure orchestrating these actions and had close ties to Neo Ng. Lee also personally violated the SFO by providing false or misleading information in SFC interviews. The firm was wound up by the Hong Kong High Court on 3 May 2022. Although Jerff Lee was not personally licensed during the period, he qualifies as a "regulated person" due to his management role. For more details of the case, please refer to the Statement of Disciplinary Action . SIGNIFICANCE: Neo Ng became a substantial shareholder in the client's holding company in December 2020 and briefly served as a director from July 2021 to January 2022. NBL claimed clients needed "liquidity provider units" from a fund to trade currencies, but this was part of the deceptive scheme. This case highlights the SFC's zero-tolerance approach to asset misuse and fraud in the financial sector. It also connects to related actions against Amber Hill Capital Limited and its former executives, Neo Ng and Simon Ng She Chun (see SFC press release dated 28 August 2025 , for details).” 7. SFC Revokes Amber Hill Capital’s License and Bans Senior Management for Life Due to Misappropriation of Client Funds and Dishonest Fund Management Practices On 28 Aug 2025, the SFC took a decisive action against Amber Hill Capital Limited (“ AHCL ”), revoking its license and imposing lifetime bans on its former senior management, Neo Ng Yu and Simon Ng She Chun, for facilitating the misappropriation of funds and engaging in dishonest practices. These measures address serious misconduct that undermined market integrity and caused significant investor losses. Key Details of the Case License Revocation and Bans: The SFC revoked AHCL’s license for its role in facilitating the misappropriation of approximately US$154 million from a client of Nerico Brothers Limited (“ NBL ”) through a Cayman-incorporated fund’s segregated portfolio (Sub-fund), managed by AHCL from October 2017 to September 2021. Neo Ng and Simon Ng, key figures in AHCL’s management, have been permanently banned from all regulated activities due to their direct involvement. Misappropriation Scheme: The SFC investigation revealed that Neo Ng orchestrated a scheme to misappropriate funds through the Sub-fund. Between January and August 2021, NBL transferred client funds to the Sub-fund for the purported purchase of “liquidity provider units,” which did not exist. AHCL accepted these funds and directed the Sub-fund to transfer a significant portion to a corporate vehicle owned by Neo Ng, with most of the remaining proceeds used for the Sub-fund’s own purposes. False Information and Fabricated Documents: AHCL misrepresented to the Sub-fund’s auditors and administrators that NBL was a broker for the Sub-fund and that most of its cash assets were held in an NBL account. Additionally, AHCL claimed Neo Ng subscribed US$297 million for Sub-fund shares via his corporate vehicle, with proceeds held in the non-existent NBL account. These claims inflated the Sub-fund’s cash position by up to US$451 million between November 2019 and May 2021. AHCL also provided fabricated auditors’ reports and documents to mislead investors and prospective investors during this period. For more details of the case, please refer to the Statement of Disciplinary Action . SIGNIFICANCE: Neo Ng, a director and sole shareholder of AHCL, masterminded the scheme and personally benefited from the misappropriated funds and inflated Sub-fund valuations. Simon Ng, his brother and a senior manager, facilitated the scheme by processing the funds, authorizing their transfer to Neo Ng’s vehicle, and providing false information. Their actions were deemed profoundly dishonest, falling far below the standards expected of licensed corporation management. The SFC’s sanctions reflect: The egregious nature of the misconduct, damaging investor and public confidence in market integrity. Significant losses to NBL’s client. The clean prior disciplinary records of AHCL, Neo Ng, and Simon Ng. This case is linked to the SFC’s actions against NBL and its director, Jerff Lee Cheuk Fung, announced on the same date (see SFC press release, 28 Aug 2025 ). The SFC’s actions underscore its commitment to rooting out dishonest practices in the financial sector. The lifetime bans and license revocation send a strong message about accountability, particularly for senior management, in safeguarding investor interests and market integrity. 