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

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – October 2024 The topics discussed in this monthly newsletter are as follows: 1. Dr Kelvin Wong appointed as new SFC Chairman 2. New Public Fund Depositaries Regime effective from 2 October 2024 3. New Listing Application Process in Hong Kong is streamlined 4. SFC launches a new Fund Authorization Simple Track (“FASTrack”) to bolster Hong Kong market appeal 5. e-IP application/ submission system on WINGS to be fully adopted in November 6. SFC concludes consultation on Enhanced REIT and Market Conduct regimes 7. SFC sets out vision to foster Fintech ecosystem in Hong Kong 8. Common Red-flags of suspicious transactions from using Customer Supplied System (CSS) observed in SFC investigations [1] 9. Tycoon Dickson Poon is alleged to be involved in Insider Dealing 10. SFC disqualifies former CFO of Fujian Nuoqi 11. SFC suspends former employee of Julius Baer for several regulatory breaches 12. First jail sentence for Unlicensed Activity with compensation order The topic involves multiple enforcement news. Market News 1. Dr Kelvin Wong appointed as new SFC Chairman On 14 Oct 2024, the SFC made a welcome announcement on appointment of new Chairman Mr Kelvin WONG Tin-yau effective 20 October 2024 who will succeed the existing Chairman Mr Tim LUI. A snapshot summary of the welcome speeches from various key figures regarding the appointment. Mr Tim LUI said: “ Kelvin has a wealth of knowledge and experience in the development and regulation of capital markets, in particular, being Chairman of the Accounting and Financial Reporting Council, which the SFC works closely with to uphold the quality and maintain the integrity of Hong Kong’s capital markets and its reputation as an international financial centre. ” And Mr LUI also added that as Kelvin been a Non-Executive Director of the SFC and Chairman of the then Investor Education Centre, Kelvin is well-versed in the policy objectives, its strategic priorities and its operation of the Commission. Mr WONG himself said: “ I am honoured to be appointed as Chairman of the SFC, a leading global securities regulator. I look forward to working cohesively with the Board, CEO Julia, and the management team, many of whom I closely partnered with in my previous role as a Non-Executive Director .” Ms Julia LEUNG, the SFC’s Chief Executive Officer, said: “ I would like to extend a warm welcome to Kelvin and express my deep gratitude to Tim for his exemplary leadership and invaluable guidance in steering the SFC through the many difficult challenges while continuing our mission in pursuing market integrity, transparency and resilience. We now have a set of very clear strategic priorities which would enable the SFC to continue its firm commitment in safeguarding the integrity of our markets and continuing to foster market development .” SIGNIFICANCE: As reflected in the speeches above that given the prior co-working experiences of Mr WONG with the Commission and its high-ranked officials, together with his vast experiences and familiarity with the policies and core missions from previous role as Non-Executive Director of the Commission, it can be expected of a smooth, consistent transition, and continuation of the mission and vision of the Commission in preserving the market integrity in Hong Kong as an international financial centre. 2. New Public Fund Depositaries Regime effective from 2 October 2024 The SFC has updated its codes and guidelines to implement the new Type 13 regulated activity (“RA 13”) regime for public fund depositaries, which will be effective from 2 October 2024 . To ease the transition, the SFC will grant RA 13 licences or registrations to 19 depositaries under major banking or insurance groups in Hong Kong and over 300 staff members on the launch date. Under the new regime, depositaries of SFC-authorised collective investment schemes (“CISs”) must be licensed or registered with the SFC to conduct RA 13 activities. They must also comply with conduct and regulatory requirements similar to those for other regulated activities. SIGNIFICANCE: " Integrating CIS depositaries under the RA 13 regime is crucial to the SFC's strategy to enhance public fund regulation, align with international practices, and boost investor protection ." said Ms Julia Leung, CEO of the SFC. 3. New Listing Application Process in Hong Kong is streamlined On 18 October 2024, the SFC and the Stock Exchange of Hong Kong Limited (the “ Exchange” ) jointly announced the launch of an enhanced timeframe for the New Listing application process (“ Enhanced Application Timeframe” ) to further elevate Hong Kong’s attractiveness as the leading international listing venue in the region. Over the years, the SFC and the Exchange have been endeavouring to enhance the application process for New Listing applications; and the Exchange has already published a Guide for New Listing Applicants in preparing the listing. Key Highlights: Current Regulatory Framework - Under the current structure for reviewing applications, the SFC plays the roles as statutory regulator in administering the Securities and Futures (Stock Market Listing) Rules (“ SMLR” ) and the Securities and Futures Ordinance ( SFO ); the Exchange as a frontline regulator in administering the listing rules and suitability of the listing; while the Listing Committee decides if the application is approved or rejected. Enhanced Application Timeframe - The Enhanced Application Timeframe will provide greater clarity and certainty to the timeline for reviewing New Listing applications by the SFC and the Exchange. Applications that fully meet the requirements - Where an applicant and its sponsor submit a New Listing application that meet all applicable requirements and guidance under the SFO, the SMLR and/or the Listing Rules (“ Applications Fully Meeting Requirements” ), the SFC and the Exchange will individually assess if there are any regulatory concerns (“ Regulators’ Assessment” ) after a maximum of two rounds of comments; and the time taken will be no more than 40 business days , and 60 business days to satisfactorily address regulator’s comments. Upon confirmation of no material regulatory concern, the Exchange will finalise the disclosure in the listing document, which then forwarded to the Listing Committee Hearing. The entire application process expected to take around 6 months . Accelerated Timeframe for Eligible A-share Listed Companies - If an existing A-share listed company meets the following criteria when submitting a New Listing application: (a) have a minimum market capitalisation of HKD10 billion ; and (b) it can confirm, with support of legal advisor’s opinion, that it has complied with all laws and regulations, throughout the two full financial years immediately before listing application, then the A-share listed company is eligible for an accelerated timeframe for the New Listing application process (“ Accelerated Timeframe” ). Under the Accelerated Timeframe, if an eligible A-share listed company submits an Application Fully Meeting Requirements , the Regulators’ Assessment will be completed after one round of regulatory comments; and each regulator will take no more than 30 business days to complete the Regulators’ Assessment (saving 10 business days than before). If material regulatory concerns arise, longer process may require, involving a more intensive and detailed assessment. SIGNIFICANCE: The SFC and HKEX believe this initiative will support Hong Kong’s listing journey by enhancing transparency and efficiency, to further elevate Hong Kong’s attractiveness as the leading international listing venue in the region. Please refer to the above summarized table in the Appendix for your reference. 4. SFC launches a new Fund Authorization Simple Track (“FASTrack”) to bolster Hong Kong market appeal On 21 October 2024, the SFC announced the launch of the Fund Authorization Simple Track (“FASTrack”) on 4 November 2024. Under the FASTrack, SFC aims to grant fund authorisations within 15 business days after receiving complete and quality submissions from applicants. The new approach will cover simple funds from jurisdictions which have mutual recognition of funds (“MRF”) arrangements with the SFC. The SFC has issued a pamphlet detailing the new features and a circular explaining the new authorisation process. Introductory Note (1) The SFC currently processes new fund applications under a two-stream approach where applications are classified as standard (with average processing time of 1.5 months) or non-standard (of 2.5 month) which are in line with SFC targets. (2) The SFC has entered into mutual recognition of funds arrangements with jurisdictions outside Hong Kong (“MRF Jurisdictions”) which comprise of regulatory regimes providing comparable investor protection for retail investment funds similar to Hong Kong; and there is room to further expedite the authorization process. (3) A new FASTrack has been launched for simple funds domiciled and regulated in MRF Jurisdictions applying for authorization. (4) The FASTrack aims to grant fund authorizations within 15 business days from applications so as to promote efficiency and maintain competitiveness of Hong Kong. Eligible funds under FASTrack (1) A simple fund from an MRF Jurisdiction will be processed under FASTrack ( “FASTrack Fund” ) if the following criteria are satisfied: (i) Type of funds: either (i) an equity, bond or mixed fund; (ii) an exchange-traded fund or unlisted fund tracking an index or a plain vanilla index; or (iii) a feeder fund; and the funds is NOT a derivative fund. (ii) The management company of the fund is located in an MRF Jurisdiction; (iii) The investment delegate is either (a) located in an MRF Jurisdiction; or (b) is an affiliate of the management company or is currently managing other SFC-authorised funds. (2) FASTrack Funds are not expected to contain novel features, have material issues or bear wider policy implications. Processing time and performance pledges (1) FASTrack Funds are intended to cover simple funds which are already subject to home regulators’ supervision, and the SFC aims to grant authorization within 15 business days upon receipt of complete and quality submissions from the applicants. (2) Under the expected timeframe for FASTrack, the SFC will either: take up or refuse to take up an application within 5 business days upon receiving it; or grant authorization within 10 business days from the take-up date. (3) Post-vetting will be conducted by SFC to ensure the applicable authorization conditions are complied with. Implementation (1) FASTrack will take effect on 4 November 2024 ( Effective Date ) with a six-month pilot period ending on 4 May 2025. (2) Applications meeting the above criteria received on or after the Effective Date will be processed under FASTrack; or otherwise with the previous two-stream approach. (3) Relevant Information Checklist and FAQ have been updated to smoothen the launch. (4) The SFC will monitor the FASTrack during the pilot period ending on 4 May 2025. Obligations of applicants (1) Applicants must discharge their responsibility and ensure that their SFC-authorised funds comply with prevailing regulatory requirements. The SFC will take action against any non-compliance cases. SIGNIFICANCE: Ms. Christina Choi, SFC’s Executive Director of Investment Products, noted that FASTrack will provide clarity and certainty for fund launches in Hong Kong, enhancing the city’s competitiveness as a premier asset management hub. 5. e-IP application/ submission system on WINGS to be fully adopted in November On 24 October 2024, the SFC announced an extension of the parallel run period of its new online application/submission system for investment products, e-IP, by one month to 29 November 2024. Following the circular dated 8 July 2024, the SFC had launched the e-IP on its WINGS portal on 29 July 2024 to streamline and enhance the efficiency of processing new product applications, post-authorization/ registration submission to Investment Product Division (“IPD”). An initial three-month period of parallel run was in schedule while applications and submission were also accepted via the existing channels whereas the SFC has been monitoring the e-IP and gathering feedbacks from industry participants. Since new features and more advanced settings were introduced, and to facilitate these enhancements, the SFC decides to extend the parallel run period by one month to 29 November 2024. SIGNIFICANCE: Starting 30 November 2024 after the parallel run period, applications and submissions of investment products administered by IPD must be submitted via e-IP. And the current submission from IPD via the IP E-submission system will be integrated into the e-IP, including reporting of net asset values, large redemptions and suspensions of dealing. 