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在2024年9月26日，天匯合規成功舉辦疫情後的首次同業交流酒會，為業界帶來了一次難得的交流契機。 天匯合規首次同業交流酒會圓滿舉行 在 2024年9月26日，天匯合規成功舉辦疫情後的首次同業交流酒會，為業界帶來了一次難得的交流契機。活動吸引了近五十名來自金融、銀行等行業的專業人士參加。現場氣氛熱烈，參加者們熱情互動，分享了最新的行業動態與創新觀點。 整個活動過程中，與會者們積極交流，深入探討當前市場的挑戰和機遇，並就如何共同推動行業發展提出了寶貴意見。酒會不僅促進了彼此間的了解，還加強了各機構之間的合作聯繫。參加者們對於活動的組織與內容給予高度評價，認為這樣的交流機會對於行業發展具有重要意義。 大家一致表示，期待天匯合規能夠在未來繼續舉辦更多類似的活動，提供更多的交流平台，促進不同領域的專業交流與資源共享。此次酒會不僅加強了業界聯繫，也為未來的合作奠定了堅實的基礎，成為行業內交流的典範。 On September 26, 2024, ComplianceOne successfully hosted its first industry networking event since the pandemic, providing a valuable opportunity for professional exchange. Nearly fifty experts from the financial and banking sectors attended the gathering. The atmosphere was vibrant, with participants eagerly interacting and sharing the latest industry trends and innovative ideas. Throughout the event, professionals engaged in meaningful discussions, exploring current market challenges and opportunities. They also shared insights on how to drive industry growth collaboratively. The event not only fostered mutual understanding but also strengthened inter-organizational connections. Attendees highly praised the event's organization and content, emphasizing its significance for industry development. Participants expressed a strong desire for ComplianceOne to continue organizing similar events in the future, offering more platforms for professional dialogue and resource sharing. This networking event not only enhanced industry connections but also laid a solid foundation for future collaborations, setting a benchmark for industry engagement.

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - April 2024 The topics discussed in this monthly newsletter are as follows: 1. China considers to limit investment of offshore Chinese municipal bonds by QDLP 2. Asia’s First Spot Virtual Assets ETFs are launched in Hong Kong 3. HKEX announces the development of ORION Derivatives Platform 4. Hong Kong Government extends the subsidiary scheme for OFC and REIT 5. The joint SFC-HKMA thematic review of the distribution of non-exchange traded investment products 6. Climate-Related Disclosure requirements extended to listed companies 7. OSL as the first to be granted the AMLO license MARKET NEWS 1. China considers to limit investment of offshore Chinese municipal bonds by QDLP On 24 Apr 2024, a report from Reuters revealed the incidence of Mainland China to curb the lavish issuances of offshore bonds through the mechanism of Qualified Domestic Limited Partnership (QDLP) from local municipal governments which were already burdened by the huge local debts. The loosely regulated quota-based QDLP had been launched since 2012, and it has recently come to the attention of the central government that the use of such mechanism for local government offshore debts issuances would attenuate the Beijing government’s efforts to tackle the local debt risks. The China Securities Regulatory Commission (CSRC) made queries to asset managers holding the QDLP licenses of their exposure to offshore debts of “local government financing vehicles (LGFVs, also known as 地方政府融資平台 or 城投平台 ), and how the QDLP quotas were used. It was noticed that the total local government bond issuances reached a new high in January 2024 compared to the highest volume in Nov 2022. SIGNIFICANCE: For reason that the process of obtaining QDLP licenses and raising QDLP funds were handled by around 10 local governments (some examples like Tianjin, Liaoning, Guangxi, Chaongqing etc.) rather than the central government which subsequently made the mechanism one of the loose and flexible investment channels to be taken advantage with. The LGFVs were originally introduced to raise funds for infrastructure projects which recently turned out to be over-invested and aggravated by the plummeting property markets. The Beijing government has pushed forward remedial measures to contain the debt risks, and to halt some ongoing state-owned infrastructures projects as imminent solutions. 2.Asia ’s First Spot Virtual Assets ETFs are launched in Hong Kong On 30 Apr 2024, HKEX was pleased to announce the listing of Asia’s first Spot Virtual Asset (VA) (namely, Bitcoins and Ethereums) ETFs, increasing the diversity of products tradeable in the Hong Kong’s markets and further manifesting Hong Kong as the leading ETF marketplace in the region nearby. A snapshot of the Spot VA ETFs is as below: The three ETF issuers are China Asset Management (Hong Kong) Limited , Harvest Global Investments Co., Ltd , and Bosera Asset Management (International) Co., Limited . Following the successful launch of the VA Futures ETF in late 2022, turnover of the total three VA Future ETFs increased a few folds from HKD$8.9 million to HKD$51.3 million in the first quarter of 2024. The parallel launches of spot VAs and VA futures ETFs enhance the liquidity in the ETFs markets and provide more flexibilities to accommodate investors with variegated risk profiles and investment horizons. SIGNIFICANCE: The accesses to spot VAs through exposures in ETF channels provide an alternative to traditional investors, both professional investors and retail investors who are still sceptical and conservative to the new crypto exchanges, by directly participating through the conventional HKEX they are familiar with. Yet, brokers providing accesses to retail clientele should still be mindful of providing sufficient risk disclosure and assessment of the clients' knowledge in the products in a compliant manner as a matter of suitability requirements. Some interesting product features of these Spot VA ETFs from their futures ETF counterparts are that in-kind subscriptions and in-kind redemptions are available which facilitate investors who have already invested in spot VAs to shift to their corresponding proxy, i.e. the ETFs. 3. HKEX announces the development of ORION Derivatives Platform On 18 April 2024, the HKEX announced the development of the Orion Derivatives Platform ( ODP ), offering enhanced trading, clearing and risk management capabilities. This new in-house developed platform is expected to be launched in 2028, which will help elevate the competitiveness of the HKEX in the global derivative marketplace. The HKEx is dedicated to building “future-ready” technology platforms and operations as its priority to advocate the market participants in delivering long-term, sustainable growth and development. The ODP platform will be built on a modular architecture, making it easier to introduce new products, enhance microstructure and add new capabilities to the market. ODP will offer enhanced trading and clearing capabilities to clients, including the potential of near 24-hour trading, additional order types, an industry-standard interface, as well as an enhanced testing and onboarding experience. The launch of ODP demonstrates HKEX’s ongoing strategic commitment to driving innovations in our financial markets through the development of best-in-class technology platforms. SIGNIFICANCE: As the new HKEX Chief Executive Officer, Bonnie Y Chan, has said: “ Developing an in-house platform that is adaptable, efficient, and scalable, and would give us a unique competitive advantage in the global derivatives space. The launch of ODP will strengthen HKEX’s capability to support the needs of global investors, and cement Hong Kong’s leading position as Asia’s risk management centre and an international financial centre .” 4. Hong Kong Government extends the subsidiary scheme for OFC and REIT On 26 Apr 2024, the SFC announced the details of the three-year extension of the Government’s grant scheme to subsidise the setting up of open-ended fund companies (OFCs) and real estate investment trusts (REITs) in Hong Kong. To further attract the set-up of OFCs to be incorporated in or re-domiciled to Hong Kong and the SFC-authorized REITs, the extended scheme covers up to 70% of eligible expenses, subject to a cap of HKD$1 million per publicly offered OFC, HKD$500,000 per privately offered OFC and $8 million per REIT. The grant scheme has been well-received since its inception in May 2021. and the extension by the Government for another three years will definitely help boost Hong Kong’s competitiveness and development as a preferred fund domicile for such a diversified industry regime. Up to end of Apr 2024, there were 86 public OFCs and 877 private OFCs registered under the SFC. The extended scheme will be available for applications from 10 May 2024 to 9 May 2027 on a first-come-first-served basis. Detailed eligibility criteria of the scheme are enclosed in SFC Eligibility criteria of the grant scheme for OFCs and REITs for OFCs opting for it. 5. The joint SFC-HKMA thematic review of the distribution of non-exchange traded investment products On 18 Apr 2024, a thematic review conducted by HKMA and SFC jointly had identified some issues on intermediaries’ practices in performing product due diligence (“PDD”) and suitability requirement (“SBR”); remedial measures by intermediaries are required to address the issues accordingly. Some key findings of the review are as follows: (1) The assignments of risk rating to investment products as part of PDD do not incorporate crucial factors like the leverage deployed, credit events relating to the product issuers, heightened market risks, adverse political environments and the like. (2) Intermediaries were exposed to the risks of making inappropriate recommendations to clients if the risk return profiles of the products were not adequately assessed and accurately reflected in the product risk ratings used for the suitability assessment. (3) Structured products were the most prevalent type of non-exchange traded investment products sold by intermediaries; the risks inherent in the format the products were structured could be unlimited or far beyond what the investors have expected to bear. (4) Some salespersons may