8. SFC Seeks Court Order to Freeze $62.5 Million in Assets for Investor Compensation in Eggriculture Ramp-and-Dump Case On 29 Aug 2025, the SFC took decisive action to protect investors by applying for a court order to freeze assets up to $62.5 million. This move aims to secure funds for compensating investors affected by a sophisticated ramp-and-dump scheme involving Eggriculture Foods Limited (8609.HK) (“ Eggriculture ”). Key Details of the Case: Asset Freeze Application: On 29 August 2025, the SFC filed an application with the Court of First Instance to restrain the disposal of assets belonging to one of the suspected ringleaders. The assets, valued up to $62,566,773, represent the estimated losses suffered by investors due to alleged market manipulation of Eggriculture shares between August and November 2018. Market Manipulation Allegations: The SFC's legal action targets six individuals, including suspected ringleaders, accused of manipulating Eggriculture Foods Limited’s shares. Eggriculture was listed on the Growth Enterprise Market (“ GEM ”) of the Stock Exchange of Hong Kong Limited on 7 September 2018. The manipulation allegedly occurred shortly after the listing, exploiting the market to the detriment of investors. Court Proceedings: The Court of First Instance held its first hearing on the SFC’s application, issuing directions and adjourning the substantive hearing to a later date to be determined. This ensures a thorough review of the application to freeze assets for investor compensation. Parallel Criminal Trial: In a related development, a criminal trial is scheduled to begin on 13 July 2026, at the District Court. Five of the six individuals involved in the SFC’s civil proceedings face charges of conspiracy to defraud and conspiracy to employ a scheme with intent to defraud or deceive in securities transactions. SIGNIFICANCE: As the legal proceedings are active, the SFC has stated it will refrain from further comments to maintain the integrity of the judicial process. This case underscores the SFC’s commitment to combating market misconduct and ensuring investor protection. By seeking to freeze assets, the SFC aims to secure potential compensation for affected investors, reinforcing trust in Hong Kong’s financial markets. The parallel civil and criminal proceedings highlight the multifaceted approach to addressing sophisticated financial crimes. 9. SFC and HKEX Take First-Ever Joint Action Against Former TOMO Directors for Non-Cooperation In a landmark enforcement action, the SFC and HKEX have collaborated to discipline two former directors of TOMO Holdings Limited (6928.HK) (“ TOMO ”) for failing to cooperate with regulatory investigations. This marks the first time the Exchange has taken disciplinary action against directors for non-cooperation, highlighting the strength of the SFC-HKEX partnership in upholding market integrity. Key Details of the Case Disciplinary Action On 12 August 2025, the Exchange publicly censured Ms. Ma Xiaoqiu, a former executive director, and Mr. Jin Lailin, a former independent non-executive director of TOMO, declaring them unsuitable to serve as directors or in senior management roles at TOMO or its subsidiaries. This action addresses their failure to cooperate with investigations by both the SFC and the Exchange’s Listing Division. Investigation Context The SFC investigated potential violations under the SFO involving TOMO and related parties, issuing notices under section 183 to Ma and Jin for relevant information and documents. Simultaneously, the Exchange’s Listing Division probed whether the directors fulfilled their obligations under the Listing Rules. Both Ma and Jin failed to respond to either investigation. Regulatory Breach The Listing Rules mandate that directors of listed issuers cooperate with SFC and Exchange investigations, an obligation that persists post-tenure. The Exchange’s Listing Committee found that Ma and Jin’s non-cooperation constituted a serious breach of these rules. The SFC’s investigation into TOMO-related matters continues, with further details pending. For more details of the case, please refer to the Disciplinary Action . SIGNIFICANCE: Christopher Wilson, SFC Executive Director of Enforcement , emphasized that non-cooperation undermines regulatory oversight and investor protection, highlighting the SFC’s commitment to robust enforcement through its partnership with the Exchange to ensure accountability. Catherine Yien, HKEX Head of Listing Regulation and Enforcement emphasized that collaboration plays a critical role in maintaining a fair and informed securities market, and underscored the HKEX's zero-tolerance stance on such misconduct and its commitment to market quality. This unprecedented joint action demonstrates the SFC and HKEX’s coordinated approach to tackling regulatory non-compliance. By leveraging the Exchange’s disciplinary powers under the Listing Rules, the regulators are sending a clear message: directors who fail to cooperate face severe consequences, including reputational and operational sanctions. 