6. SFC concludes consultation on Enhanced REIT and Market Conduct regimes On 8 Oct 2024, the SFC released consultation conclusions on proposals for a statutory scheme of arrangement and compulsory acquisition mechanism for real estate investment trusts (“REITs”) and the enhanced market conduct regime for listed collective investment schemes (“CIS”) under the Cap. 571 (“SFO”). The REIT Scheme Proposal allows REITs to conduct privatisation and corporate restructuring in an orderly manner with investor safeguards akin to those under the Companies Ordinance. The Listed CIS Proposal aims to extend SFO market misconduct rules, including insider dealing and market manipulation, to listed CIS, enhancing market integrity. SIGNIFICANCE: The proposals received general support. Ms Christina Choi, SFC’s Executive Director of Investment Products, emphasized that these measures will provide transparency, consistency, and greater investor protection. The legislative process is underway to implement these proposals. 7. SFC sets out vision to foster Fintech ecosystem in Hong Kong In the Fintech Week 2024, the SFC announced its vision for fostering a healthy and robust fintech ecosystem in Hong Kong by outlining several major areas of its initiatives to balance market development and investor protection. In a speech delivered by Dr Eric Yip, the SFC’s Executive Director of Intermediaries, he elaborated the details of the initiatives to further develop and scale up the Hong Kong’s virtual asset market. Key Initiatives: Swift Licensing for VATPs: The SFC is implementing a swift licence approval process for handling deemed-to-be-licensed VATP applicants, and expects the first batch of formal licences to be granted to deemed-to-be-licensed VATP applicants by the end of this year. Consultative Panel: To support licensed VATPs’ development of sustainable business models, a consultative panel will be launched in early 2025 for all licensed VATPs with their representative and also other stakeholders, feedbacks will be collected for SFC’s forthcoming white paper on the virtual asset industry. Regulatory Development: The SFC is working with the HKSAR Government and other regulatory bodies to develop proposals for regulating the provision of virtual asset trading services, and the provision of virtual asset custody services. Tokenisation and Project Ensemble: The SFC is a core member of the Architecture Community of Hong Kong Monetary Authority’s Project Ensemble, co-leading tokenisation initiatives for the asset management industry; the Project Ensemble plays a crucial role in establishing the necessary infrastructure for Hong Kong’s tokenisation ecosystem. SIGNIFICANCE: SFC demonstrates its commitment in moulding itself as a pioneer in the virtual assets regime, and navigating Hong Kong toward the destination. Dr Eric Yip emphasized the SFC's commitment to balancing market development with investor protection through proactive monitoring and collaboration with other agencies. Enforcement News 8. Common Red-flags of suspicious transactions from using Customer Supplied System (CSS) observed in SFC investigations During the previous month of OCT 2024, a couple of SFC investigations were found to be related to AML/CTF breaches arising from the use of Customer Supplied System (“CSS”) by the clients instead of the official Broker Supplied System (“BSS”) provided by the futures brokers. Three brokers, namely, CSC Futures (HK) Limited (" CSC "), Xinhu International Futures (Hong Kong) Co., Limited (" Xinhu ") and Zheshang International Financial Holdings Co., Limited (" ZIF "), were reprimanded and fined by the SFC, and there are similar red-flags to be alerted from the three cases taking a look at the Statement of Disciplinary Action. In retrospect of the previous quarters, there were occasional investigation cases related to use of CSS, the following observations from the case studies above are as below. Summary of the COMMON red-flags of clients using CSS: (1) The Relevant Periods covered the investigations by the SFC were similar ranging from 2016 to 2019. (2) The CSS used by the clients was the same trading software of Xinguanjia (“XGJ” or “信管家” ) which allowed the clients (the users) to create sub-accounts for the authorized users in XGJ under the clients’ own accounts maintained with the futures brokers. (3) The brokers failed to conduct proper due diligence on the CSS , namely the XGJ, used by their clients instead of the official BSS provided by the brokers. (4) The brokers failed to conduct proper due diligence on the CSS authorized users whom operated under the sub-accounts within the XGJ system. (5) The internal monitoring system and control policy were not sufficient to effectively detect suspicious transactions with the findings of large number of self-matched trades executed by the same client account (with sub-accounts behind). As a result, the broker failed to ensure compliance with the AML/CTF Ordinance, the AML Guidelines and Code of Conduct required by the SFC. (6) The large size and number of deposits made by the client accounts (with suspicious transactions) were incommensurate with the declared financial status of the clients with regard to the information provided upon account openings. (7) The follow-up enquiries conducted by the brokers were not sufficient to address the observations of abnormal large deposits made by the client accounts concerned SIGNIFICANCE: The use of CSS has long been a loophole which allows client users to create sub-accounts to hide the authentic identities of the order originators and to circumvent the ongoing monitoring by the brokers. Brokers should be alert and adopt a conservative approach when granting the use of CSS to their clients if the brokers themselves do not have effective monitoring devices for detecting suspicious transactions, and the due diligence procedures are not so effective in assessing the compliance risk behind the veil of CSS. 9. Tycoon Dickson Poon is alleged to be involved in Insider Dealing The SFC had commenced proceedings in the Market Misconduct Tribunal (MMT) against chairman of Dickson Concepts (International) Limited (“ Dickson Concepts ”), Mr Dickson Poon, and Equity Advantage Limited (“ Equity ”) for alleged insider dealing in the shares of Dickson Concepts on 15 October. The SFC also alleges that Dickson Poon and his son, Pearson Poon, caused a seven-week delay in disclosing inside information about Paypal’s acquisition of Honey Science Corporation, which significantly benefited the Company. On 20 November 2019, Paypal Holdings, Inc. (“ Paypal ”) announced on its website that it had agreed to acquire Honey Science Corporation (“ Honey ”) for approximately US$4 billion (proposed acquisition). At the material time, Dickson Concepts held 24,834,600 shares of Honey, yet the holdings were only recorded as “Unlisted equity securities” under “Other Financial Assets” without any reference to Honey. On 9 January 2020, Dickson Concepts issued an announcement disclosing to the public, among other things, that Paypal and Honey had completed the proposed acquisition on 3 January 2020, thus resulting in a gain of approximately HK$928,744,921 over Dickson Concepts’ net book value , triggering the stock price of Dickson Concepts an increase of 33.3%! Findings of SFC revealed that: (1) Dickson Poon was in possession of the inside information about the proposed acquisition, and purchased a total of 2,756,500 shares of Dickson Concepts via the securities account of Equity between 28 November and 19 December 2019 before public disclosure. (2) Dickson Concepts failed to disclose inside information about the proposed acquisition as soon as reasonably practicable, Dickson Poon and Pearson Poon caused Dickson Concepts’ breach of the disclosure of insider information requirements. (3) Dickson Poon and Pearson Poon, who were members of senior management of Dickson Concepts, became aware of the inside information about the proposed acquisition; and failed to take steps to cause the Board of Dickson Concepts to disclose the inside information to the public as soon as reasonably practicable and Dickson Concepts only issued the announcement seven weeks later on 9 January 2020. SIGNIFICANCE: It is an illustrative exemplification of insider information where the individual possessing the information can take advantage of it for making lucrative remuneration. The SFC alleges that Dickson Poon and Pearson Poon, senior management of the Company, became aware of the inside information on 21 November 2019 but failed to ensure timely disclosure. The announcement was issued seven weeks later on 9 January 2020. And the SFC’s proceedings highlight the importance of timely and accurate disclosure to maintain market integrity. Dickson Poon has denied the allegation. 10. SFC disqualifies former CFO of Fujian Nuoqi The SFC has obtained a disqualification order against Mr. Au Yeung Ho Yin, the former CFO and executive director of Fujian Nuoqi Co., Ltd. (Stock Code: 1353) (“Nuoqi”), for failing to discharge his duties. Au Yeung is disqualified from holding directorial or managerial positions in any Hong Kong corporation for three years . Au Yeung admitted failing to oversee accounting functions and ensure proper governance. The SFC's investigation revealed that around RMB225 million was withdrawn from the Company’s bank accounts without proper approval . Justice Peter Ng of the Court of First Instance stated that Au Yeung breached his duties as CFO by failing to investigate unauthorized transfers totalling RMB225 million and not alerting fellow directors. He also falsely claimed in Nuoqi's 2013 annual report that unused IPO proceeds were deposited in Hong Kong banks, while RMB160 million was actually transferred to a Mainland bank and used outside the specified scope in the listing prospectus. SIGNIFICANCE: Mr. Christopher Wilson, the SFC’s Executive Director of Enforcement, emphasized that investors rely heavily on chief financial officers of listed companies to safeguard business assets through their oversight of financial functions and reporting. This case clearly shows CFOs have a duty to investigate suspicious transactions and promptly report them to the board. CFOs must ensure all financial report disclosures are accurate and complete, as investors depend on these reports to evaluate the financial health of listed companies. 11. SFC suspends former employee of Julius Baer for several regulatory breaches On 18 October 2024, the SFC announced the suspension of Mr. Singh Amit Kishan, a former employee of Bank Julius Baer & Co. Ltd. (“ Julius Baer ”), for seven months due to regulatory breaches. Key Findings: Singh falsely claimed he had a face-to-face meeting with a client as part of the required account opening procedure. Singh advised a client to make 14 transactions that appeared unsolicited, breaching company policies. Eleven transactions involved products not permitted for solicitation, while the others lacked pre-trade approval. SIGNIFICANCE: As a result, Singh circumvented the Company’s procedures on account opening, know-your-client (“KYC”), and product suitability, preventing proper compliance monitoring. In deciding the sanction, the SFC considered the lack of evidence suggesting the client information was materially deficient and Singh’s otherwise clean disciplinary record. 12. First jail sentence for Unlicensed Activity with compensation order On 30 Oct 2024, the Eastern Magistrates’ Court has sentenced Ms. LAI Ka Yi (“ LAI ”) to two weeks’ imprisonment and ordered her to pay $98,000 as a compensation to a victim of her unlicensed activity after she was convicted of holding herself out as carrying on a business in dealing in securities without a licence from the SFF. It is also the first time the Court imposed an immediate imprisonment for an unlicensed activity offence under section 114 of the SFO ( Restriction on carrying on business in regulated activities ). Between April and 10 May 2018, Lai who was then a university student, held herself out to the victim, who she knew personally, as carrying on a business in dealing in securities. Lai enticed the victim to transfer to her bank account funds for her to invest in securities on the victim’s behalf. In the end, the victim was unable to withdraw the investment from Lai except receiving from her $2,000 in purported earnings. SIGNIFICANCE: The SFC urges the public to verify the licensing status of firms and individuals on its Public Register of Licensed Persons and Registered Institutions. According to public information, LAI was licensed and accredited to Convoy Asset Management Limited to carry on Type 1 (dealing in securities) regulated activity from 30 December 2015 to 11 January 2016, for thirteen days only. And the incidence happened between April and 10 May 2018, a relatively short episode which was two years after expiry of her previous SFC license, while the only victim was a friend of LAI personally. This marks the first time an immediate jail sentence and compensation order have been imposed for such an offence under section 114 of the Cap. 571 Securities and Futures Ordinance (“SFO”). For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