not have the required knowledge to explain to the investors the characteristics and risks of the structured products; and it is imperative for the intermediaries to provide adequate training to the relevant staff. (5) Intermediaries are reminded to exercise due skill, care and diligence in selecting investment products for different risk categories of clients and reach an assessment of the products commensurate with the client’s profile. (6) All intermediaries are reminded of their obligations to: (i) give due consideration to all the relevant circumstances specific to a client; (ii) disclose all the relevant information to a client in order that informed investment decisions can be made. 6. Climate-Related Disclosure requirements extended to listed companies On 19 Apr 2024, The Stock Exchange of Hong Kong (SEHK) published its consultation conclusions on the enhancement of climate-related disclosure (“CRD”) requirements for listed companies in HK. The new CRD requirements, effective from 1 January 2025, is the first step to align local sustainability disclosure requirements with the IFRS Sustainability Disclosure Standards . To facilitate the launch, SEHK has also published an Implementation Guidance to assist listed companies to kick off the new regime which will be implemented on a balanced and phased approach. SIGNIFICANCE: As Ms Julia Leung, SFC’s Chief Executive Officer, has said: “ The new regime on climate-related disclosures will give listed companies in Hong Kong a head-start in speaking the common international language of the International Sustainability Standards Board (ISSB) to the investing public and capital markets. ” The vogue for green finance has been sweeping over financial markets across various regions, the SFC has played the pioneer role in formulating guidelines for licensed corporations engaged in funds management to comply with the Climate-Related Risk Disclosure Requirements by the end of Nov 2022. 7. OSL as the first to be granted the AMLO license OSL Digital Securities Limited (“OSL”) is the first service provider to be granted a license under the AML and CTF Ordinances (“AMLO”) by the SFC on 19 April 2024. Up to now, only OSL is the first to be granted two licenses under the new dual licensing regime with both the SFO license (for security tokens) and AMLO license (for non-security tokens) at the same time. SIGNIFICANCE: To facilitate and ensure a seamless regulatory transition, a “dual licensing regime” had been introduced where existing services providers had to submit an application during the transition period from 1 Jun 2023 to 31 May 2024 with deadline for application submission on 29 Feb 2024. Those applicants which could meet the regulatory requirements were deemed to be licensed to operate on or after 1 Jun 2024 until a final decision has been made by the SFC on their license applications. If the SFC considers that some existing service providers (the applicants) cannot meet the relevant requirements of the transitional arrangement, a “No-deeming notice” will be issued to these applicants, together with those services providers which did not submit any applications before the deadline, will have to cease operation by 31 May this year. 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 – September 2024 The topics discussed in this monthly newsletter are as follows: Statistics showed Hong Kong’s securities industry extends earnings growth into first half of 2024 SFC announces arrangements to facilitate distribution of research reports of eligible ETFs under Stock Connect SFC issues new guides for visiting and returning professionals to highlight pragmatic licensing options LET and Summit Ascent were required to repurchase shares to protect independent minority shareholders SFC reprimands and fines Profitech Securities Limited $3.99 million for several regulatory breaches SFC bans former Goldman Sachs employee for six months for misusing facilitation trade and misrepresentation MARKET NEWS 1. Statistics showed Hong Kong’s securities industry extends earnings growth into first half of 2024 On 25 September 2024, the SFC issued the financial review of the securities industry illustrating that Hong Kong’ s securities industry posted further growth in total net profits for the six months ended 30 June 2024 amidst higher average daily market turnover and increases in the number of active cash and margin clients. A snapshot of the key takeaways: During the first half of 2024, the total net profits of all securities dealers and securities margin financiers rose 50% to HKD19 billion, or up 29% from a year ago; The total income for the first six months in 2024 ended flat, as higher net commission income, underwriting fees and trading profits were offset by the lower income from asset management and corporate finance advisory! Reduction in non-interest overheads was the main drivers of the increase in profits; Dealing activities in virtual assets generated a total revenue of HKD77 million for the first year; Transactions of non-exchange traded investment products also reached a record high of HKD1,238 billion. SIGNIFICANCE: The promising performance of the industry is attributed to the enhanced breadth and depth of the products and services offered over the time; as well as the improved business environment that active cash and margin clients reaching an all-time high of around 4.87 million, demonstrating the securities industry remain robust and resilient. The principal of “survival of the fittest” always prevail, those participants remaining in the market should be the ones which can adapt to weather the tough times in past few years. 2. SFC announces arrangements to facilitate distribution of research reports of eligible ETFs under Stock Connect On 9 September 2024, the SFC issued a circular to set out the conditions that allow intermediaries to distribute research reports of eligible Mainland exchange-traded funds (ETFs) under Stock Connect in Hong Kong. Ever since its inclusion of ETFs under the Stock Connect (ETF Connect) in July 2022, the scheme was highly welcomed by investors in both markets. In view of the recent expansion and increasing diversity of eligible securities, China Securities Regulatory Commission (CSRC) has clarified that the existing relevant requirements for Mainland securities companies to forward research reports of eligible Hong Kong stocks under Stock Connect on the Mainland can apply to research reports of eligible Hong Kong ETFs under Stock Connect. Such reciprocity in access to information helps enhance Mainland and Hong Kong investors’ understanding of the products in each other’s market, as well as facilitate trading and liquidity in both markets. It should be noted that the SFC would not consider these research reports as advertisement or invitation as prohibited by section 103(1) of the SFO, subject to the following conditions: Distribution Party : The reports are distributed by an intermediary licensed in Type 4 regulated activities; or in Type 1 regulated activities in an incidental manner. Preparation : The intermediary preparing the reports should be responsible for it, and be compliant with the applicable requirements in the Code of Conduct; and to ensure that the information is factual, fair and neutral. Disclosure : The reports should contain prominent and adequate disclosures of conflicts of interest and warning statements with respect to any relation or interests between the intermediary and the subject ETFs in the reports. SIGNIFICANCE: As Ms Christina Choi, the SFC’ s Executive Director of Investment Products, had said, “ the latest arrangement will facilitate the circulation of product information with a clear, compliant and professional method. ” 3. SFC issues new guides for visiting and returning professionals to highlight pragmatic licensing options On 2 September 2024, the SFC published two new quick reference guides to assist visiting and returning professionals in understanding the SFC's pragmatic licensing regime, complementing the five popular quick reference guides published in 2023. Let us take a snapshot of the arrangements for “returning professional” which is a more common phenomenon nowadays in Hong Kong. Theme: The new guideline in licensing regime provides flexibility for former practitioners intending to return to the industry in Hong Kong after an interval of less than eight years to perform regulated activities (RAs) with alternative means to satisfy the competence requirements . Time Intervals of returning: A prerequisite here is that the RA the returning professional is planning to carry on should be with the same examination requirements (namely, the same LRP) and in the same role (namely, the same RIQ) as previously licensed , then if: within three years: enjoy full exemption from all examinations (under both the RIQ and LRP requirements); within three years to eight years: enjoy conditional exemptions from both RIQ and LRP requirements by only completing additional CPT hours before re-applying for a license (if subject to same RIQ and LRP requirements). Remarks: LRP: Local Regulatory Framework Paper RIQ: Recognised Industry Qualifications SIGNIFICANCE: With illustrative case studies, the two new guides offer useful information about licensing options and processes as well as various conditions for examination exemptions, in order to facilitate a smooth and compliant transition to the Hong Kong financial markets for these professionals. The more flexibility is provided in the second case where the years of absence from being licensed is above the three years threshold to within eight years. According to the quick reference guide leaflet, in order to be eligible for conditional exemptions , the applicant has to complete five CPT hours per RA applied, and per year of absence , with at least 50% of the CPT hours are in local regulatory knowledge. Suffice