10. SFC Bans Zhu Hong for 12 Months and Fines Her $400,000 for Fund Management Failures On 18 Aug 2025, the SFC imposed a 12-month ban and a $400,000 fine on Ms. Zhu Hong, a substantial shareholder, director, and former manager-in-charge (“ MIC ”) of Kylin International (HK) Co., Limited (“ Kylin ”). The disciplinary action, effective from 16 August 2025, to 15 August 2026, addresses Zhu’s failures in managing private funds and ensuring compliance with anti-money laundering and counter-terrorist financing (“ AML/CTF ”) obligations. Key Details of the Case The SFC banned Zhu from engaging in any regulated activities and fined her $400,000 for lapses in her duties as a director and MIC at Kylin. Between August 2018 and July 2021, Kylin served as the investment manager and/or consultant for sub-funds of a Cayman-incorporated fund. Zhu was responsible for approving borrowing agreements and implementing AML/CTF internal controls but failed to discharge her duties as a director of Kylin and MIC for the AML/CTF in managing the funds. Kylin was licensed under SFO for Type 9 (asset management) activities from 4 April 2014, until its license was revoked on 22 January 2025, following its cessation of regulated activities on 31 December 2023. From 30 April 2019 to 22 January 2025: Zhu, while not a licensed person, qualifies as a “regulated person” under section 194(7) of the SFO due to her management roles: i. MIC of AML/CTF; ii. MIC of Risk Management; and iii. MIC of Finance and Accounting SIGNIFICANCE: The SFC considered Zhu’s acceptance of liability, her expressed remorse, and her clean disciplinary record in determining the sanctions. The disciplinary action against Zhu is linked to an ongoing SFC investigation into another related entity concerning the same funds, with further details to be released upon its conclusion. This case highlights the SFC’s commitment to holding individuals accountable for failures in fund management and compliance, particularly in critical areas like AML/CTF. It serves as a reminder to financial professionals of the importance of robust oversight and adherence to regulatory standards to protect investors and maintain market integrity. [End of ComplianceOne Newsletter – August2025] 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 – Jan 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES 1. SFC extends swift licensing process to new VATP applicants 2. Onshore RMB bonds accepted as margin collateral in OTC Clearing Hong Kong Limited 3. SFC expands listed structured fund offerings in Hong Kong MARKET NEWS 4. InvestHK brought a record-breaking number of new companies to Hong Kong in 2024 5. Enhancing sponsors’ expertise to drive GEM advancement 6. HashKey Exchange's Trading Volume Increased by 85% in 2024 7. Hong Kong joins LME global warehouse network ENFORCEMENT NEWS 8. Hang Seng Bank Limited is fined $66.4 million for misconduct in selling investment products 9. Associate Director of SFC charged by ICAC with conspiracy to pervert course of justice 10. The first solicitor convicted of breaching secrecy provision by the SFC 11. Enforcement action against FingerTango Inc. and its former directors by concerted effort of SFC and HKEX 12. MMT sanctions chauffeur and wife for insider dealing before a takeover announcement Regulatory Updates 1. SFC extends swift licensing process to new VATP applicants ON 16 January 2025, the SFC announced that all new virtual asset trading platform (“ VATP ”) applicants can now seek licences under its swift licensing process. This new licensing approach requires VATP applicants to implement their policies, procedures, systems and controls before conducting an external assessment on these measures. The SFC will become a party to the engagement to supervise the overall external assessment process. This extension is made in light of the effectiveness of the SFC’s direct engagement and communication with deemed-to-be-licensed VATP applicants on the regulatory standards during its risk-based on-site inspections of all such applicants. It should be noted that all VATP applicant submitting license applications after 18 December 2024 should refer to the new Circular (dated 16 January 2025) for the updated swift licensing process. Key takeaways of the revamped swift licensing process are as follows: the SFC continues to adopt its engagement and communication with the VATP applicants through the process as before; the new VATP applicant has to submit its licensing application bundle to the SFC for assessment through WINGS, and to engage an external assessor (“ EA ”) to perform an external assessment; after an initial assessment by the SFC of the key personnels of the applicant, and upon acceptance of the license application, the applicant will proceed to deploy its relevant systems and controls; while the applicant is ready for an external assessment, a tripartite agreemen t with the SFC and the EA should be entered; the SFC will scrutinize and be assured that the policies, procedure and system controls (“ P&P ”) of the applicants are suitably designed and implemented; in case of any findings or exceptions, these should be resolved during the external assessment process; upon completion of the external assessment and all other outstanding matters such as capital injection, the SFC will grant a licence to the VATP applicant if it is satisfied that the applicant is then fit and proper to be licensed. What to know about the revamped external assessment? it is expected that there will be substantial changes to P&P of the VATP applicant from its conventional operational routines; as such it would be important to conduct external assessment only after the VATP deploys its systems and controls and evaluate itself if it fully adapts