香港海關於2024年1月2日成功偵破一宗涉及未註冊鑽石交易的案件，並拘捕了涉案公司的一名董事。On 2 January 2024, Hong Kong Customs and Excise Department (the “Customs”) successfully uncovered a case involving unregistered diamond trading and arrested the involved director. 香港海關偵破未註冊鑽石交易案件 一名公司董事被捕 香港海關於2024年1月2日成功偵破一宗涉及未註冊鑽石交易的案件，並拘捕了涉案公司的一名董事。該公司未經註冊進行多宗金額逾12萬港元的鑽石交易，這不僅違反了香港的法律規定，也暴露出一些貴金屬及寶石業務經營者對監管規範的忽視。 根據香港海關的報告，該公司在沒有依照《打擊洗錢及恐怖分子資金籌集條例》所要求的註冊情況下，進行了數宗總額超過12萬港元的鑽石交易。所有在香港從事貴金屬及寶石交易的商業活動，如果涉及12萬港元或以上的交易金額（無論是現金還是非現金支付），均需向海關註冊。 涉及的董事被捕後，已獲准保釋，但案件仍在進一步調查中。海關強調，任何未註冊的貴金屬及寶石交易商，無論其業務規模大小，都不應忽視這一法律要求。根據法律規定，未註冊進行大額交易者將面臨最高10萬元港幣罰款及最多6個月監禁的處罰。 海關提醒所有貴金屬及寶石交易商，註冊過渡期已經結束，所有業務必須在獲得註冊後才能進行金額為12萬港元或以上的交易。如果您不確定是否需要註冊或如何進行註冊，建議儘早聯繫專業的合規顧問，避免因違法交易而承擔高額罰款和刑事責任。 《貴金屬及寶石交易商監管制度》簡介 所有涉及貴金屬和寶石業務的公司和個人，必須遵守香港特區政府於2023年4月1日實施的新規範，即《貴金屬及寶石交易商監管制度》。該制度要求所有在香港經營貴金屬及寶石交易，並進行12萬港元以上交易的商家必須註冊，並接受海關的監管。 註冊類別 交易方式 A類註冊人 非現金交易 B類註冊人 現金交易及非現金交易 ** 更多關於貴金屬及寶石交易商註冊的資訊，請參考 天匯合規網站 上的詳細指引 ** 根據《打擊洗錢及恐怖分子資金籌集條例》（第615章）的要求，未經註冊的交易不僅涉及法律風險，還可能引發洗錢和恐怖分子資金籌集等金融犯罪問題。所有貴金屬及寶石交易商在進行大額交易前，必須先向香港海關註冊，以確保合規經營。 為什麼需要監管？ 貴金屬和寶石，尤其是鑽石、金、銀等高價值商品，往往成為洗錢、資金籌集和其他非法活動的工具。由於這些交易通常金額巨大且難以追蹤，若缺乏有效的監管，將容易成為金融犯罪的溫床。這一註冊制度旨在提高對貴金屬和寶石交易的監管透明度，確保該行業避免用作洗錢、資金籌集等非法活動的渠道。 如您有任何疑問，或需要協助完成註冊過程，請隨時 聯繫我們 。我們提供專業的合規顧問服務，幫助您輕鬆應對監管要求。 此外，參加 天匯合規網上持續培訓平台 – Thinkific 提供的貴金屬及寶石交易商（”DPMS”）線上培訓課程，了解更多貴金屬及寶石業務經營的合規知識。 The Customs Reveal another Unregistered Diamond Trading Case On 2 January 2024, Hong Kong Customs and Excise Department (the “Customs”) successfully uncovered a case involving unregistered diamond trading and arrested the involved director. The company had conducted multiple transactions exceeding HK$120,000 in diamond sales without the required registration, violating Hong Kong’s legal regulations and highlighting the negligence of some precious metals and gemstone traders regarding the regulatory framework. According to the Customs, the company carried out several transactions exceeding HK$120,000 in total, without registering as required by the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“AMLO”) (Cap. 615). All businesses engaging in precious metals and gemstone transactions in Hong Kong involving amounts of HK$120,000 or more (whether in cash or non-cash payments) are required to register with the Customs. The arrested director has been released on bail; investigation still ongoing. The Customs emphasized that all precious metals and gemstone traders, regardless of the size of their business, must comply with Dealers in Precious Metals and Stones (“DPMS”) Regulatory Regime. Violate the registration rule can result in fines of up to HK$100,000 and a maximum of 6 months' imprisonment. The Customs urges all precious metals and gemstone traders that the grace period for registration has ended, and must register before engaging in transactions of HK$120,000 or more. If you are unsure whether you need to register or how to register, it is advisable to contact a professional compliance advisor to avoid any legal breaches. Dealers in Precious Metals and Stones (“DPMS”) Regulatory Regime All entities and individuals involved in the precious metals and gemstones business must comply with the new regulations under the DPMS implemented by the Hong Kong SAR government on 1 April 2023. The system requires businesses engaging in precious metals and gemstones transactions of HK$120,000 or more to register and be monitored by the Customs. Registration Categories Registration Categories Category A Non-cash transactions Category B Cash and non-cash transactions For more information about registering as a precious metals and gemstones trader, please refer to the detailed guidelines on the ComplianceOne website. In accordance with the AMLO, unregistered transactions not only carry legal risks but may also trigger money laundering and terrorist financing concerns. All traders must register with the Customs before engaging in large transactions to ensure compliance. Why Is Regulation Needed for DPMS? Precious metals and gemstones, especially diamonds, gold, and silver, are often used for money laundering, fundraising for terrorism, and other illicit activities. These transactions typically involve large sums of money and untraceable. Without regulation, they can become a breeding ground for financial crimes. The DPMS regulatory regime aims to increase transparency in the precious metals and gemstones market and ensure that the industry is not used for money laundering, terrorist financing, or any other illegal activities. If you have any questions or need assistance with the registration process, please feel free to Contact Us . We provide professional compliance advisory services to help you meet legal requirements smoothly. For more compliance knowledge, join the DPMS online training course on ComplianceOne Onling Training Platform - Thinkific .

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

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – June 2022 ComplianceOne Newsletter – June 2022 The topics discussed in this monthly newsletter are as follows: 1. SFC reminded investors of risks associated with non-fungible tokens 2. SFC proposed amendments to the Securities and Futures Ordinance (“SFO”) to strengthen enforcement 3. SFC fined China Everbright Securities $3.8 million for breach of anti-money laundering (“AML”) regulatory requirements 4. SFC fined CES Capital International (HK) Co. Limited $3.2 million for failures in managing private funds MARKET NEWS 1. SFC reminded investors of risks associated with non-fungible tokens The SFC raised concern to investors of the risks associated with non-fungible tokens (NFTs) which become popular in recent years. As with the other virtual assets, NFT are exposed to heightened risks of illiquid secondary markets, volatility and opaque pricing. Despite the majority of the NFTs are intended to represent a unique copy of an underlying asset such as a digital image, artwork, music or video; some NFTs have trespassed to the boundary between a simple collectible and a financial asset, say securitized in the form of a collective investment scheme (CIS). The SFC has expressed that where an NFT constitutes an interest in a CIS, marketing or distributing it may constitute a “regulated activity” which necessitates a license unless an exemption applies. Significance: NFTs allow the purchase and ownership of one-time digital assets, with ownership records kept in blockchain. Make it explicitly, the fads of NFTs allow virtual assets to become as collectible and tradeable as real-world works. Such fancy collectables as NFTs seem to offer some sort of get-rich-quick stampede which evolve even faster than the cryptos counterparts. Investors opting to these fancy stuffs should bear in mind always the inherent risks and their underlying intrinsic values before putting their hard-earned money into the basket. 2. SFC proposed amendments to the SFO to strengthen enforcement The SFC launched a two-month consultation in June on proposed enforcement-related amendments to the SFO to enable it to take more effective enforcement action. The amendments would (i) broaden the scope of some SFO provisions to expand the basis for the SFC to apply for remedial and other orders against a regulated person under section 213; and (ii) also enable the SFC to address insider dealing perpetrated in and outside Hong Kong. Amendments particularly deserve attention include clarifying an exemption such that, unless authorized by the SFC , advertisements of investment products which are intended to be sold only to professional investors may only be issued to professional investors who have been identified in advance as such by an intermediary through its know-your-client and related procedures Significance: As exemplified in the speech made by Mr. Ashley, the CEO of the SFC, "effective enforcement is essential to safeguard the integrity of Hong Kong"; the advertisements of investment products which are restricted to professional investors should not be made accessible to investors in general public looks reasonable especially with the overwhelming emergence of derivatives products and cryptos of which the inherent volatilities are mostly beyond the tolerance levels even of any professional investors. ENFORCEMENT NEWS 3. SFC fined China Everbright Securities for breach of AML regulatory requirement The SFC has reprimanded and fined China Everbright Securities (HK) Limited (“ CESL ”) $3.8 million for failures in complying with AML/CFT regulatory requirements. The SFC found that CESL failed to implement adequate systems and controls to guard against and mitigate the risk of money laundering associated with third party deposits between January 2015 and February 2017. CESL also failed to detect suspicious fund deposits in some of the client accounts and make appropriate enquiries despite the presence of identifiable red flags. 4. SFC fined CES Capital Int’l (HK) Co. Ltd for failures in managing private funds The SFC reprimanded and fined CES Capital International (Hong Kong) Co. Ltd. (“ CESHK ”) HK$3.2 million over its failure to discharge its duties as an investment manager of two funds between February 2015 and July 2017. The SFC found that CESHK failed to (i) perform sufficient due diligence and monitoring of the funds' underlying investments and (ii) undertake satisfactory risk management measures to identify, quantify and manage the risks exposed to the funds. Also, CESHK failed to keep a proper audit trail of the due diligence and monitoring allegedly performed on the funds and their underlying investments. Significance: It seems the first time the SFC stepped into how an asset management company managed the funds, and scrutinized the deficiencies in the daily routines for failures to comply with what are supposed to be essential procedures expected from the regulatory bodies. Given the intention of the SFC to strengthen its enforcement efficiencies as mentioned in news topic #2 above, it is likely to have more cases coming up especially for those asset management companies where the rights of decisions of investments are not explicitly delineated and exercised in compliance with the investment mandates. Since 15th June, 2021, CESHK has been ceasing business of regulated activities, according to information from its company website. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================== The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or call us at (852) 39550277 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk To unsubscribe, please simply reply with “ I don’t like to know more about Compliance ”.