it to say that if the applicant has been licensed four years ago for an RA, it is required to complete 20 CPT hours (10 hours in regulatory knowledge) instead of having to re-take the LRP again. ENFORCEMENT NEWS 4. LET and Summit Ascent were required to repurchase shares to protect independent minority shareholders On 27 September 2024, it was announced that the SFC had commenced legal proceedings under the section 214 of the SFO in the Court of First Instance to seek a share repurchase order to protect the interests of independent minority shareholders (the “Minority”) of LET Group Holdings Limited (LET) and Summit Ascent Holdings Limited (Summit) as a result of alleged misconduct of Mr Lo Kai Bong (LO), chairman, executive director and controlling shareholder of both companies. As the alleged misconduct of LO had resulted in suspension of trading of the shares of LET and Summit and it was not certain when the shares could be resumed for trading. In order to protect the Minority, LO, LET and Summit were required by the Court to repurchase the shares from the Minority at a price and in a manner determined by the Court. The SFC investigation further revealed that LO deliberately disregarded the Listing Rules and the Code on Takeover and Merger in disposing of the assets of LET and Summit in Russia in 2024 despite of disapproval by other directors of LET and Summit in a non-compliant manner. Though the disposal was later terminated, the SFC alleged that LO had failed to apply due care and diligence in performing his duties in both companies. 5. SFC reprimands and fines Profitech Securities Limited $3.99 million for several regulatory breaches On 30 September 2024, the SFC reprimanded and fined Profitech Securities Limited (Profitech) HKD3.99 million for failures to comply with the Securities and Futures (Financial Resources) Rules (FRR) and other regulatory requirements. Key findings in the SFC investigation were that Profitech: (i) failed to maintain its required liquid capital of HKD3 million in compliance with the FRR between February and June 2021 and since July 2022; (ii) improperly repledged client securities collateral to its execution broker for 17 months for financial accommodation without a valid client standing authority; (iii) failed to ensure that the aggregate market value of its repledged securities collateral should not exceed the repledging limit; (iv) recklessly provided financial accommodation to two new clients for HKD15.6 million without reasonable credit controls and risk management measures; (v) failed to notify SFC of a change in its holding company’s shareholding structure within seven business days. The above-mentioned failures of Profitech constituted breaches of the SFO, the Securities and Futures (Licensing and Registration) (Information) Rules, the Securities and Futures (Client Securities) Rules and the Code of Conduct. SIGNIFICANCE: Observation of the findings directly revealed how insufficient the internal controls measures Profitech was managed as a licensed corporation; as SFC had pointed out in considering its disciplinary sanction note including Profitech’s repeated and prolonged failures to maintain the required liquid capital, the gravity of the improper repledge of client securities and failure to rectify the irregularities despite repeated reminders from SFC, it all rendered the SFC to its suggestion for Profitech to engage an independent reviewer to review its relevant internal controls! 6. SFC bans former Goldman Sachs employee for six months for misusing facilitation trade and misrepresentation On 23 September 2024, it was announced that the SFC banned Mr Dennis Cheng Chung Sing (Cheng), a former trader of Goldman Sachs (Asia) L.L.C. and Goldman Sachs (Asia) Securities Ltd (collectively, Goldman Sachs), from re-entering the industry for six months from 20 September 2024 to 19 March 2025 The investigation found that on 24 August 2020, Cheng erroneously placed a client order for buying 2,232,000 shares of company X to 232,000 shares into the system, resulting in an under-execution of two million shares. Cheung reported the case to Goldman Sach’s management only four day later, and he dishonestly conceal the trade execution error by the following means: (i) arranging a facilitation trade to buy the under-executed two million shares to fill the client order; (ii) misrepresenting to his colleagues that he had consent from client for the trade facilitation; (iii) booking the lower price for the original trade instead of the higher price for the trade facilitation. As a result, the SFC considered Cheng’ s conduct was in breach of the Code of Conduct and he was not fit and proper to be a licensed person. SIGNIFICANCE: Errors in trade executions are not uncommon in daily dealing activities. Licensed corporations should have internal control measure in place to govern any remedial procedures to be taken in a timely manner, including immediate reporting to senior management, notification to client with their consent for any compensating arrangements, as well as any subsequent reconciliations of the post error trade arrangements. Licensed corporations have to review their internal controls and procedures, and assess if they can be implemented as efficiently as designed for any specific purpose. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – July 2025 The topics discussed in this monthly newsletter are as follows: 1. Practice Note: Commission Up to 70% in the first year, with the remainder paid over 5 years 2. Compulsory RO-CPD Requirement for Responsible Officers 3. Anti-Scam Consumer Protection Charter 3.0 Regulatory News 1. Practice Note: Commission Up to 70% in the first year, with the remainder paid over 5 years On 30 July 2025, the IA released a Practice Note . It builds on Guideline GL16, which covers long-term insurance business (excluding investment-linked policies). The goal is simple: ensure insurance companies pay commissions to agents and brokers in a way that encourages fair treatment of customers. This practice guideline shall come into effect on 1 January 2026 . Who Does This Apply To? Insurers: All authorized insurance companies in Hong Kong that issue participating policies with regular premiums. Intermediaries: Licensed individual agents, agencies, and broker companies who sell and service these policies. Key Rule: How Commissions Must Be Paid To avoid "front-loading" (paying too much too soon, which might lead to pushy sales and poor after-sales service), commissions must be spread out: Up to 70% can be paid in the first policy year (from the start date to 12 months later). The remaining at least 30% must be paid evenly over the next minimum 5 years (policy years 2 to 6) – or over the full premium payment term if it's shorter than 5 years. Example - a policy where the total commission is $100 (based on premiums paid): Policy Year Before 1 January 2026 After 1 January 2026 Commission paid % of total commission Commission paid % of total commission Year 1 $100 100% $70 70% Year 2 $0 Nill $6 6% Year 3 $0 Nill $6 6% Year 4 $0 Nill $6 6% Year 5 $0 Nill $6 6% Year 6 $0 Nill $6 6% Year 7 $0 Nill $0 Nill Under the existing practice (“ Before 1 January 2026 ”), with all commissions paid in the first year, intermediaries may have reduced incentive to provide ongoing service from year 2 onward, potentially leading to policies receiving less attention or being neglected. For the new practice (“ After 1 January 2026 ”), the spreading of commissions ensures that intermediaries remain motivated to carefully handle and service policies over subsequent years to secure the remaining payments, promoting better long-term customer care. The new practice applies to the total commission per policy, including basic pay, overrides (to managers), and bonuses tied to sales volume (unless exempted – see below). Exceptions (When Spreading Isn't Required) You can skip the 70/30 split if the below scenarios apply, but still required to follow GL16's fair treatment rules: Scenario Remarks Overriding commission (Agents only) Applies to: Commissions for producing agents (who introduce, arrange, and serve policies) and overriding commissions for agent managers (who oversee producing agents). Exception: Overriding commissions are exempt if calculated using objective non-financial performance metrics, such as policy persistency rates, product variety in portfolios, customer feedback, and agent retention rates, to ensure adherence to "treating customers fairly." Volume-Based bonus commission (Agents only) Applies to : Bonuses for licensed insurance agents contingent on meeting sales volume targets (e.g., minimum premium volume), where eligibility and amount are uncertain until targets are met. Exception : Exempt if the bonus incorporates objective non-financial metrics (e.g., persistency rates, product diversity, customer feedback, agent retention) alongside volume. Note for Brokers : Volume-based commissions are outright prohibited for licensed insurance brokers per a 2006 circular from the Office of the Commissioner of Insurance. Fixed salaries Exception : Fully exempt for fixed remuneration packages, which are contractually guaranteed regardless of policy arrangements, servicing, or premium volumes. Bank channels (bancassurance) Exception: Allowed departure for commissions in the bancassurance channel (e.g., banks as insurance agencies under the Banking Ordinance), provided they adhere to overriding principles in GL16. The IA and Hong Kong Monetary Authority (“ HKMA ”) will monitor and act if needed. Policy Holders Who Are Professional Investors Exception : Departure permitted for commissions on policies with policyholders qualifying as Professional Investors (per Securities and Futures Ordinance and Rules), subject to: Establishing effective controls to verify PI status during onboarding and KYC processes. Confirming the policyholder meets PI criteria. Ensuring commission structures continuously comply with GL16's overriding principles. SIGNIFICANCE: This Practice Note strengthens regulatory oversight of long-term insurance conduct, promoting sustainable practices that prioritize policyholder protection over short-term sales. By mandating commission spreading, it reduces risks of misconduct, enhances industry integrity, and supports fair treatment amid fluctuating policy benefits. Insurers are encouraged to consult the full document and FAQs for guidance; the IA may update it based on market developments. For inquiries, contact the IA at relevant channels. 