its P&P to ensure that they can operate as intended/ designed; it is also important for the EA to assess if the P&P are suitably designed and implemented by the VATP applicant even though the P&P can operate as intended; the SFC requires opinion from the EA that VATP applicant’s P&P are suitably designed and implemented to comply with the Guidelines specified for VATPs; the SFC, the EA and the VATP applicant should agree on the terms and scope before commencing the assessment. SIGNIFICANCE: The SFC has just granted licences to four deemed-to-be-licensed VATPs in December last year under the newly introduced swift licensing process, the determination of the Commission to give a greenlight in the licensing process to the new applicants is quite obvious. Subject to the new circular in January 2025, new VATP applicants are only required to conduct one external assessment throughout the streamlined licensing application process. 2. Onshore RMB bonds accepted as margin collateral in OTC Clearing Hong Kong Limited Effective 13 January 2025, the OTC Clearing Hong Kong Limited (“ OTC Clear ”) started accepting the Ministry of Finance and Mainland policy banks onshore bonds held under Northbound Bond Connect (“ CGB ”s) by offshore investors as margin collateral for Northbound Swap Connect (“ NBSC ”) transactions. Under the arrangement, the SFC, the People’s Bank of China (“ PBoC ”) and the Hong Kong Monetary Authority (“ HKMA ”) reached a consensus that offshore investors can use CGBs as margin collateral for all other eligible derivative transactions cleared in OTC Clear. In the Circular posted by HKEX dated 16 December 2024, the new eligible collateral can be used to cover initial margin requirements of NBSC , providing greater flexibility to international investors and enhancing their capital efficiency. Ever since its launch in May 2023, the Swap Connect has evolved with smooth operations and steady growth in trading volume, adding vibrancy to the region’s financial markets. SIGNIFICANCE: As Mr Rico Leung, the SFC’s Executive Director of Supervision Markets, has said, “ Global institutional investors can benefit from further reduction in liquidity cost with more efficient use of their onshore RMB bonds as non-cash collateral when clearing with OTC Clear. ” He further added that the new measures strengthen HK’s position as a leading global offshore RMB hub and advancing development of its fixed income market. 3. SFC expands listed structured fund offerings in Hong Kong On 23 January 2025, the SFC sets out new regulatory requirements for product issuers, with a view to broadening the range of listed structured funds that may be offered to the public in Hong Kong, notably adding to their product mix Single Stock Leveraged and Inverse (L&I) Products and Defined Outcome Listed Structured Funds (“ P&F ”). There has been growing interest among the product issuers in launching the P&F in HK amid their appeal to investors. The P&F offer investors who are looking for trading and hedging tools for popular individual stocks listed overseas, as well as for seeking price discovery tools for overseas exposure during Asian trading hours. One distinctive feature of the P&F is that they provide investors with a more customised investment exposure than the prevailing conventional products. In balancing the potential benefits and risks associated with exposure to these complex and novel products, the SFC has in place enhanced regulatory framework with additional safeguards and measure for protecting HK investors. For example, with respect to Single Stock L&I Products, only those referencing a highly liquid mega-cap stock listed on a major overseas exchange is accepted by the SFC, and is subject to a maximum leverage factor of 2X to -2X only. SIGNIFICANCE: With the protective constraints on Single Stock L&I Products imposed by the SFC, it excludes overseas listed stocks which may be dually listed in Hong Kong and stocks listed on any Mainland exchange which are not overseas exchanges; while only a lower leverage factor is accepted aiming to reduce exposure to any single stock volatility. For details of additional requirements, reference can be made to the circular post the same day. Market News 4. InvestHK brought a record-breaking number of new companies to Hong Kong in 2024 On 20 January 2025, the Invest Hong Kong (“ InvestHK ”), a government department of Hong Kong Special Administrative Region (HKSAR) which aims to strengthen Hong Kong’s status as the leading international business location in Asia, announced that the department achieved a record-breaking year of foreign direct investment (“ FDI ”) in 2024, assisting 539 overseas and Mainland companies to set up their business in Hong Kong, which represents a 41% increase compared with 2023, further reflecting the appeal of HK as a leading business hub in the region. The strong FDI performance was driven by investment in diversified and high-valued industries which is estimated to bring to HK over HKD67.7 billion, a record high of near 10 % increase over 2023’ around 6,864 