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

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – June 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES A tour of recent developments of the VA Regulatory Regime in Hong Kong SFC joins global regulatory effort to curb activities of unauthorised finfluencers Rumour of mainland’s crackdown on illegal cross-border accounts opening: more Hong Kong brokers tighten onboarding rules The Government welcomed the passage of the Banking (Amendment) Bill 2025 to share information of suspicious accounts SFC proposes to further restrict use of misleading names to enhance investor protection MARKET NEWS SFC released the 2024-25 Annual Report ENFORCEMENT NEWS SFC issues restriction notice to GA (Int'l) Capital Management Limited and conducts search operation SFC suspends Pun Hong Hai for supervisory failures SFC bans WONG Lai Suen for failure in managing credit risks and detecting suspicious trading activities SFC suspends Hadiee CHUI Lai Chun for undisclosed personal trading account SFC reaches first settlement of its kind to compensate public shareholders of Combest Holdings Limited SFC bans LAW Man Wai for market manipulation Regulatory Updates 1. A tour of recent developments of the VA Regulatory Regime in Hong Kong Recent Developments (1) Hong Kong Expands Crypto Market with Derivative Trading for Professional Investors The SFC is ready to introduce virtual asset derivatives trading for professional investors as part of its efforts to increase product diversity and reinforce robust risk controls. The move is part of Hong Kong's drive to enhance its competitiveness in the global digital asset market. With this in mind, the SFC will focus on robust risk management measures to ensure orderly, transparent, and secure trading. The proposed product is designed to facilitate efficient risk transfers, increase liquidity in spot markets where cryptocurrencies area traded instantly, and assist experienced investors in implementing their hedging and leveraging strategies. The Financial Services and the Treasury Bureau is preparing a second policy statement on virtual assets, exploring how to harness traditional financial services and emerging technologies to drive growth in the VA market. More encouraging, virtual assets will be classified as qualifying transactions under Hong Kong's preferential tax regimes to attract international fintech players. (2) Second policy statement on development of digital assets issued to scale Hong Kong to new heights of global digital asset leadership On 26 June 2025, the HKSAR Government issued its long-awaited Policy Statement 2.0 on the Development of Digital Assets in Hong Kong, reinforcing its commitment to establishing Hong Kong as a global hub for innovation in the digital asset (DA) field; built upon the foundational measures outlined in its initial policy statement in October 2022. The Policy Statement 2.0 sets out a vision for a trusted and innovative DA ecosystem that prioritizes risk management and investor protection; the latest statement introduces the main theme of “ LEAP ” framework with focuses on: Legal and regulatory streamlining : The government is establishing a comprehensive regulatory framework for DA service providers, including DA exchanges, stablecoins issuers, DA dealing service providers, and DA custodian service providers. Expanding the suite of tokenised products : The government will regularize the issuance of tokenised Government bonds and incentivize the tokenisation of RWAs to enhance liquidity and accessibility. Advancing use cases and cross-sectoral collaboration : The government is fostering collaboration among regulators, law enforcement agencies, and technology providers for the development of DA infrastructures. People and partnership development : The government is strengthening talent development through partnerships with industry and academia, positioning Hong Kong as a centre of excellence for DA knowledge-sharing and international cooperation. (3) Next move is to seek opinion from market practitioners. Starting with the first “ Public Consultation on Legislative Proposal to Regulate Dealing in Virtual Assets ” (a non-exhaustive extract) (1) Scope and coverage : any person who conducted a business in providing services of spot trade of any VAs in Hong Kong will need to be licensed (2) Business types and Business models: a) simple dealing; b) more complex dealing services; c) all other VA dealing services. (3) Exemptions: a) stablecoin issuers who (i) are licensed by the HKMA and (ii) conduct offering or redemption of the stablecoins they issue in the primary market; b) peer-to-peer trading of VAs between individuals where no intermediary is involved. (4) Regulatory Requirements: a) VA dealing service providers that fall within the scope will need to be licensed or registered; b) The SFC will set out standards of the requirements. (5) Regulatory Principle: a) taking the “same activity, same risks, same regulation” principle, taking reference from the VATP licensing regime. (6) Eligibility: a) A HK company with two ROs with sufficient financial resources such as HKD5M as minimum paid-up capital or HKD3M as minimum required liquid capital; b) A licensee or registrant will have to set up a token admission and review committee establishing, implementing and enforcing the criteria for any VA to be made available for/withdrawn from trading; c) deposits/withdrawals of clients’ VAs to/from the licensees’ wallet addresses; d) Investor Protection: assessing clients’ VA knowledge, risk profiling, position limits etc. (7) Licensing Matters: no deeming arrangement to the pre-existing VA dealing service providers. (8) Powers of the Regulatory Authorities: the SFC still being the licensing and registration authority, and be empowered to impose licensing and registration conditions. (9) Sanctions: to achieve the necessary deterrent effect and to ensure regulatory parity among different regimes relating to VA activities (10) Public Consultation. (4) Then come with the next round for “ Public Consultation on Legislative Proposal to Regulate Virtual Asset Custodian Services ” (a non-exhaustive extract) (1) Definition: the provision of VA custodian service as a business is proposed to be defined as: by way of business, the safekeeping of (i) VAs on behalf of clients; or (ii) instruments enabling transfer of VAs of clients (including but not limited to private keys) on behalf of clients. (2) Incidental Exemption for SFC or HKMA regulated entities where the safekeeping of client VAs is wholly incidental to the principal business of providing the VA service. (3) Examples of VA Custodian like associated entities of SFC-licensed VATPs or banks, licensed or registered fund managers etc. (4) Eligibility: a regime similar to Type 13 regulated activity. (5) Licensing Issues: no deeming arrangement to the pre-existing VA Custodian. (6) Powers of the Regulatory Authorities: the SFC still being the licensing and registration authority, and be empowered to impose licensing and registration conditions. (7) Sanctions: to achieve the necessary deterrent effect and to ensure regulatory parity among different regimes relating to VA activities. (8) Public Consultation. Active participations from market participants (5) GF Securities (Hong Kong) issued its first tokenised securities - HashKey Chain announced that GF Securities (Hong Kong) Brokerage Limited (“ GFS ”) as the first brokerage firm to issue tokenized securities in Hong Kong, has now fully integrated with HashKey Chain as the core on-chain issuance network, and has launched the first daily redeemable tokenized security ,"GF Token". High-net-worth individual professional investors and institutional professional investors can participate in subscription and trading. "GF Token" is a tokenized security issued by GFS based on its credit rating support where the issuance to investors includes three currencies: USD, HKD, and CNH. Among them, the yield of the US dollar tokenized securities is anchored to the Secured Overnight Financing Rate (“SOFR”), providing users with a fair, transparent, and low-volatility cash management tool denominated in USD. HashKey Group Chairman Xiao Feng stated that the on-chain integration of Real-World Assets (RWA) requires genuine two-way integration between financial institutions and blockchain technology platforms, and the release of the "GF Token" materialized this concept. 2. SFC joins global regulatory effort to curb activities of unauthorised finfluencers The SFC is joining regulators across the globe to curb activities of unlawful financial influencers (“ finfluencers ”) who are putting millions of social media users at risk by touting financial products or services illegally. To achieve this aim, the SFC and the other members of the International Organization of Securities Commissions (“ IOSCO ”) are participating in the “Global Week of Action Against Unlawful Finfluencers” during the week of 2 June 2025. This initiative involves regulators using a combination of supervisory and enforcement powers to disrupt illegal activities of finfluencers, coupled with educational schemes and consumer awareness programmes. Some key takeaways are: A) SFC’s supervisory actions assess securities brokers’ compliance with applicable regulatory requirements when engaging finfluencers and digital platforms; review selected securities brokers’ due diligence of the finfluencers and digital platforms to ensure that these media are not involved in any unlicensed activities or improper practices; issue guidance to licensed corporations outlining expected standards when engaging finfluencers and digital platforms. B) SFC’s enforcement actions suspend the licence of a finfluencer who was criminally convicted for providing investment advice via a chat group beyond the scope of his licence; commence criminal prosecution against a finfluencer for unlicensed regulated activities; take a pro-active role to press the overseas VATP to terminate affiliate arrangements with finfluencers thus preventing them from marketing to local public; engage with social media platforms to remove social media posts and profiles impersonating public figures and promoting unauthorised investment products. C) Investor education warn the public about scammers impersonating or posing as finfluencers on social media through its Alert List system; encourage the public to utilise IOSCO’s newly revamped global warning system, the International Securities & Commodities Alerts Network (“ I-SCAN ’); make use of its ongoing “Don't be Sucker” anti-scam publicity campaign to arouse awareness of the public against finfluencers-related pitfalls and other common investment scam tactics. SIGNIFICANCE: As Julia Leung, the SFC’s Chief Executive Officer, said: “ As part of our education efforts, we must emphasise the importance of personal responsibility . Investors should serve as their own first line of defence by verifying the regulatory status and trustworthiness of the finfluencers, critically evaluating any investment ideas from them, and conducting thorough due diligence on any prospective investments before committing ”. 