2. Compulsory RO-CPD Requirement for Responsible Officers The IA has officially rolled out the compulsory Continuing Professional Development (“ CPD ”) requirement for Responsible Officers (“ ROs ”) (here refer as “ RO-CPD ”) of all licensed insurance broker companies. Effective from 1 August 2025 . Key Details of the Requirement RO must complete at least 2 RO-CPD hours focused specifically on management and control functions during each assessment period. The RO-CPD hours fall under the " Ethics or Regulations " category and count toward the existing 15-hour annual CPD requirement for ROs. RO-CPD Course Details, and how to attend The IA will organize the courses, delivered through the two key broker industry bodies: Professional Insurance Brokers Association (“ PIBA ”) The Hong Kong Confederation of Insurance Brokers (“ CIB ”) Further details on training sessions for the 2025/26 assessment period will be announced soon. ROs must attend at least one session per period through either body. Consequence of Non-Compliance Non-compliance should not be taken lightly. Failure to meet the RO-CPD without reasonable excuse may result in: Disciplinary Action : As detailed in the IA's "Penalty Framework for Non-compliance with CPD" (from the circular dated 23 July 2021 ). Impact on Fit and Proper: May question the individual's ongoing suitability to serve as an RO. Increased Scrutiny : IA could apply heightened regulatory oversight to the associated broker company. SIGNIFICANCE: Given the growing complexity of these duties, the IA believes it's essential for ROs to dedicate time to enhancing their skills in management and control functions. This builds on positive feedback from a pilot scheme launched in the 2024/25 assessment period, which was well-received by the industry and successfully raised awareness about RO responsibilities. 3. Anti-Scam Consumer Protection Charter 3.0 In a united stand against rising financial frauds and scams, the Hong Kong Monetary Authority (“ HKMA ”), Securities and Futures Commission (“ SFC ”), the IA, and Mandatory Provident Fund Schemes Authority (“ MPFA ”) have unveiled the Anti-Scam Consumer Protection Charter 3.0 . Effective from 9 July 2025 . Building upon the foundations laid by Charters 1.0 (2023) and Charter 2.0 (2024) , Charter 3.0 expands the fight against scams by forging partnerships with technology and telecommunications firms. This collaborative framework aims to disrupt fraud at its core through six key principles outlined in the annex. These focus areas include: Charter 3.0 Principles include: 1. Reporting Functions for Users Participating Institutions will allow users to file reports related to suspected financial frauds and scams, and will endeavor to address them in a reasonable manner, once found to be in violation of the Participating Institutions’ policies. 2. Reporting Channels for Financial Regulators Participating Institutions will provide a direct and efficient process for the Financial Regulators to report suspected financial frauds and scams, and to follow up on such reports. 3. Checking of Advertisers Participating Institutions will adopt a risk-based approach to facilitate verification, applying measures that are necessary and proportionate. 4. Internal Monitoring Processes Participating Institutions will put in place and update from time to time internal rules, policies, processes, and tools to monitor advertisements and content that promote financial products or services on their platforms, with a view to creating a safe online environment for users. 5. Enforcement of Terms of Service Participating Institutions will enforce their own terms of service by detecting and removing financial scam advertisement or content that violate their platform policies. 6. Collaboration on Public Awareness Participating Institutions will work together with the Financial Regulators and the financial industry on raising public awareness about frauds and scams and promoting cybersecurity. This will include Participating Institutions’ collaboration with the Financial Regulators, financial institutions, or other agencies where appropriate, to launch anti-deception promotional campaigns to educate the Hong Kong public. The launch event featured engaging discussions among executives from regulators, tech giants, and telecom providers on emerging scam trends and joint strategies to protect the public. SIGNIFICANCE: Julia Leung, Chief Executive Officer, SFC: "Charter 3.0 is a meaningful step forward, bringing in major technology and telecommunications companies to join the fight against online scams. It positions Hong Kong as a leader in safeguarding the financial world’s digital future, building a safer, more responsible online landscape." Clement Cheung, Chief Executive Officer, IA: "The Charter 3.0 represents collaborative efforts to forge a robust alliance against financial frauds. The IA will leverage this platform to strengthen public education and empower policyholders against sophisticated swindlers." With scams evolving rapidly in the digital age, Charter 3.0 emphasizes cross-sector collaboration to preempt threats. It aligns with global calls for action and reinforces Hong Kong's role as a secure financial hub. [End of ComplianceOne Insurance Newsletter – July 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The SFC and HKMA issued a Joint Circular on 20 October 2023 to provide further guidance on intermediaries’ virtual asset-related activities. We have prepared an executive summary to summarize the key points for easier reference.

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

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter - Aug 2024 The topics discussed in this monthly newsletter are as follows: Statistics showed total gross premium increased in Hong Kong in 2024-1H The latest “Conduct In Focus” published by the IA provided various guidelines to the industry. Reminder to submit Audited Financial Statements and Auditor’s Report under Section 73(1) of the IO (Cap.41) before the deadline. AIA was fined HKD 23 million for delays in identifying politically exposed persons (PEPs). Former insurance agent was sentenced to prison for mishandling premium payments. I A banned individuals for making use of false documents in applying for registration as licensed insurance agents. IA Regulatory Updates 1. Statistics showed total gross premium increased in Hong Kong in 2024-1H On 30 August 2024, the IA released a report highlighting a 5.1% increase in total gross premiums to $310.9 billion for the first half of 2024, showcasing the industry’s resilience and growth. Key Highlights: Long Term Business: Total revenue premiums reached $273 billion (up 5.5%). Individual Life and Annuity (Non-Linked) business grew by 6.9% to $243.3 billion. New office premiums increased by 12.3% to $115.9 billion. General Business: Gross premiums rose to $37.9 billion (up 2.4%). Accident & Health business saw a 12.5% increase to $11.7 billion. Motor Vehicles business grew by 8.5% to $2.8 billion. SIGNIFICANCE: These statistics underscore the robust growth and stability of Hong Kong’s insurance sector, highlighting its ability to adapt and thrive amidst changing market conditions. The significant rise in premiums across various segments indicates strong consumer confidence and a healthy demand for insurance products. This growth not only reinforces Hong Kong’s position as a leading international insurance hub but also emphasizes the importance of maintaining stringent regulatory standards to ensure continued trust and integrity in the industry. 2. The latest “Conduct In Focus” published by the IA provided various guidelines to the industry. The IA published its latest issue of Conduct In Focus on 16 August 2024, presenting the latest complaint statistics and disciplinary actions. The role of insurance brokers in the life insurance market. Topics include: Standards to prevent unlicensed selling, especially to Mainland China visitors. Fair commission structures. Best practices for renewal notices. A call for insurers and brokers to join the SMS Sender Registration Scheme to protect customers from scams. Benefits of using online self-service portals. The IA has also restructured its Market Conduct Division to enhance prevention and deterrence. Starting 23 September 2024, the IA will charge fees for processing insurance intermediary licensing applications and related notifications, following the end of a five-year waiver period. This new fee structure aims to sustain the IA’s regulatory functions. SIGNIFICANCE: Featured article delves into the role of insurance brokers in the life insurance market, focusing on the standards, controls, and procedures required by the IA. The issued emphasize that this will continue to be a key focus of future regulatory and enforcement efforts, including a more comprehensive consideration of how to ensure commission structures align with the “fair treatment of customers” principle. 