job opportunities are expected to be created during the first year of operation. Taking a look at the figures, the top five locations of origins of these new companies ranked in order are Mainland China, United States, France, The United Kingdom and Singapore; the results reflect full confidence in HK from these enterprises in selecting the city as their base to capture the unique opportunities brought by HK as a “super connector” and a “super value-adder” . Furthermore, more than 800 applications were received through the New Capital Investment Entrant Scheme (“ New CIES ”) by the end of 2024 since its launch last March, bringing around HKD24 billion of investments to the city. SIGNIFICANCE: As Ms Alpha Lau, Director-General of Investment Promotion, has said, “ It demonstrates HK's resilience and adaptability and businesses' strong confidence in the city as the preferred base to expand in the region. ” 5. Enhancing sponsors’ expertise to drive GEM advancement At the seminar “ Hong Kong Capital Market – The Future of GEM ” organised by theAssociation of Hong Kong Capital Market Practitioners, Dr Kelvin Wong, Chairman of the SFC, delivered a keynote speech entitled Enhancing Sponsors’ Value Proposition to Drive GEM Advancement . He emphasised the importance of GEM to small and medium enterprises (SMEs) and Hong Kong’s listing market development. He also discussed how the sponsors of initial public offerings (IPOs) should enhance their value proposition by leveraging their unique roles to strengthen the corporate governance and resilience of companies for their longer-term success. The key points of the speech are as follows: Importance of a robust GEM to SMEs and listing market the secondary board of GEM has served as a source of long-term capital for SMEs to pursue innovation, value creation and business growth, testifying hundreds of both local and Mainland SMEs. SMEs are the backbone of the HK economy and accounted for 98% of the total number of businesses, and employing around 44% of the workforce. GEM enhancements in 2024 there were three GEM lPOs in 2024 raising a total of HK$235 million with a total initial market capitalisation of HK$720 million at listing; under the new streamlined transfer mechanism, three GEM issuers’ applications to transfer to the Main Board had been received by the HKEX; the average sponsor fees increased to HK$6.8 million in 2024, up by 25% compared to 2020. Enhancing sponsors’ value proposition the roles of sponsors and corporate financial advisors are essential in helping their clients ensure regulatory compliance and navigate the complexities of the IPO journey, and in conducting due diligence on the listing applicant’s business to ensure fulfilment of the SFC’s stringent standards, their recommendations are conducive to the sustainable development of companies long after their IPO; sponsors should also critically assess the commercial viability of a company’s business model and ensure the disclosure of accurate and sufficient information to investors. Facilitating corporate sustainability and governance beyond the IPO sponsors can help shape a culture of good corporate governance by discussing the internal control inadequacies with the listing applicant’s board of directors and recommending remedies; finding of research indicates that strong value proposition of reputable sponsors can always bring smaller under-pricing at IPO and lower price volatility post IPO; sponsors can conduct a range of investor relation initiatives and ensuring continuous equity coverage by research analysts, exposing the newly listed companies to persistent scrutiny by public eye through which is then transformed into a driving force for the companies to improve their operations, accountability, disclosure standards, corporate governance, as well as shareholder returns post IPO. Importance of governance to long-term corporate success it must be emphasised corporate governance is crucial to the long-term success of corporates post IPO. Research findings also indicated a high correlation between corporate governance and a company’s profitability and sustainability, a competent board of directors, robust internal controls and management systems as well as effective risk management are indispensable elements for success. Sponsor failures and good practices since sponsor’s rigor of due diligence is pivotal in sustaining HK’s reputation as an international fund-raising hub, the SFC is committed to combating sponsor misconduct with zero tolerance; always alert that any weakening in investors’ confidence would increase difficulties and costs for companies to raise capital. 