3. Rumour of mainland’s crackdown on illegal cross-border accounts opening: more Hong Kong brokers tighten onboarding rules Media reports in China indicate that regulatory efforts to curb mainland residents’ unauthorized use of Hong Kong accounts for cross-border investments are intensifying. Following the responses by Futu Securities International (Hong Kong) Limited and Tiger Brokers (HK) Global Limited , many Hong Kong-based securities firms—including Long Bridge HK Limited and Valuable Capital Limited —are tightening the account-opening requirements for clients originated from mainland since June. Media indicated that some brokers have already done away with the previously accepted method of using " proofs of existing accounts " (存量證明, “ PEA ”) for onboarding. Instead, mainland clients must now provide proof of cross-border residence or employment, such as utility bills or rental agreements. This explicitly strangles the flexibility that allowed mainland investors to indirectly open securities accounts in Hong Kong through loopholes. The PEA methodology had permitted mainland investors to open Hong Kong or U.S. securities accounts by verifying ownership of another already existing overseas securities account. With its removal replaced with the new “proof of life & work”, the requirement substantially raises barriers for mainland residents seeking to open new trading accounts in Hong Kong, explicitly cutting off any channels for those investors permanently residing in mainland China. The report quoted a number of Hong Kong brokerages as saying that the closure of mainland residents' account opening was carried out under the guidance of mainland regulators, and the relevant requirements were effected about three days ago, when several brokerages received a unified regulatory order restricting mainland residents from opening accounts in Hong Kong. 4. The Government welcomed the passage of the Banking (Amendment) Bill 2025 to share information of suspicious accounts Passage of the Banking (“ Amendment ”) Bill 2025 by the Legislative Council on 4 June helps facilitate the sharing of account information among banks under specified conditions to enhance the efficiency in detecting and preventing crime in Hong Kong. With the Amendment Ordinance:- a voluntary mechanism is in place for banks and relevant law enforcement agencies to share with each other, via electronic means, information of corporate and individual accounts through secure platforms designated by the Hong Kong Monetary Authority (“ HKMA ”), when banks become aware of suspected prohibited conduct (i.e. money laundering, terrorist financing or financing of proliferation of weapons of mass destruction); legal protection provided for banks that disclose the relevant information; banks and relevant law enforcement agencies are enabled to act swiftly to intercept illicit funds and expedite intelligence gathering, thus providing better protection to the public. SIGNIFICANCE: As the Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, " The new mechanism not only enhances Hong Kong's ability to combat fraud and associated money laundering activities , providing better protection for citizens, but also helps maintain the stability of Hong Kong's banking system and showcases the efforts made by Hong Kong, as an international financial centre, in international collaborations to combat relevant illegal activities. " And the Chief Executive of the HKMA, Mr Eddie Yue, said, " The new information sharing mechanism will further enhance the ability of the banks to detect and prevent fraud and other financial crime . The HKMA will continue to work closely with the Hong Kong Police Force and the banking sector to take forward the preparation work, including the upgrade of systems and formulation of practical guidelines, with a view to implementing the new mechanism as soon as practicable. " 5. SFC proposes to further restrict use of misleading names to enhance investor protection On 12 June 2025, the SFC launched a consultation aimed at restricting unregulated entities from improperly adopting names that may give the public a false impression that they are regulated entities. Some key points of the proposal: to cater for recent developments, including the emergence of virtual asset trading platforms (VATPs), the SFC proposes expanding the current list of restricted titles under the Securities and Futures Ordinance (SFO) which currently sets out a list of names that cannot be adopted except with the SFC's approval (e.g. "stock exchange" and "commodity exchange"); the aim of it is to ensure that businesses and operations do not adopt names that may mislead the public into believing they are regulated by the SFC when in fact they are not; to include similar restrictions under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). The rationale is that VATPs that carry on business in Hong Kong , or actively market their services to Hong Kong investors, are required to be licensed and regulated by the SFC . The SFO regulates VATPs providing services for virtual assets that also constitute securities or futures contract s, while the AMLO regulates VATPs offering services for virtual assets that do NOT constitute securities or futures contracts; extend the restrictions to commonly used terms that are similar in meaning to “exchange” (e.g. “trading platform”) and those that refer to some of the financial products and platforms regulated under the SFO; some titles that may imply an association with established exchanges, VATPs and other similar entities are also covered under the restriction. SIGNIFICANCE: The proposed restriction is conducive in stifling the use of misleading name in the disguise of any publicly known entity for deceiving the public and conveying any fraudulent message of its legitimacy. Market News 6. SFC released the 2024-25 Annual Report Hong Kong's capital markets are experiencing a renaissance, driven by cutting-edge innovation and strengthened global ties. The SFC Annual Report 2024-25, released on 25 June 2025, paints a picture of a vibrant financial hub that's embracing the future while solidifying its position as a global leader. Innovation at the Forefront Hong Kong is rapidly evolving into a future-ready financial hub, leading the charge in virtual assets and securities tokenization. Virtual assets, such as cryptocurrencies, and tokenized securities are making markets more efficient and accessible. Last quarter (Q1 2025), it authorized the Asia-Pacific’s first batch of three tokenized money market funds for retail access[1], with total assets under management reaching HKD$736 million by March 2025. Under the SFC’s "ASPIRe" roadmap : Two virtual asset ETFs were permitted to engage in staking (earning rewards by holding certain cryptocurrencies), making them the first-of- their-kind in the Asia-Pacific region. The six Hong Kong-listed virtual asset spot ETFs have also seen their total market capitalization surge 95% since April 2024, with daily turnover rising 16%. Additionally, the SFC has licensed 11 virtual asset trading platforms, cementing Hong Kong’s role as a digital finance hub. Strengthening Global Connectivity Hong Kong’s global ties have deepened, particularly with Mainland China and the Middle East. The Stock Connect scheme has been a standout success, with cumulative southbound inflows exceeding $4.35 trillion by May 2025, and southbound trading now accounting for 22.5% of Hong Kong’s market turnover. New partnerships with the Middle East are thriving. Two Hong Kong ETFs cross-listed on the Saudi Exchange have become the largest there, boasting a market capitalization of $14.5 billion (US$1.86 billion) as of May 2025. Asia’s first Saudi ETF, listed in Hong Kong since late 2023, has seen its feeder ETFs on Mainland exchanges contribute 17% to its market cap since mid-2024. These milestones highlight Hong Kong’s growing role as Asia’s premier capital intermediary. Other Noteworthy Highlights Enforcement & Protection: The SFC secured landmark rulings, including the longest prison sentences for market manipulation and a historic settlement for Combest Holdings Limited shareholders, reinforcing market integrity. Anti-Scam Efforts : The “Don’t Be Sucker” campaign expanded via MTR commercials and TV, garnering over 1.6 million views to protect investors. Sustainability: The SFC halved its carbon emissions from the baseline, hitting its interim target five years early, showcasing its green commitment.[2] SIGNIFICANCE: The SFC’s leadership has been instrumental. Chairman Dr. Kelvin Wong emphasized, “ Our role as an effective regulator is to ensure Hong Kong remains a cornerstone of global finance, where capital flows efficiently, innovation thrives, and fairness builds trust .” CEO Ms. Julia Leung added, “ Hong Kong’s long-term success hinges on strengthening our core competence as a premier fund-raising and asset management hub and capitalizing on transformative global forces .” The numbers speak for themselves. Since April 2024, 64 Mainland enterprises have listed in Hong Kong, raising over $100 billion through IPOs. The total market capitalization of ETFs and leveraged and inverse products hit a record $520 billion, up 35% year-on-year, comprising 15% of market turnover. The SFC, collaborating with HKEX, has also slashed the average response time for new listing applications to 20 business days, boosting efficiency. [1] These include the introduction of tokenised classes to existing SFC-authorised money market funds. The AUM represents that of their tokenised classes. [2] SFC announces carbon neutrality commitment : SFC has set the interim goal of halving its carbon emissions by 2030 and ultimate goal of achieving carbon neutrality by 2050. Enforcement News 7. SFC issues restriction notice to GA (Int'l) Capital Management Limited and conducts search operation On 6 June 2025, the SFC took decisive action against GA (Int'l) Capital Management Limited (“ GCML ”) due to concerns about its reliability, integrity, and ability to carry out its regulated activities (i.e. RA 4 & 9[1]) competently, honestly, and fairly. This has led the SFC to question GCML's fitness and properness to remain a licensed entity. The SFC issued a restriction notice to GCML, imposing the following prohibitions: GCML cannot carry on any of its licensed regulated activities without prior written consent from the SFC. GCML is barred from disposing of or dealing with any relevant property, except for paying operational expenses in the ordinary course of business. Such actions require prior written notification to the SFC and their consent. SIGNIFICANCE: In addition to the restriction notice, the SFC conducted a search operation on June 6, 2025, which included searching the premises occupied by GCML’s responsible officer. This step underscores the seriousness of the ongoing investigation. These measures are designed to protect the investing public and maintain market integrity, reflecting the SFC's assessment of the situation's severity. The SFC has emphasized that the investigation remains active, and no further comments will be provided at this stage. [1] RA4 : Type 4 Advising on securities; RA9 : Type 9 Asset management 8. SFC suspends Pun Hong Hai for supervisory failures The SFC has suspended Mr. PUN Hong Hai (“ PUN ”), a former responsible officer and chief executive officer of Freeman Commodities Limited, for 10 months, from 11 June 2025, to 10 April 2026. This disciplinary action stems from supervisory failures identified during an investigation into his oversight of the company’s operations between June 2017 and December 2018. Key Findings PUN failed to ensure Freeman Commodities Limited upheld appropriate standards of conduct and adhered to proper procedures during his tenure: PUN inadequately managed risks tied to the company’s use of customer supplied systems (CSSs) for client order placements. PUN did not sufficiently oversee suspicious money movements and trading patterns in client accounts over the specified period. SIGNIFICANCE: The SFC’s suspension of PUN reinforces its firm stance on accountability among senior management in licensed corporations. By imposing this 10-month penalty, the regulator sends a clear message about the necessity of diligent supervision and robust risk management practices. 