3. Reminder to submit Audited Financial Statements and Auditor’s Report under Section 73(1) of the IO (Cap.41) before the deadline. The IA reminds licensed insurance broker companies of their obligation to submit audited financial statements and an auditor’s report under Section 73(1) of the Insurance Ordinance (Cap. 41) (“IO”) within six months after the end of each financial year. This requirement ensures transparency and compliance with financial regulations. Failure to comply may result in fines and enforcement actions. If a broker company cannot meet the deadline due to circumstances beyond its control, it must apply for an exemption under Section 79 of the IO before the deadline. SIGNIFICANCE: Applications for extensions submitted from 23 September 2024 onwards will incur a fee. No extensions will be granted after the deadline has passed. Enforcement News 4. AIA was fined HKD 23 million for delays in identifying politically exposed persons (PEPs) The IA conducted an on-site inspection of AIA International Limited’s Hong Kong branch under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615). The IA found issues with the company’s AML system, leading to delays in identifying politically exposed persons (PEPs) and conducting enhanced due diligence . As a result, the IA ordered AIA to submit a report by an independent advisor validating remediation measures and imposed a HK$23 million penalty. AIA has since implemented measures to strengthen its AML controls and governance. SIGNIFICANCE: In recent enforcement news, the IA is firmly upholding robust AML controls to maintain trust and integrity in the insurance industry, with a particular emphasis on due diligence process requirements. 5. Former insurance agent was sentenced to prison for mishandling premium payments. The IA drew public attention with a press release on 26 August 2024, announcing that a former insurance agent was sentenced to three months and two weeks in prison and ordered to pay compensation for misappropriating HK$60,000 in premiums, which led to a client’s policy lapsing in 2021. The agent was arrested after a police report and pleaded guilty on 22 April 2024, under Section 9 of the Theft Ordinance (Cap. 210). The IA stresses the importance of handling premium payments correctly and advises policyholders to use official payment channels. SIGNIFICANCE: The severe consequences of misappropriating premiums in this case serve as a strong deterrent, warning others in the industry against similar actions. 6. IA banned individuals for making use of false documents in applying for registration as licensed insurance agents The IA has banned four individuals for using false academic certificates to apply for registration as licensed insurance agents between 2014 and 2019. Three individuals used certificates from a non-existent university in Mainland China, while the fourth used a certificate that the issuing institute confirmed was not valid. One individual received a 23-month ban, and the other three received 35-month bans. The IA emphasizes that using false documents undermines industry integrity and public trust. SIGNIFICANCE: The IA emphasizes that using false or forged documents is a serious offense that damages the integrity of the insurance industry. Such actions erode public trust and are unfair to honest practitioners. [End of ComplianceOne Insurance Newsletter – August 2024] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

分享金錢服務經營者牌照的合規性與跨境支付安全的合規指南概述 天匯合規再次獲邀參與國際會計師公會香港分會主辦之可持續發展講座 天匯合規榮幸再次受到國際會計師公會香港分會（AIA）的邀請，共同主辦有關合規反洗錢新動向加行業指引分享的研討會。 藉此機會，我們很高興能分享金錢服務經營者牌照的合規性與跨境支付安全的合規指南概述。我們旨在傳達客戶盡職調查（CDD）程序和實施安全風險管理的重要性，特別是作為金錢服務經營者（MSOs）的角色。 我們非常感謝這次的合作，並對觀眾的熱烈參與感到高興。 我們期待未來能夠舉辦更多研討會與大家分享更多合規的資訊！ ComplianceOne are honoured to be invited one year again from the Association of International Accountants (AIA) to co-host the seminar regarding to the updates on anti-money laundering guidelines. We were delighted to share about the security and compliance guidance of the cross-border payment by this opportunity. We aimed to convey the significance of Customer Due Diligence (CDD) procedure and risk management strategy as being Money Service Operators (MSOs). We greatly appreciated our collaboration and were thrilled by the enthusiastic participation from the audience, with many attendees joining the conference. We anticipate organizing more seminars in the future to share further insights on compliance topics with everyone!

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – Mar 2025 The topics discussed in this monthly newsletter are as follows: 1. IA and HKMA Clarify Regulatory Framework for Indexed Universal Life (IUL) Products 2. IA publishes its Annual Report 2023-24 3. Insurance Complaints Bureau Releases 2024 Claims Complaint Statistics and Case Review 4. Macau Prepares for a Modernized Insurance Framework 5. PAObank Secures Insurance Agency License and Forms Strategic Partnerships 6. First Case of Insurance Broker Fined for Late Submission of Financial Statements 7. Suspension of Chan Lok Wang’s Insurance License for falsification client signature IA News Updates 1. IA and HKMA Clarify Regulatory Framework for Indexed Universal Life (IUL) Products On 7 April 2025, the IA and Hong Kong Monetary Authority (“ HKMA ”) issued a circular to chief executives of authorized insurers, institutions, and licensed insurance intermediaries, addressing the growing interest in Indexed Universal Life (“ IUL ”) insurance products among high-net-worth clients. The circular clarifies the application of the insurance regulatory framework to IUL products, ensuring policyholder protection and fair treatment. Classify Scope: IUL products combine life insurance with a cash value component tied to financial indices (e.g. stock market indices), offering premium payment flexibility. Unlike traditional universal life insurance, the cash value is linked to index performance, classifying IUL as Class C (linked long term) business under the Insurance Ordinance (Cap. 41). Regulatory Application: As Class C business, IUL products fall under guidelines such as GL15 (Underwriting Class C Business) and GL26 (Sale of ILAS Products), alongside cross-referenced GL28 (Benefit Illustrations) and GL30 (Financial Needs Analysis). However, recognizing IUL’s hybrid nature with traditional universal life features, certain GL16 (Underwriting Long Term Insurance Business) provisions also apply. For IUL products sold exclusively to Professional Investors (“ PIs ”) as defined by the Securities and Futures Ordinance (Cap. 571), adjustments to GL15 and GL26 requirements are permitted to balance practicality and protection. Key Highlights: Some Class C provisions are less relevant to IUL or require tailored application. Traditional universal life elements necessitate select GL16 compliance. For PI-only sales, certain GL15 and GL26 rules can be offset without compromising safeguards. SIGNIFICANCE: This clarification responds to industry enquiries amid rising demand for IUL products, offering a practical framework that aligns innovation with regulatory oversight. It ensures robust protection for sophisticated investors while fostering market growth. The Annex to the circular details specific guideline provisions and their adjusted application for IUL products targeting PIs, which insurers and intermediaries must follow. 2. IA publishes its Annual Report 2023-24 The IA released its Annual Report 2023-24 on 19 March 2025, titled "Striding towards a Sustainable Future." This report showcases the IA’s pivotal role in guiding Hong Kong’s insurance industry through a challenging year, spotlighting key achievements such as: Risk-based Capital (RBC) Regime The IA successfully implemented the RBC regime, a framework that requires insurers to maintain capital aligned with the risks they underwrite. This ensures financial stability, protects policyholders, and positions Hong Kong as a leader in global insurance standards. Insurance-linked Securities (ILS) Market Progress in developing the ILS market has allowed insurers to transfer risks to capital markets, enhancing risk management and attracting international investors. This strengthens Hong Kong’s reputation as a premier financial hub. Conduct Supervision and Disciplinary Enforcement The IA intensified its efforts to oversee conduct and enforce disciplinary measures, ensuring that insurers and intermediaries uphold high ethical standards. These actions safeguard policyholder interests and bolster trust in the industry. SIGNIFICANCE: Through these initiatives, the IA is not only addressing today’s challenges but also laying a foundation for the long-term sustainability of Hong Kong’s insurance sector. The report reflects a commitment to resilience, innovation, and policyholder protection in an ever-evolving global landscape. The complete Annual Report 2023-24 , along with an engaging abridged animated version, is now available on the IA website. 3. Insurance Complaints Bureau Releases 2024 Claims Complaint Statistics and Case Review The Insurance Complaints Bureau (“ ICB ”) in Hong Kong released its 2024 claims complaint statistics on 27 March 2025, showing a rise in disputes, particularly in medical and travel insurance. Of the 646 cases received, 356 were resolved, with 111 complainants receiving over HK$10 million in total compensation, the highest being HK$120,000. The 356 resolved cases showed the following distribution: Policy term interpretations: 54% of cases, the most common issue. Exclusions: 16.5% of cases. Non-disclosure of facts: 15.5% of cases. Leading policy types causing disputes were: Hospitalization/medical insurance: 46% of cases. Travel insurance: 27% of cases. Key Case Examples: Medical Insurance Dispute: A policyholder insured in 2018 declared good health but later clarified on the policy issuance date that a 2017 hospital record (using her social security card) belonged to her father due to liver issues. In 2023, diagnosed with breast cancer, she claimed compensation, but the insurer initially denied it, citing non-disclosure of liver conditions diagnosed as primary biliary cirrhosis. The ICCP investigated, noting she provided a 2022 normal liver ultrasound report, indicating she was unlikely to have had liver disease in 2017. The ICB ruled in her favor, ordering the insurer to pay HK$120,000. Travel Insurance Dispute: A policyholder planned a trip but a blizzard halted train services for three days, delaying his scheduled trip. The insurer offered 50% of the trip delay limit, arguing no specific train ticket was booked. The ICCP found the delay due to "adverse weather" was covered, supported by evidence like hotel bookings, and recommended full compensation, which the insurer accepted. SIGNIFICANCE: The 2024 data reflect the ICB’s role in balancing consumer protection with industry practices, particularly as medical and travel insurance disputes rise. Those cases illustrate the ICCP’s emphasis on objective evidence and fair interpretation, suggesting policyholders need accurate disclosures and insurers clear term explanations. It serves as a reference for insurers and policyholders, highlighting communication and evidence’s role in reducing disputes, especially in an increasingly complex insurance environment for medical and travel policies. 