6. HashKey Exchange's trading volume increased by 85% in 2024 As investors’ interests in virtual assets remain keen, the HashKey Exchange, one of the licensed VATPs in Hong Kong, continues to records with robust growth with its trading volume exceeding HKD 600 billion last year, marking an 85% year-on-year increase. As commented by Mr. Xiao Feng, Chairman and CEO of the parent company HashKey Group, the company is expected to reach breakeven by 2025. Currently, HashKey Exchange offers four cryptocurrencies for retail investors: Bitcoin (BTC), Ethereum (ETH), Avalanche (AVAX), and Chainlink (LINK). Its Chief Risk Officer Mr. Ru Haiyang anticipates more cryptocurrencies will be made available to cope with increasing interests at retail level. The introduction of derivative contracts, options or leveraged trading are still under communication with the regulatory bodies. SIGNIFICANCE: As HaskKey Exchange remains bullish on Bitcoin, the most popular and actively traded crypto to retail investors, trading volume is expected to grow sustainably in 2025. 7. Hong Kong joins LME global warehouse network The London Metal Exchange (“ LME ”) has confirmed, on 20 January 2025, its approval of HK as an LME warehouse location, HK will now join the LME’s existing network of 32 locations over the USA, Europe and Asia. Matthew Chamberlain, LME CEO, said, “The addition of Hong Kong to our global warehousing network is an exciting development, providing warehouse facilities closer to the metals hubs of Mainland China than ever before. The driving factors for such approval are: (i) Hong Kong provides the natural hub for connectivity to the Chinese market which is the world’s largest consumer of metal; (ii) there are keen interests from warehouse, landlords and metal owners in seeing HK as a metal delivery point; (iii) China is a largest net consumption area which is in vicinity to HK; (iv) established local fiscal and regulatory system and access to good transport network are in place in HK. SIGNIFICANCE: At the initial stage, HK is permitted to store LME-registered aluminium alloy, primary aluminium, copper, lead, nickel, tin, and zinc, and it will become an active warehouse location three months after the approval of the first warehouse company. This approval marks another cornerstone in the development of metal trading industry in HK since the HKEX acquired the LME in 2012 for USD2.2 billion. Enforcement News 8. Hang Seng Bank Limited is fined $66.4 million for misconduct in selling investment products The SFC reprimanded and fined Hang Seng Bank Limited (“ HSB ”) $66.4 million for serious regulatory failures in relation to the bank’ s sale of collective investment schemes (“ CIS ”) and derivative products and overcharging its clients and making inadequate disclosure of monetary benefits to them during various periods over the course of nine years between February 2014 and May 2023. A snapshot of the findings: (1) Sales practices in relation to CIS 111 client accounts were found to have executed 100 or more CIS transactions during the material period from 1 June 2016 to 30 November 2017; 46 clients were solicited into conducting excessively frequent transactions which contradicted to their investment perspectives/ horizon; HSB’s internal controls were deficient in monitoring the sales of CIS by their relationship managers. (2) Sales and distribution of derivative products from 17 February 2014 to 19 December 2018, it was found that 388 clients with no knowledge of the nature and risk of derivative products had purchased derivative funds in 629 transactions; while some products were of higher risk levels than the client’s tolerance levels. (3) Overcharging and inadequate disclosure of monetary benefits retained monetary benefits from client transactions in breach of regulatory standards; charged higher transaction fees from clients; failed to adequately disclose trailer fee arrangements to clients; HSB received at least HKD22.4 million in excess benefits/ fees from these transactions from the clients. SIGNIFICANCE: The SFC is of the view that the misconduct of HSB was serious and systemic, and its failure to act with due care and diligence, further aggravated by the lack of proper monitoring of sales distributions and compliance with disclosure requirements, all amounted to the adverse influence on the best interests of its clients. 9. Associate Director of SFC charged by ICAC with conspiracy to pervert course of justice The ICAC announced on 9 January 2025 that Deng Yingxia (“ DENG ”), a then Associate Director of the SFC, was charged by the ICAC with conspiracy to pervert the course of public justice by allegedly providing advice to subjects of an SFC investigation into suspected market manipulation in relation to a listed company on how to conduct themselves in the probe, including destroying potential evidence. The ICAC investigation stemmed from a corruption complaint. After investigation, the ICAC arrested DENG in an operation jointly carried out with the SFC in April 2024. It was alleged that between July 15 and 27, 2022, DENG had conspired with a subject of a Market Manipulation Investigation (relating to China Gas Industry Investment Holdings Company Limited ( 01940.HK )), she met with that person and other subjects of the investigation, and advised them how to answer possible questions posed by the SFC as well as advising them to destroy potential evidence. SIGNIFICANCE: The SFC was committed to render full assistance to the ICAC during investigation of the case. The ICAC, which stands itself out as emblem of upholding the integrity of HK’s financial market, shares the same mission of the SFC; their concerted effort to combat misconduct in the case is a good example to testify to the public that HK remains as a hub of justice and integrity. 