9. SFC bans WONG Lai Suen for failure in managing credit risks and detecting suspicious trading activities The SFC has imposed a six-month industry ban on Ms. WONG Lai Suen (“ WONG ”), former responsible officer (“ RO ”) and executive director of MTF Securities Limited (“ MTF ”), effective from 4 June to 3 December 2025. This disciplinary action stems from significant lapses in managing credit risks and detecting suspicious trading activities at MTF. Case Overview & Key Findings MTF’s clients executed transactions vastly disproportionate to their financial profiles, displaying red flags suggestive of market misconduct and money laundering, with one client’s limit even reaching ten times his declared annual income. MTF failed to flag these activities as suspicious, investigate further, or report them promptly to the Joint Financial Intelligence Unit and the SFC. The SFC concluded that MTF lacked robust policies for credit risk management and monitoring suspicious trading, breaching the Code of Conduct and other regulatory standards. These shortcomings were pinned on WONG, who, as a RO and senior manager, failed to uphold her duties. SIGNIFICANCE: Christopher Wilson, SFC’s Executive Director of Enforcement, underscored the importance of accountability: " Senior management of a licensed corporation must not blindly follow marching orders from the firm’s shareholders or controllers. When faced with an unusual or suspicious request, the ROs should exercise independent judgment and, where appropriate, conduct proper due diligence before acting on the request. " He also added: " It is the duty of ROs and senior management to ensure that effective policies and controls are in place to prevent the firm from being used to facilitate wrongdoing, including market misconduct and money laundering. " 10. SFC suspends Hadiee CHUI Lai Chun for undisclosed personal trading account The SFC has suspended Ms. Hadiee CHUI Lai Chun (“ CHUI ”), a licensed representative of Rifa Securities Limited (“ Rifa ”), for seven months from 13 June 2025, to 12 January 2026. This disciplinary action follows an SFC investigation into her conduct between September 2018 and September 2021. Case Overview & Key Findings During this period, CHUI maintained a personal securities trading account at another brokerage firm without disclosing it to Rifa, her employer. CHUI conducted 20 personal trades through this undisclosed account without obtaining prior approval from any responsible officer of Rifa. Furthermore, CHUI failed to report these trades or provide the relevant trade confirmations and statements of account to Rifa. The SFC considers CHUI’s actions wilful and dishonest, raising serious concerns about her fitness and properness to remain a licensed person. By failing to disclose her trading account and conducting unauthorized trades, she undermined Rifa’s ability to oversee her activities, potentially jeopardizing the firm and its clients. SIGNIFICANCE: In imposing the seven-month suspension, the SFC took into account: The duration of her breaches, spanning approximately three years. Her cooperation in resolving the SFC’s concerns. Her otherwise clean disciplinary record. This sanction balances the severity of her misconduct with these mitigating factors. This case highlights the critical need for transparency and compliance with regulatory and company policies among licensed persons. Failing to disclose personal trading activities can lead to significant consequences, including suspension or loss of licensure. Licensed individuals must uphold their obligations to safeguard the integrity of the financial markets and maintain public trust. 11. SFC reaches first settlement of its kind to compensate public shareholders of Combest Holdings Limited On 2 June 2025, the SFC has obtained a groundbreaking court decision in the Court of First Instance, ordering former senior executives of Combest Holdings Limited (“ Combest ”) (HKEX: 08190) to pay $192 million in compensation to shareholders. This ruling also includes disqualification orders against a shadow director[1] and two former executive directors for their misconduct, please refer to: SFC’s press release dated 21 May 2020 . SFC’s press release dated 16 September 2024 . Case Overview The SFC’s investigation revealed that between 2016 and 2019, the shadow director - Mr. NG Kwok Fai (“ NG ”) and two former executive directors - Mr. LIU Tin Lap and Mr. LEE Man To in serious financial misconduct, including: Overvaluing two subsidiary group acquisitions by $229 million. Paying $64 million in fictitious loan interests and fees to entities linked to NG. Artificially inflating Combest’s revenue through transactions with NG-related entities. These actions misled shareholders and misrepresented the company’s financial position, ultimately harming independent public shareholders of the now-delisted company. [1] Shadow Director: someone who isn't officially appointed as a director of a company but exerts significant influence over its decisions, effectively acting as a director without the formal title. Court Orders The Court of First Instance delivered the following rulings: Name Roles Disqualifications Court Orders Mr. NG Kwok Fai Shadow Director Disqualified for 12 years, reflecting the severity of his misconduct. Compensation The trio must pay $192 million, to be redistributed as special dividends to independent public shareholders. Legal Cost The former executives were ordered to cover the SFC’s legal costs. Mr. LIU Tin Lap Executive Director Each disqualified for 8 years for knowingly assisting Ng. Compensation The trio must pay $192 million, to be redistributed as special dividends to independent public shareholders. Legal Cost The former executives were ordered to cover the SFC’s legal costs. Mr. LEE Man To Executive Director Each disqualified for 8 years for knowingly assisting Ng. Compensation The trio must pay $192 million, to be redistributed as special dividends to independent public shareholders. Legal Cost The former executives were ordered to cover the SFC’s legal costs. The disqualification periods bar them from serving as directors, liquidators, receivers, or managers, or being involved in the management of any corporation. Compensation Scheme Details (First-of-its-kind settlement in Hong Kong) In an innovative settlement, the $192 million compensation will be administered by Bruno Arboit of Kroll (HK) Limited, jointly appointed by the SFC and Combest. Enhanced Payouts: Two major shareholders (holding 24.4% of Combest) forfeited their entitlements, boosting independent shareholders’ dividends by 32.3%. Per-Share Amount: Eligible shareholders will receive $0.066 per share—2.75 times higher than Combest’s last closing price before its suspension on 29 May 2019. Distribution Process: Payments will be based on shareholdings as of the date the funds are deposited into the administrator’s account. The administrator will contact eligible shareholders directly. For inquiries, reach out to: Email: DL.combestholdingslimited@kroll.com Hotline: (852) 2281 0108 SIGNIFICANCE: SFC Chief Executive Officer Ms. Julia Leung highlighted the ruling’s significance: “ This court decision underscores the SFC’s power to hold de facto controllers of listed companies accountable for their misconducts, ensuring they face repercussions for their wrongdoings. The provision of direct compensation to affected shareholders marks a pioneering step, demonstrating the SFC’s unwavering devotion to exploring all avenues to achieve the most fair and efficient resolutions to protect the investing public .” This case sets a powerful precedent, reinforcing accountability for corporate misconduct and introducing a direct compensation model that prioritizes affected investors. Case Reference: HCCW 118/2020 12. SFC bans LAW Man Wai for market manipulation The SFC has banned Mr. LAW Man Wai (“ LAW ”), a former licensed representative of Cinda International Securities Limited (“ CISL ”), from re-entering the industry for three years, from 19 June 2025, to 18 June 2028. This action stems from an SFC investigation into his activities between March and September 2023. Background LAW, who was licensed to conduct RA 1 (dealing in securities) from 26 March 2020, to 8 June 2024, used accounts belonging to his sister and a friend for personal trading. These accounts were held at CISL and another brokerage. During the specified period, he executed 109 matched trades[1] or wash trades[2] across nine stocks, involving his own CISL account and those of his sister and friend. His goal was to avoid forced liquidation due to potential margin calls, disregarding the trades' impact on stock prices or trading volumes. Key Findings LAW deliberately hid his beneficial interests and personal trades in these accounts, breaching CISL’s staff dealing policy. LAW used CISL’s recorded telephone line to confirm trades with his sister and friend, submitting signed order records that falsely suggested the orders came from them. Additionally, LAW impersonated his friend to place orders for the friend’s account at another brokerage, keeping his involvement hidden from that firm. The SFC determined that LAW’s actions were dishonest, casting significant doubt on his fitness and properness to remain a licensed individual. However, the SFC noted a lack of evidence showing manipulative intent behind the trades and considered his previously clean disciplinary record when determining the three-year ban. SIGNIFICANCE: This case highlights the critical need for licensed representatives to follow regulatory and internal policies on personal trading and account usage. Unauthorized trading and concealment of interests can result in severe penalties, such as extended industry bans. Transparency and integrity are essential for maintaining trust in the financial markets. [1] Matched Trade: A trade where a person sells securities at a price nearly identical to their (or an associate’s) buy offer, creating an artificial market appearance. [2] Wash Trade: A trade with no change in beneficial ownership, effectively a self-transaction. [End of ComplianceOne Newsletter – June 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . 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The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - August 2024 The topics discussed in this monthly newsletter are as follows: SFC’s Second Quarterly Report reveals market growth and regulatory progress in Hong Kong HKEX’s annual rehearsal for trading system recovery Joint announcement on modifications to requirements for specialist technology companies and de-SPAC transactions HKMA’s response on Nova Credit Limited’s cessation of operation and exit of Credit Data Smart SFC consults on proposals to abolish mixed media offers Chairman and CEO of China Forestry found culpable of false information and insider trading by Market Misconduct Tribunal MARKET NEWS 1. SFC Second Quarterly Report reveals market growth and regulatory progress in Hong Kong On 22 August, 2024, the SFC posted its second quarterly report (“ Report ”) showing encouraging performance on asset management, listing and virtual assets landscapes in Hong Kong. Key takeaways of the achievements mentioned in the Report are as follows: Hong Kong-domiciled funds continued the momentum with AUM up 7% Quarter-over-Quarter(“ QoQ ”) as end-June, and recorded with net fund inflows up 80% QoQ for the quarter; license applications received by the SFC rose 3% QoQ and 8% Year-over Year (“ YoY ”); new listing applications up 6% QoQ; on virtual assets, the six VA spot ETFs were traded with a total market capitalisation of HKD2.4 billion as of mid-August; 17 applications for virtual asset trading platform (VATP) were received in the quarter; further deepening of connectivity with Mainland and regional capital markets for Hong Kong through the five measures announced by the Mainland to expand market cooperation with Hong Kong; Besides, the collaboration between the SFC and the HKEX for launch of the severe weather trading arrangement in late September this year further pushes Hong Kong a bit forward towards uninterrupted trading environment to algin with the global markets. SIGNIFICANCE: As Ms Julia Leung, the SFC’ s Chief Executive Officer, has said: “ the latest quarterly data and continuing trends reaffirm the SFC’ s strategic approach , and we will build upon our accomplishments with steadfast commitment to market connectivity, innovation, sustainability and, above all, integrity ”. 