4. Macau Prepares for a Modernized Insurance Framework The Monetary Authority of Macau (“ AMCM ”) is laying the groundwork for the new Insurance Intermediaries Law (Law No. 15/2024) , set to take effect on 1 August 2025. Key changes in the law include: Extending license validity to two years Introducing pre-approval and notification requirements for specific actions Expanding suitability assessments for intermediaries Enhancing the AMCM’s supervisory powers The AMCM has taken proactive steps to ensure a smooth transition. Recently, it joined an exchange session hosted by the Macau Financial Society, briefing representatives from banks, insurers, brokerages, and corporate agents on the law’s details. SIGNIFICANCE: These updates go beyond mere administration—they align Macau’s standards with global best practices, boosting the sector’s competitiveness and resilience. This landmark legislation replaces the outdated Decree-Law No. 38/89/M , in place for 36 years, and aims to bring the regulatory framework for insurance intermediaries into the modern era. With 7,798 licensed intermediaries as of 30 April 2024, this sector is a vital pillar of Macau’s financial ecosystem. Market News 5. PAObank Secures Insurance Agency License and Forms Strategic Partnerships On 5 March 2025, PAObank – a leading digital bank in Hong Kong, has been granted an insurance agency license by the IA. This milestone allows PAObank to act as an intermediary. PAObank will provide customers with a range of general and life insurance products, all accessible through a seamless, fully online purchasing experience. The IA-issued license empowers PAObank to broaden its financial services by offering insurance solutions. As an insurance agency, PAObank will distribute products from its appointing principals China Ping An and FWD to its growing customer base. Strategic Partnerships PAObank has partnered with two powerhouse insurance providers: China Ping An Insurance (Hong Kong) Company Limited and FWD Life Insurance Company (Bermuda) Limited. These collaborations unlock a broad spectrum of insurance offerings, ranging from general policies such as motor, travel, and home insurance, courtesy of Ping An, to life insurance solutions provided by FWD. Digital Innovation PAObank is redefining convenience by harnessing advanced fintech and API technology. By syncing its digital platform with those of Ping An and FWD, the bank offers a streamlined, entirely online process for purchasing insurance. Customers can now browse options, choose coverage, and finalize policies in just a few clicks without any paperwork or branch visits required. SIGNIFICANCE: PAObank 's entry into the insurance business is not only a major step forward for its business, but also demonstrates its determination to build a comprehensive financial services platform. Through its collaboration with Ping An Hong Kong and FWD, relies on the professional advantages of the United Insurance Group to provide customers with high-quality insurance products, while combining its banking digital technology advantages to meet the market's urgent demand for convenient financial services. This "bank + insurance" (bancassurance) model is not unfamiliar in Hong Kong, but PAObank has taken this traditional cooperation to a whole new level with its fully online service model. Customers can purchase reliable protection for themselves and their families in just a few simple steps. Enforcement News 6. First Case of Insurance Broker Fined for Late Submission of Financial Statements On 19 March 2025, a licensed broker company was convicted by the Eastern Magistrates’ Courts and fined $26,060 for failing to submit audited financial statements within the required six-month deadline, on two occasions. This is the first such conviction by the IA. Case Overview The licensed broker company, was found guilty of contravening section 73(1) of the Insurance Ordinance (Cap. 41). The company failed to submit its audited financial statements, auditor’s report, and auditor’s compliance report within the mandatory six-month period following the end of its financial year—on not one, but two separate occasions. As a result, the court imposed a fine of $26,060. SIGNIFICANCE: These documents are more than just paperwork—they are vital tools for assessing whether a broker meets the regulatory standards necessary to responsibly handle public insurance business. Regulators (including IA) relies on them to ensure transparency, accountability, and trust within the industry. Failing to submit them on time can signal potential issues with a broker’s operations and erode public confidence. This case highlights the need for strict adherence to regulatory requirements to uphold industry standards and public trust. 7. Suspension of Chan Lok Wang’s Insurance License for falsification client signature On 12 March 2025, the IA suspended Mr. Chan Lok Wang’s insurance license for four months. The suspension follows his falsification of a client’s signature on a policy surrender form. Case Overview In December 2022, Mr. Chan, having inherited a client from colleagues at his company, received a partially completed surrender form signed by the client to terminate one of their two long-term insurance policies. Mistakenly assuming the client intended to surrender both policies, Mr. Chan photocopied the original form, completed it with details for the second policy, and submitted it without verifying the client’s intentions. Consequently, both policies were cancelled. In determining the four-month suspension, the IA considered several factors: Mr. Chan’s admission of his misconduct, the internal disciplinary measures already imposed by his insurer, and his full cooperation throughout the IA’s disciplinary process. SIGNIFICANCE: The IA has made it clear that forging a client’s signature—irrespective of intent or method—is unacceptable for a licensed insurance intermediary. Such actions can expose policyholders to significant risks or financial harm. This case also highlights the critical need for due diligence when managing orphan policies to uphold public trust in the insurance industry. [End of ComplianceOne Insurance Newsletter – March 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – Jan 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES 1. SFC extends swift licensing process to new VATP applicants 2. Onshore RMB bonds accepted as margin collateral in OTC Clearing Hong Kong Limited 3. SFC expands listed structured fund offerings in Hong Kong MARKET NEWS 4. InvestHK brought a record-breaking number of new companies to Hong Kong in 2024 5. Enhancing sponsors’ expertise to drive GEM advancement 6. HashKey Exchange's Trading Volume Increased by 85% in 2024 7. Hong Kong joins LME global warehouse network ENFORCEMENT NEWS 8. Hang Seng Bank Limited is fined $66.4 million for misconduct in selling investment products 9. Associate Director of SFC charged by ICAC with conspiracy to pervert course of justice 10. The first solicitor convicted of breaching secrecy provision by the SFC 11. Enforcement action against FingerTango Inc. and its former directors by concerted effort of SFC and HKEX 12. MMT sanctions chauffeur and wife for insider dealing before a takeover announcement Regulatory Updates 1. SFC extends swift licensing process to new VATP applicants ON 16 January 2025, the SFC announced that all new virtual asset trading platform (“ VATP ”) applicants can now seek licences under its swift licensing process. This new licensing approach requires VATP applicants to implement their policies, procedures, systems and controls before conducting an external assessment on these measures. The SFC will become a party to the engagement to supervise the overall external assessment process. This extension is made in light of the effectiveness of the SFC’s direct engagement and communication with deemed-to-be-licensed VATP applicants on the regulatory standards during its risk-based on-site inspections of all such applicants. It should be noted that all VATP applicant submitting license applications after 18 December 2024 should refer to the new Circular (dated 16 January 2025) for the updated swift licensing process. Key takeaways of the revamped swift licensing process are as follows: the SFC continues to adopt its engagement and communication with the VATP applicants through the process as before; the new VATP applicant has to submit its licensing application bundle to the SFC for assessment through WINGS, and to engage an external assessor (“ EA ”) to perform an external assessment; after an initial assessment by the SFC of the key personnels of the applicant, and upon acceptance of the license application, the applicant will proceed to deploy its relevant systems and controls; while the applicant is