10. The first solicitor convicted of breaching secrecy provision by the SFC A Hong Kong practicing solicitor, Mr Tse Yin Fung (“ TSE ”), was convicted today at the Eastern Magistrates’ Courts for violating the secrecy provision under the Securities and Futures Ordinance (“ SFO ”) following a prosecution brought by the SFC, and was fined HKD25,000 together with the payment for investigation costs of the SFC. In the case, TSE, acting as the legal representative of an individual, received confidential information regarding a restriction notice that the SFC had disclosed to that individual, which was subject to the secrecy provision under the SFO. After receiving the confidential information, TSE disclosed the information to two other individuals on 9 February 2021. SIGNIFICANCE: This case marks the first occasion in which a Hong Kong practicing solicitor has been convicted of an offence for contravening the secrecy provision under the SFO. No matter what intention or reason TSE had, as a legal professional, he should maintain the highest standard of professional conduct amid conducting his entrusted duty for his client. 11. Enforcement action against FingerTango Inc. and its former directors by concerted efforts of SFC and HKEX On 16 January 2025, the SFC and the Stock Exchange of Hong Kong Limited (“ Exchange ”) have joined hands in an enforcement action that resulted in the Exchange’s disciplinary actions against a Mainboard-listed FingerTango Inc. (“ Finger ”) ( 06860.HK ) and its eight former directors for misconduct and breach of their duties towards the company and its subsidiaries. Meanwhile, the SFC also sought disqualification and compensation orders from the Court of First Instance (“ CFI ”) for the same alleged misconduct. Snapshot of the legal action: the investigation was concerned with the directors’ misconduct in relation to problematic investments and loans to external parties; at the time of listing, all then directors, including independent non-executive directors, resolved to adopt a policy that would allow certain investment decisions to bypass board approval ; since then, Finger used the proceeds from its IPO to: (i) invest HKD450 million in a fund without knowledge of the board; (ii) partially redeemed the fund and invested another HKD250 million in loan notes (“2019 Loan Notes”); which later turned to be default with a loss of HKD258.75 million; (iii) between May 2020 and March 2021, another 20 loan agreements were entered by Finger and its two subsidiaries with 15 borrowers, totalling HKD500 million (the “2020-21 Loans”), which turned out later with a loss of HKD424 million in default; in the light of the above findings, the SFC expanded the scope of misconduct to include the 2020-21 Loans, with focus on the former directors’ failure to carry out proper procedures and due diligence before entering into loan agreements; SFC is of the view that the losses resulting from the 2019 Loan Notes and 2020-21 Loans were attributable to breaches of the duties of the former directors of Finger, rendering them liable to the compensate the company and its subsidiaries for the incurred losses. SIGNIFICANCE: As SFC’s Executive Director of Enforcement, Mr Christopher Wilson, had commented that corporate directors have the obligations to oversee the activities of management and ensure adequate internal control policies and procedures operate effectively. A lax policy adopted by the directors cannot be considered as an excuse to alleviate their responsibilities. It also conveys the message to the directors and audit committees that they should be mindful of their duties to prevent loss or misuse of listed corporations’ assets. 12. MMT sanctions chauffeur and wife for insider dealing before a takeover announcement The Market Misconduct Tribunal (“ MMT ”) had ordered Ms Choi Ban Yee (“ CHOI ”), the wife of a chauffeur, Mr Sit Yuk Yin (“ SIT ”), who worked for the family of the chairman of Tian An China Investments Company Limited at the material time, to disgorge illicit profit gained from insider dealing in the shares of Asiasec Properties Limited, formerly known as Dan Form Holdings Company Limited (“ Dan Form ”) ( 00271.HK ), before a takeover involving the companies was announced. The MMT was satisfied that SIT was in possession of inside information about the takeover by 13 September 2016 before the announcement was made on 22 September 2016, and he procured his wife to trade the Dan Form shares for a profit of HKD106,968. As a result of the judgement, the MMT imposed against CHOI and SIT cold shoulder orders for 16 months, cease and desist orders and to pay the costs incurred by the government and the SFC. [End of ComplianceOne Newsletter –January 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