2. HKEX’s annual rehearsal for trading system recovery On 13 August 2024, the SFC announced that the HKEX will conduct an annual rehearsal for emergency trading system recovery in securities market on 7 September 2024. The following process of the Hong Kong investor identification regime (“ HKIDR ”) will be covered in the rehearsal: Submission of the BCAN-CID Mapping File and Reporting Forms to the data repository of the Stock Exchange of Hong Kong (SEHK) (applicable to all Relevant Regulated Intermediaries1(RRIs)); and BCAN tagging for order submission to SEHK’s trading system (applicable to RRIs who are Exchange Participants (EPs) only). RRIs refers to “Relevant Regulated Intermediaries”, namely, the SFC-licensed corporations which are subject to the HKIDR requirements; and the RRIs are encouraged to participate in the rehearsal to get familiar with the contingency procedures and related operational matters upon the simulated service outage on the SEHK’ trading system. SIGNIFICANCE: The HKIDR was launched on 20 March 2023 last year, the submission of the BCAN-Mapping File and tagging of BCAN are indispensable without which the orders will be invalid. Given such paramount importance, RRIs are advised to participate in the rehearsal as failure to act promptly according to the contingency plan might lead to disastrous consequences a RRI can hardly withstand. RRIs can make reference to Attachment 2 (Guidelines for Exchange Participants during the Rehearsal) of the HKEX Circular for details. 3. Joint announcement on modifications to requirements for specialist technology companies and de-SPAC transactions On 23 August 2024, the SFC and The Stock Exchange of Hong Kong Limited (SEHK) made a joint announcement regarding the temporary modifications to Listing Rules (“ Modifications” ) and amendments to the SEHK’s guidance materials with effect from 1 September 2024. The modifications are designed to address the changes in market conditions since introduction of the listing regimes, key takeaways of the Modifications are : A) For Specialist technology companies Reduction in initial market capitalisation threshold for listing reduced from (in HKD): (i) 6 billion to 4 billion for commercial companies; (ii) 10 billion to 8 billion for pre-commercial companies. B) For de-SPAC transactions 1. The minimum independent third-party investment required for a de-SPAC transaction will be modified to the lower of: (i) the currently prescribed percentage of the negotiated value of the de-SPAC target as set out in Main Board Listing Rule 18B.41 , or (ii) $500 million in value. 2. Independence requirements for third party investors: The independence test for third party investors in a de-SPAC transaction pursuant to Main Board Listing Rule 18B.40 will be aligned with that for sophisticated independent investors (“ SIIs” ) in specialist technology companies in Chapter 18C Independence Test (please refer to the hyperlinks for details), a brief of the details are as follows: (i) the independence of a third-party investor will be determined as at the date of the signing of the definitive agreement for investment in the de-SPAC; (ii) the following persons will not be considered as independent third-party investors, namely, (a) core connected persons of the SPAC or the de-SPAC target, (b) controlling shareholder of the SPAC or the de-SPAC target; (c) the founder of the de-SPAC target and their close associates; (iii) the SEHK retains the discretion to deem any other person to be not independent based on the facts and circumstances of an individual case. Other key notes are: C) Time limit for the Modifications The above Modifications will apply temporarily for a fixed period of three years from 1 September 2024 to 31 August 2027 (“ Implementation Period ”), and the SEHK may review the requirements and conduct public consultation if required during the Implementation Period. D) Clarification on the definition of a “sophisticated investor” for independent third party investment The SEHK has amended its guidance materials that align the definition of a “sophisticated investor” for independent third-party investment more closely with the SEHK’ s requirement for identifying qualified SIIs in specialist technology companies. SIGNIFICANCE: According to Ms Katherine Ng, Head of Listing of HKEX, who said: “These modifications will provide greater flexibility and clarity for both issuers and investors, whilst upholding our robust regulatory standards .” Reduction of the thresholds in minimum initial market capitalization, together with the subsequent alignments of: (a) independence test between the third-party investors in a de-SPAC transaction and the SII in specialist technology companies; (b) definition of a “sophisticated investor”; all amounted to providing facilitation and flexibilities as the HKEX official has stated. 4. HKMA’s response on Nova Credit Limited’s cessation of operation and exit of Credit Data Smart On 31 July 2024, the Hong Kong Monetary Authority (“ HKMA ”) had been informed by notifications from the Hong Kong Association of Banks, the Hong Kong Association of Restricted License Banks and Deposit-taking Companies, and the Hong Kong S.A.R. Licensed Money Lenders Association Limited (collectively as the “ Industry Associations ”) that Nova Credit Limited (“ Nova ”), one of the consumer credit reference agencies under the Credit Data Smart, had decided to cease its operations and exit Credit Data Smart for its own reasons. For sake of protecting the security of consumers’ personal credit data, the Industry Association had required Nova to destroy all personal credit data downloaded from the Credit Data Smart as soon as possible as a matter of compliance to the service agreement; and an independent third party has also been appointed to monitor the implementation progress by Nova. SIGNIFICANCE: The HKMA is concerned about the incident of Nova and will maintain close communication with the Industry Association to ensure the exit work of Nova is properly conducted with priority in protection of personal credit data. 5. SFC consults on proposals to abolish mixed media offers On 16 August 2024, the SFC launched a two-month consultation on proposals to abolish mixed media offers (“ MMOs ”) to facilitate a fully electronic process for public offerings and enhance the efficiency of the regulatory process in Hong Kong. With the proposed changes, an issuer of equity or debt securities listed or to be listed on the SEHK will be removed of the option to issue printed application forms accompanied by electronic prospectuses under the Companies (Winding Up and Miscellaneous Provisions) Ordinance, thus expanding the implementation of paperless listing regime . The SFC takes one step forward to cease granting waivers for the use of MMOs in public offerings of SFC-authorised collective investment schemes listed or to be listed on the SEHK. SIGNIFICANCE: Under the existing arrangement, MMO allows listing applicants to issue paper application forms in public offers; abolition of this practice helps facilitate and materialise a paperless listing regime and further digitalise the listing process for the benefits of the issuers and the investors. ENFORCEMENT NEWS 6. Chairman and CEO of China Forestry found culpable of false information and insider trading by Market Misconduct Tribunal On 7 August 2024, the Market Misconduct Tribunal (“ MMT ”) has found Mr Li Kwok Cheong (former chairman, “ LKC ”) and Mr Li Han Chun (former CEO, “ LHC ”) of China Forestry Holdings Company Limited (“ China Forestry ”), culpable for disclosing false or misleading information in China Forestry’s IPO prospectus and its annual results announcement and annual report for the year ended 31 December 2009, inducing transactions in the company’s shares. It was found that as a result of the false information, the reported turnover of China Forestry was overstated by 91.56 % and 99.99% for the years ended 31 December 2008 and 2009. Also, the customers claimed by the company were either non-existent or not genuine, and documentations were falsified as well. The MMT concluded that LHC and LKC knew of the falsifications amid the IPO and annual results announcement; and LHC with his company were further found of insider dealing by selling 119,000,000 shares of China Forestry in January 2011, thus avoiding a loss of HKD353 million. SIGNIFICANCE: The SFC started the proceedings in the MMT against LHC and LKC for market misconduct in 2018, details of which is available in the SFC’s press release dated 28 June 2018. 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

香港特別行政區政府在2025年6月建議採取一系列措施加強規管持牌放債人 (“放債人”) ，加大力度處理過度借貸的問題 。The Government of the Hong Kong Special Administrative Region (“HKSAR”) proposes a series of measures in June 2025 to strengthen regulation of licensed money lenders ("money lenders"), aiming to address the problem of excessive borrowing. 有關加強規管持牌放債人的公眾諮詢 [June 2025] 香港特別行政區政府在2025年6月建議採取一系列措施加強規管持牌放債人 (“ 放債人 ”) ，加大力度處理過度借貸的問題 。 I. 背景及現狀: 1) 規管框架 i. 放債人受《放債人條例》（第163章）規管，需持牌經營，並遵守利率上限、及廣告規範等要求。 ii. 監管分工：牌照法庭（發牌及附加條件）、公司註冊處（處理申請、監察合規）、警方（執法）。 2) 市場問題 i. 過度借貸：低收入群體（尤其外傭）問題突出。 月入≤1萬港元的借款人占無抵押貸款宗數29%，壞賬率9.4%（高於整體7%）。 外傭貸款宗數占比26%，壞賬率9.9%（全職業最高） ii. 滋擾問題：外傭借貸後失蹤，導致雇主被追債騷擾。 II. 擬議加強規管措施: 1) 無抵押個人貸款新限制 方案A：累計貸款額上限 針對低收入借款人的無抵押貸款總額設定嚴格限制： 月收入≤5,000港元者 ，累計未償還貸款總額不得超過其1個月收入。 月收入介於5,001至10,000港元者 ，累計未償還貸款總額上限為2個月收入。 注：若借款人無固定收入，放債人須按其過去12個月平均收入計算月收入基準。 方案B：還款占入息比率上限 通過控制月還款額占收入比例防範過度負債： 月收入≤5,000港元者 ，所有無抵押貸款月還款總額不得超過其月收入的35%。 月收入介於5,001至10,000港元者 ，月還款總額上限為月收入的40%。 注："還款"指借款人需向放債人償還的所有無抵押貸款月供總和；浮動收入者同樣適用12個月平均收入計算。 2) 諮詢人制度優化 i. 防騷擾措施：放債人須主動發信向諮詢人核實同意書真偽，或要求諮詢人親臨簽署。 ii. 或考慮禁止要求借款人提供貸款諮詢人。 3) 強制加入"信資通"信貸資料庫 i. 目標：提升借款人信用評估準確性。 ii. 要求： 所有放債人須定期向"信資通"提供借款人信貸資料（包括: 貸款詳情、還款紀錄等）。 業務量達標者（如年無抵押貸款總額≥1億港元，約50家）：批貸前須使用"信資通"報告評估還款能力。 4) 優化投訴處理 i. 公司註冊處將增加投訴處理透明度，強化與警方協作。 ii. 定期收集並分析放債人投訴資料，監察高投訴率放債人的整改措施。 5) 宣傳教育 i. 針對外傭、青年及低收入群體，推廣審慎借貸（如外傭不得擅用雇主資料）。 ii. 加強雇主投訴管道宣傳。 6) 制度改革 i. 發權機制集中化：建議由公司註冊處統一負責放債人發牌及監管（取代牌照法庭）。 ii. 增加透明度：政府網站公佈屢次違規放債人名單。 iii. 修法計畫：擬修訂《放債人條例》落實上述措施。 III. 徵詢與下一步: 公眾可以於2025年8月22日前通過電郵（money-lenders-consult@fstb.gov.hk）或郵寄提交意見。政府將分析回饋後敲定最終方案。 IV. 資料參考: 有關加強規管持牌放債人的公眾諮詢 (香港特別行政區政府 - 財經事務及庫務局 ) 中文版: https://www.fstb.gov.hk/fsb/tc/publication/consult/doc/ConsultationPaperMoneyLenders-c.pdf 英文版: https://www.fstb.gov.hk/fsb/en/publication/consult/doc/ConsultationPaperMoneyLenders-e.pdf Summary on Public Consultation on Enhancing Regulation of Licensed Money Lenders [June 2025] The Government of the Hong Kong Special Administrative Region (“ HKSAR ”) proposes a series of measures in June 2025 to strengthen regulation of licensed money lenders (" money lenders "), aiming to address the problem of excessive borrowing. I. Background and Current Situation 1) Regulatory Framework i. Money lenders are regulated under the Money Lenders Ordinance (Cap. 163), requiring a licence to operate. Key rules include: Interest rate caps, and advertising standards. ii. Regulatory roles: the Licensing Court issues licences and imposes conditions, the Companies Registry (“ CR” ): Processes applications/monitors compliance, and the Police enforces the law (e.g., unlicensed lending, excessive interest). 