ready for an external assessment, a tripartite agreemen t with the SFC and the EA should be entered; the SFC will scrutinize and be assured that the policies, procedure and system controls (“ P&P ”) of the applicants are suitably designed and implemented; in case of any findings or exceptions, these should be resolved during the external assessment process; upon completion of the external assessment and all other outstanding matters such as capital injection, the SFC will grant a licence to the VATP applicant if it is satisfied that the applicant is then fit and proper to be licensed. What to know about the revamped external assessment? it is expected that there will be substantial changes to P&P of the VATP applicant from its conventional operational routines; as such it would be important to conduct external assessment only after the VATP deploys its systems and controls and evaluate itself if it fully adapts its P&P to ensure that they can operate as intended/ designed; it is also important for the EA to assess if the P&P are suitably designed and implemented by the VATP applicant even though the P&P can operate as intended; the SFC requires opinion from the EA that VATP applicant’s P&P are suitably designed and implemented to comply with the Guidelines specified for VATPs; the SFC, the EA and the VATP applicant should agree on the terms and scope before commencing the assessment. SIGNIFICANCE: The SFC has just granted licences to four deemed-to-be-licensed VATPs in December last year under the newly introduced swift licensing process, the determination of the Commission to give a greenlight in the licensing process to the new applicants is quite obvious. Subject to the new circular in January 2025, new VATP applicants are only required to conduct one external assessment throughout the streamlined licensing application process. 2. Onshore RMB bonds accepted as margin collateral in OTC Clearing Hong Kong Limited Effective 13 January 2025, the OTC Clearing Hong Kong Limited (“ OTC Clear ”) started accepting the Ministry of Finance and Mainland policy banks onshore bonds held under Northbound Bond Connect (“ CGB ”s) by offshore investors as margin collateral for Northbound Swap Connect (“ NBSC ”) transactions. Under the arrangement, the SFC, the People’s Bank of China (“ PBoC ”) and the Hong Kong Monetary Authority (“ HKMA ”) reached a consensus that offshore investors can use CGBs as margin collateral for all other eligible derivative transactions cleared in OTC Clear. In the Circular posted by HKEX dated 16 December 2024, the new eligible collateral can be used to cover initial margin requirements of NBSC , providing greater flexibility to international investors and enhancing their capital efficiency. Ever since its launch in May 2023, the Swap Connect has evolved with smooth operations and steady growth in trading volume, adding vibrancy to the region’s financial markets. SIGNIFICANCE: As Mr Rico Leung, the SFC’s Executive Director of Supervision Markets, has said, “ Global institutional investors can benefit from further reduction in liquidity cost with more efficient use of their onshore RMB bonds as non-cash collateral when clearing with OTC Clear. ” He further added that the new measures strengthen HK’s position as a leading global offshore RMB hub and advancing development of its fixed income market. 3. SFC expands listed structured fund offerings in Hong Kong On 23 January 2025, the SFC sets out new regulatory requirements for product issuers, with a view to broadening the range of listed structured funds that may be offered to the public in Hong Kong, notably adding to their product mix Single Stock Leveraged and Inverse (L&I) Products and Defined Outcome Listed Structured Funds (“ P&F ”). There has been growing interest among the product issuers in launching the P&F in HK amid their appeal to investors. The P&F offer investors who are looking for trading and hedging tools for popular individual stocks listed overseas, as well as for seeking price discovery tools for overseas exposure during Asian trading hours. One distinctive feature of the P&F is that they provide investors with a more customised investment exposure than the prevailing conventional products. In balancing the potential benefits and risks associated with exposure to these complex and novel products, the SFC has in place enhanced regulatory framework with additional safeguards and measure for protecting HK investors. For example, with respect to Single Stock L&I Products, only those referencing a highly liquid mega-cap stock listed on a major overseas exchange is accepted by the SFC, and is subject to a maximum leverage factor of 2X to -2X only. SIGNIFICANCE: With the protective constraints on Single Stock L&I Products imposed by the SFC, it excludes overseas listed stocks which may be dually listed in Hong Kong and stocks listed on any Mainland exchange which are not overseas exchanges; while only a lower leverage factor is accepted aiming to reduce exposure to any single stock volatility. For details of additional requirements, reference can be made to the circular post the same day. Market News 4. InvestHK brought a record-breaking number of new companies to Hong Kong in 2024 On 20 January 2025, the Invest Hong Kong (“ InvestHK ”), a government department of Hong Kong Special Administrative Region (HKSAR) which aims to strengthen Hong Kong’s status as the leading international business location in Asia, announced that the department achieved a record-breaking year of foreign direct investment (“ FDI ”) in 2024, assisting 539 overseas and Mainland companies to set up their business in Hong Kong, which represents a 41% increase compared with 2023, further reflecting the appeal of HK as a leading business hub in the region. The strong FDI performance was driven by investment in diversified and high-valued industries which is estimated to bring to HK over HKD67.7 billion, a record high of near 10 % increase over 2023’ around 6,864 job opportunities are expected to be created during the first year of operation. Taking a look at the figures, the top five locations of origins of these new companies ranked in order are Mainland China, United States, France, The United Kingdom and Singapore; the results reflect full confidence in HK from these enterprises in selecting the city as their base to capture the unique opportunities brought by HK as a “super connector” and a “super value-adder” . Furthermore, more than 800 applications were received through the New Capital Investment Entrant Scheme (“ New CIES ”) by the end of 2024 since its launch last March, bringing around HKD24 billion of investments to the city. SIGNIFICANCE: As Ms Alpha Lau, Director-General of Investment Promotion, has said, “ It demonstrates HK's resilience and adaptability and businesses' strong confidence in the city as the preferred base to expand in the region. ” 5. Enhancing sponsors’ expertise to drive GEM advancement At the seminar “ Hong Kong Capital Market – The Future of GEM ” organised by theAssociation of Hong Kong Capital Market Practitioners, Dr Kelvin Wong, Chairman of the SFC, delivered a keynote speech entitled Enhancing Sponsors’ Value Proposition to Drive GEM Advancement . He emphasised the importance of GEM to small and medium enterprises (SMEs) and Hong Kong’s listing market development. He also discussed how the sponsors of initial public offerings (IPOs) should enhance their value proposition by leveraging their unique roles to strengthen the corporate governance and resilience of companies for their longer-term success. The key points of the speech are as follows: Importance of a robust GEM to SMEs and listing market the secondary board of GEM has served as a source of long-term capital for SMEs to pursue innovation, value creation and business growth, testifying hundreds of both local and Mainland SMEs. SMEs are the backbone of the HK economy and accounted for 98% of the total number of businesses, and employing around 44% of the workforce. GEM enhancements in 2024 there were three GEM lPOs in 2024 raising a total of HK$235 million with a total initial market capitalisation of HK$720 million at listing; under the new streamlined transfer mechanism, three GEM issuers’ applications to transfer to the Main Board had been received by the HKEX; the average sponsor fees increased to HK$6.8 million in 2024, up by 25% compared to 2020. Enhancing sponsors’ value proposition the roles of sponsors and corporate financial advisors are essential in helping their clients ensure regulatory compliance and navigate the complexities of the IPO journey, and in conducting due diligence on the listing applicant’s business to ensure fulfilment of the SFC’s stringent standards, their recommendations are conducive to the sustainable development of companies long after their IPO; sponsors should also critically assess the commercial viability of a company’s business model and ensure the disclosure of accurate and sufficient information to investors. Facilitating corporate sustainability and governance beyond the IPO sponsors can help shape a culture of good corporate governance by discussing the internal control inadequacies with the listing applicant’s board of directors and recommending remedies; finding of research indicates that strong value proposition of reputable sponsors can always bring smaller under-pricing at IPO and lower price volatility post IPO; sponsors can conduct a range of investor relation initiatives and ensuring continuous equity coverage by research analysts, exposing the newly listed companies to persistent scrutiny by public eye through which is then transformed into a driving force for the companies to improve their operations, accountability, disclosure standards, corporate governance, as well as shareholder returns post IPO. Importance of governance to long-term corporate success it must be emphasised corporate governance is crucial to the long-term success of corporates post IPO. Research findings also indicated a high correlation between corporate governance and a company’s profitability and sustainability, a competent board of directors, robust internal controls and management systems as well as effective risk management are indispensable elements for success. Sponsor failures and good practices since sponsor’s rigor of due diligence is pivotal in sustaining HK’s reputation as an international fund-raising hub, the SFC is committed to combating sponsor misconduct with zero tolerance; always alert that any weakening in investors’ confidence would increase difficulties and costs for companies to raise capital. 