2) Market Issues i. Excessive borrowing among low-income groups (especially foreign domestic helpers (" FDHs ")) Borrowers with ≤HK$10,000 monthly income: 29% of unsecured loans; default rate: 9.4% (vs. 7.0% overall). FDHs: 26% of unsecured loans; highest default rate: 9.9%. ii. Harassment: Employers of FDHs chased by debt collectors after borrowers disappear. II. Proposed Enhanced Regulatory Measures 1) New Restrictions on Unsecured Personal Loans Scheme A: Cumulative Loan Cap: Strict limits on total outstanding unsecured loans for low-income borrowers: Monthly income ≤HK$5,000: Total loans ≤1 month’s income. Monthly income HK$5,001–10,000: Total loans ≤2 months’ income. Note: For non-fixed income borrowers, use 12-month average income. Scheme B: Debt Servicing Ratio Cap: Limit monthly repayments as a percentage of income: Monthly income ≤HK$5,000: Repayments ≤35% of income. Monthly income HK$5,001–10,000: Repayments ≤40% of income. Note: Applies to total repayments for all unsecured loans; non-fixed income calculated as above. 2) Optimisation of Referee System i. Anti-harassment measures: Money lenders must verify referees’ consent by post or require in-person signing. ii. Alternative: Prohibit requiring referees for loan applications. 3) Mandatory Participation in Credit Data Smart (“CDS”) i. Goal: Improve credit assessment accuracy. ii. Requirements: All money lenders must regularly submit borrower data (e.g., loan details, repayments) to CDS. iii. Large lenders (e.g., ≥HK$100M annual unsecured loans, ~50 firms) must use CDS reports for affordability assessments pre-approval. 4) Enhanced Complaint Handling i. CR will increase transparency in complaint procedures and strengthen collaboration with Police, ii. Monitor lenders with high complaint rates. 5) Publicity and Education i. Target FDHs, youth, and low-income groups on prudent borrowing (e.g., FDHs must not misuse employer data). ii. Promote employer complaint channels. 6) Regime Reforms i. Centralise licensing: Propose transferring licence issuance/supervision from Licensing Court to CR. ii. Increase transparency: Publish names of repeat offenders on government website. iii. Legislative amendments: Revise the Money Lenders Ordinance to implement measures. III. Consultation and Next Steps The Public can submit the comment on or before 22 August 2025 via email: ` money-lenders-consult@fstb.gov.hk , or post: Division 6, Financial Services Branch, FSTB, 15/F, Queensway Government Offices, 66 Queensway, Hong Kong. The final proposals to be determined after analyzing feedback from the Public. IV. Reference Materials Full Consultation Paper: English: https://www.fstb.gov.hk/fsb/en/publication/consult/doc/ConsultationPaperMoneyLenders-e.pdf Chinese: https://www.fstb.gov.hk/fsb/tc/publication/consult/doc/ConsultationPaperMoneyLenders-c.pdf ] 天匯合規顧問有限公司 ComplianceOne Consulting Limited 2025年6月24日

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – August 2022 ComplianceOne Newsletter – August 2022 The topics discussed in this monthly newsletter are as follows: 1. Regulators to enhance Stock Connect trading calendar 2. Hong Kong Securities and Futures Commission (SFC) sets out the way forward for green and sustainable finance 3. Creating and accumulating wealth with diversified fund structures—by Financial Services and the Treasury Bureau 4. SFC reprimands and fines TC Capital International Limited $3 million and suspends its responsible officer for sponsor failures 5. SFC commences MMT proceedings against hedge fund manager over alleged false trading 6. SFC issues restriction notice to a broker to freeze client account linked to suspected insider dealing 7. Retail investors convicted and fined for illegal short selling MARKET NEWS 1. Regulators to enhance Stock Connect trading calendar The SFC and the China Securities Regulatory Commission (CSRC) today jointly announced their in-principle approval for changes to the trading calendar for Stock Connect. The changes would apply to both northbound and southbound trading. Because different public holidays are observed in the Mainland and Hong Kong, investors currently cannot trade through Stock Connect on certain days. The proposed changes enable Stock Connect trading on any day when both the Mainland and Hong Kong markets are open, even when the corresponding settlement day falls on a public holiday Significance: As Mr. Ashley Alder, the SFC’s Chief Executive Officer had said: “ Stock Connect provides a unique opportunity for Mainland and Hong Kong investors to participate in each other’s market. The enhancements will allow investors to better manage their portfolios through Stock Connect and support the further expansion of the programme. ” 2. SFC sets out the way forward for green and sustainable finance The SFC published its “ Agenda for Green and Sustainable Finance ” to set out further steps to support Hong Kong’s role as a regional green finance center with key focus on: a) Enhancing corporate disclosures; b) Monitoring the implementation of and enhancing existing measures relating to environmental, social and governance (ESG) funds and expectations for fund managers; and c) Identifying an appropriate regulatory framework for any proposed carbon markets. As a speech of Mr. Ashley Alder, the SFC’s Chief Executive Officer, has made it explicit that: “ Climate change and sustainability are cross-border issues which require a coordinated response, and Hong Kong has a critical role to play as a regional and international green finance center. The SFC will continue to lead global regulatory development in this space to ensure that domestic policies and international standards are aligned. ” Significance The SFC as a robust regulatory body in HK plays a pro-active role in navigating and allocating more resources to attaining an intricated balance between global economic growth and the preservation of environment from climate risk given the existing scenario where the private sectors, if left to its own device, would not be so dedicated to implementing the measures in a sound and efficient manner than otherwise spearheaded by a regulatory body a like SFC. 3. Creating and accumulating wealth with diversified fund structures Last year, the assets managed by Hong Kong stood at HK$35.5 trillion (US$4.6 trillion), which was 12 times the size of our GDP. The HKSAR has been striving to develop Hong Kong as a premier international asset and wealth management center in the Asia-Pacific region; and among the measures taken is the introduction of new fund structures, which includes the set-up of open-ended fund company (OFC), is of prior significance. Ever since commencement of the OFC regime, 88 OFCs have been set up or re-domiciled to Hong Kong, and the number of registered OFCs recorded a more than four-fold year-on-year increase as at end July this year. To further enhance the attractiveness of the OFC regime, a three-year grant scheme was launched in May 2021, and subsidies have been provided to 52 OFCs set up in/re-domiciled to Hong Kong. Significance: The HKSAR plays a proactive role in developing the asset and wealth management regime, given the advantages enjoyed by OFC as follows: (1) Tax concession (2) Cost-savings (3) Easy management (4) Facilitate international distribution (5) Cater for public/private funds (6) Eligible Products under the Cross-boundary Wealth Management Connect Scheme in the Greater Bay Area and ETF Cross-listing Scheme Coupled with the introduction of the grant scheme, and the fact that OFCs are qualified products under the Cross-boundary Wealth Management Connect Scheme, it is expected that market practitioners would be delighted to show great interest among the industry in this new fund structure and anticipate further growth of the OFCs ENFORCEMENT NEWS 4. SFC reprimands and fines TC Capital International Limited $3 million The SFC has reprimanded and fined TC Capital International Limited (TC Capital) $3 million for failing to discharge its duties as the sponsor in the listing application of China Candy Holdings Limited (China Candy). It is found that TC Capital failed to: a) conduct reasonable due diligence on the third party payments made on behalf of two top customers of China Candy; and b) maintain proper records of the due diligence work allegedly done in relation to the listing application Although TC Capital was aware of the third party payments, their RO and transaction team members did not make any further queries and assess if such payment method was legitimate or not; and no follow-up due diligence was conducted. Apart from the lack of proper records in due diligence, there was also no audit trail showing that TC Capital had turned its mind to the issues at all. Significance: It demonstrates to the market practitioners again the crucial importance of due diligence on any third party payments which are signal of red flags that necessitate serious attention and follow-up remedial action from licensed corporation in the eyes of SFC. 5. SFC commences MMT proceedings against hedge fund manager over alleged false trading The SFC has commenced proceedings in the Market Misconduct Tribunal (MMT) against Mr. Jonathan Dominic Iu Wai Ching, a responsible officer of Tarascon Capital Management (Hong Kong) Limited (Tarascon), for allegedly engaging in false trading in the shares of two Hong Kong-listed companies. The SFC alleges that Iu executed matched trades between the brokerage accounts of the hedge fund and of his mother between August and September 2014, which had the effect of creating a false or misleading appearance of active trading or of the price for dealings in the listed shares concerned. 6. SFC issues restriction notice to a broker to freeze client account linked to suspected insider dealing The SFC has issued a restriction notice to Bright Smart Securities International (H.K.) Limited (Bright Smart), prohibiting it from disposing of or dealing with certain assets held in a client account that holds proceeds of suspected insider dealing. Significance: The SFC considers that the issue of the restriction notice, which prevents dissipation of proceeds of suspected insider dealing held in the account, is desirable in the interest of the investing public or in the public interest. 7. Retail investors convicted and fined for illegal short selling The Eastern Magistrates’ Court today convicted Ms. Chan Siu Tai and her sister Ms. Janice Chan after they pleaded guilty to illegal short selling in prosecutions brought by the SFC. The sisters were fined a sum of $114,000 and ordered to pay the SFC’s investigation costs. 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香港海關根據《打擊洗錢及恐怖分子資金籌集條例》(第615章)，對四間持牌金錢服務經營者違規行為進行了紀律處分。其中三間經營者受到公開譴責，顯示違規行為的嚴重性。 海關對四間找換店違反反洗錢條例進行紀律處分 香港海關根據《打擊洗錢及恐怖分子資金籌集條例》(第615章)，對四間持牌金錢服務經營者違規行為進行了紀律處分。其中三間經營者受到公開譴責，顯示違規行為的嚴重性。 案例一 決定日期: 2024年8月12日; 紀律處分: 公開譴責及糾正行動。 違規事項: 未就匯款交易備存相關文件記錄（包括內地銀行帳戶匯款明細）。 未設立程序以識別客戶或實益擁有人是否為政治人物。 未在指定時間內向海關報告銀行帳戶變更詳情。 案例二 決定日期: 2024年8月12日; 紀律處分: 公開譴責及糾正行動。 違規事項: 未備存六宗匯款交易的文件記錄（包括客戶盡職審查篩查文件）。 進行匯款交易前，未識別及核實匯款人及實益擁有人身份。 進行匯款交易前，未識別代表客戶行事的人的身份及授權。 案例三 決定日期: 2024年8月12日; 紀律處分: 公開譴責及糾正行動。 違規事項: 未在與客戶建立業務關係前執行客戶盡職審查措施。 進行匯款交易前，未記錄收款人地址及指示時間。 未在指定時間內向海關報告營業處所的停業日期。 案例四 決定日期: 2024年8月12日; 紀律處分: 糾正行動。 違規事項: 未在指定時間內向海關報告提供金錢服務的銀行帳戶變更詳情。 海關執法行動焦點 這四間店鋪中，有三間的違規行為與 客戶盡職審查 和 文件備存 有關。這些行動強調了客戶盡職審查和文件備存在反洗錢合規中的重要性。 根據香港海關執行反洗錢和打擊恐怖融資的紀錄，從2014年到2024年，大部分的執法行動涉及 客戶盡職審查 和 文件備存 的規定。這些規定包括： 第5條: 就客戶作盡職審查及備存紀錄： 這是指金錢服務經營者在與客戶建立業務關係前，必須進行客戶盡職審查，並保存所有與交易有關的文件記錄。 附表2: 就客戶作盡職審查及備存紀錄： 這是對上述規定的具體應用，強調在進行交易前，必須確保客戶的身份和交易活動的合法性。 總計 2024年 2023年 2022年 2021年 2014-2020年 第5條: 就客戶作盡職審查及備存紀錄 23 0 2 1 6 14 第29條: 經營金錢服務的限制 21 0 0 0 2 19 第35條: 擬任持牌人董事需獲關長批准 1 0 1 0 0 0 第37條: 擬成為持牌人合夥人的人需獲關長批准 2 0 2 0 0 0 第38條: 加入新的營業處所 2 0 0 2 0 0 第40條: 持牌人有責任向關長具報詳情改變 19 3 7 8 0 1 第41條: 持牌人有責任向關長具報停業 3 0 1 2 0 0 附表2: 就客戶作盡職審查及備存紀錄 10 0 2 2 2 4 資訊來源 ComplianceOne - 香港海關對金錢服務經營者的執法和刑事調查案件資訊： https://eservices.customs.gov.hk/MSOS/common/enforcenew 客戶盡職審查 指在與客戶建立業務關係前，金錢服務經營者需要採取措施來識別和核實客戶及其實益擁有人的身份，並確保他們不涉及任何非法活動。這包括檢查客戶的身份證明文件、收集相關信息，並在必要時進一步核實。 文件備存 則要求金錢服務經營者保存所有與交易有關的文件記錄至少五年，以確保在監管機構要求時可以提供完整的交易記錄。這不僅有助於防止洗錢活動，還能提高業務透明度，保護金錢服務經營者免受潛在的法律風險。 這些行動展示了海關對維護金融系統完整性及嚴格執行反洗錢法規的承諾。公開譴責提醒所有金錢服務經營者，遵守反洗錢要求的重要性。金錢服務經營者應審查其反洗錢政策及程序，以確保符合要求，避免面臨類似處分。 立即試用「東查查反洗錢/ 客戶管理系統」