6. HashKey Exchange's trading volume increased by 85% in 2024 As investors’ interests in virtual assets remain keen, the HashKey Exchange, one of the licensed VATPs in Hong Kong, continues to records with robust growth with its trading volume exceeding HKD 600 billion last year, marking an 85% year-on-year increase. As commented by Mr. Xiao Feng, Chairman and CEO of the parent company HashKey Group, the company is expected to reach breakeven by 2025. Currently, HashKey Exchange offers four cryptocurrencies for retail investors: Bitcoin (BTC), Ethereum (ETH), Avalanche (AVAX), and Chainlink (LINK). Its Chief Risk Officer Mr. Ru Haiyang anticipates more cryptocurrencies will be made available to cope with increasing interests at retail level. The introduction of derivative contracts, options or leveraged trading are still under communication with the regulatory bodies. SIGNIFICANCE: As HaskKey Exchange remains bullish on Bitcoin, the most popular and actively traded crypto to retail investors, trading volume is expected to grow sustainably in 2025. 7. Hong Kong joins LME global warehouse network The London Metal Exchange (“ LME ”) has confirmed, on 20 January 2025, its approval of HK as an LME warehouse location, HK will now join the LME’s existing network of 32 locations over the USA, Europe and Asia. Matthew Chamberlain, LME CEO, said, “The addition of Hong Kong to our global warehousing network is an exciting development, providing warehouse facilities closer to the metals hubs of Mainland China than ever before. The driving factors for such approval are: (i) Hong Kong provides the natural hub for connectivity to the Chinese market which is the world’s largest consumer of metal; (ii) there are keen interests from warehouse, landlords and metal owners in seeing HK as a metal delivery point; (iii) China is a largest net consumption area which is in vicinity to HK; (iv) established local fiscal and regulatory system and access to good transport network are in place in HK. SIGNIFICANCE: At the initial stage, HK is permitted to store LME-registered aluminium alloy, primary aluminium, copper, lead, nickel, tin, and zinc, and it will become an active warehouse location three months after the approval of the first warehouse company. This approval marks another cornerstone in the development of metal trading industry in HK since the HKEX acquired the LME in 2012 for USD2.2 billion. Enforcement News 8. Hang Seng Bank Limited is fined $66.4 million for misconduct in selling investment products The SFC reprimanded and fined Hang Seng Bank Limited (“ HSB ”) $66.4 million for serious regulatory failures in relation to the bank’ s sale of collective investment schemes (“ CIS ”) and derivative products and overcharging its clients and making inadequate disclosure of monetary benefits to them during various periods over the course of nine years between February 2014 and May 2023. A snapshot of the findings: (1) Sales practices in relation to CIS 111 client accounts were found to have executed 100 or more CIS transactions during the material period from 1 June 2016 to 30 November 2017; 46 clients were solicited into conducting excessively frequent transactions which contradicted to their investment perspectives/ horizon; HSB’s internal controls were deficient in monitoring the sales of CIS by their relationship managers. (2) Sales and distribution of derivative products from 17 February 2014 to 19 December 2018, it was found that 388 clients with no knowledge of the nature and risk of derivative products had purchased derivative funds in 629 transactions; while some products were of higher risk levels than the client’s tolerance levels. (3) Overcharging and inadequate disclosure of monetary benefits retained monetary benefits from client transactions in breach of regulatory standards; charged higher transaction fees from clients; failed to adequately disclose trailer fee arrangements to clients; HSB received at least HKD22.4 million in excess benefits/ fees from these transactions from the clients. SIGNIFICANCE: The SFC is of the view that the misconduct of HSB was serious and systemic, and its failure to act with due care and diligence, further aggravated by the lack of proper monitoring of sales distributions and compliance with disclosure requirements, all amounted to the adverse influence on the best interests of its clients. 9. Associate Director of SFC charged by ICAC with conspiracy to pervert course of justice The ICAC announced on 9 January 2025 that Deng Yingxia (“ DENG ”), a then Associate Director of the SFC, was charged by the ICAC with conspiracy to pervert the course of public justice by allegedly providing advice to subjects of an SFC investigation into suspected market manipulation in relation to a listed company on how to conduct themselves in the probe, including destroying potential evidence. The ICAC investigation stemmed from a corruption complaint. After investigation, the ICAC arrested DENG in an operation jointly carried out with the SFC in April 2024. It was alleged that between July 15 and 27, 2022, DENG had conspired with a subject of a Market Manipulation Investigation (relating to China Gas Industry Investment Holdings Company Limited ( 01940.HK )), she met with that person and other subjects of the investigation, and advised them how to answer possible questions posed by the SFC as well as advising them to destroy potential evidence. SIGNIFICANCE: The SFC was committed to render full assistance to the ICAC during investigation of the case. The ICAC, which stands itself out as emblem of upholding the integrity of HK’s financial market, shares the same mission of the SFC; their concerted effort to combat misconduct in the case is a good example to testify to the public that HK remains as a hub of justice and integrity. 10. The first solicitor convicted of breaching secrecy provision by the SFC A Hong Kong practicing solicitor, Mr Tse Yin Fung (“ TSE ”), was convicted today at the Eastern Magistrates’ Courts for violating the secrecy provision under the Securities and Futures Ordinance (“ SFO ”) following a prosecution brought by the SFC, and was fined HKD25,000 together with the payment for investigation costs of the SFC. In the case, TSE, acting as the legal representative of an individual, received confidential information regarding a restriction notice that the SFC had disclosed to that individual, which was subject to the secrecy provision under the SFO. After receiving the confidential information, TSE disclosed the information to two other individuals on 9 February 2021. SIGNIFICANCE: This case marks the first occasion in which a Hong Kong practicing solicitor has been convicted of an offence for contravening the secrecy provision under the SFO. No matter what intention or reason TSE had, as a legal professional, he should maintain the highest standard of professional conduct amid conducting his entrusted duty for his client. 11. Enforcement action against FingerTango Inc. and its former directors by concerted efforts of SFC and HKEX On 16 January 2025, the SFC and the Stock Exchange of Hong Kong Limited (“ Exchange ”) have joined hands in an enforcement action that resulted in the Exchange’s disciplinary actions against a Mainboard-listed FingerTango Inc. (“ Finger ”) ( 06860.HK ) and its eight former directors for misconduct and breach of their duties towards the company and its subsidiaries. Meanwhile, the SFC also sought disqualification and compensation orders from the Court of First Instance (“ CFI ”) for the same alleged misconduct. Snapshot of the legal action: the investigation was concerned with the directors’ misconduct in relation to problematic investments and loans to external parties; at the time of listing, all then directors, including independent non-executive directors, resolved to adopt a policy that would allow certain investment decisions to bypass board approval ; since then, Finger used the proceeds from its IPO to: (i) invest HKD450 million in a fund without knowledge of the board; (ii) partially redeemed the fund and invested another HKD250 million in loan notes (“2019 Loan Notes”); which later turned to be default with a loss of HKD258.75 million; (iii) between May 2020 and March 2021, another 20 loan agreements were entered by Finger and its two subsidiaries with 15 borrowers, totalling HKD500 million (the “2020-21 Loans”), which turned out later with a loss of HKD424 million in default; in the light of the above findings, the SFC expanded the scope of misconduct to include the 2020-21 Loans, with focus on the former directors’ failure to carry out proper procedures and due diligence before entering into loan agreements; SFC is of the view that the losses resulting from the 2019 Loan Notes and 2020-21 Loans were attributable to breaches of the duties of the former directors of Finger, rendering them liable to the compensate the company and its subsidiaries for the incurred losses. SIGNIFICANCE: As SFC’s Executive Director of Enforcement, Mr Christopher Wilson, had commented that corporate directors have the obligations to oversee the activities of management and ensure adequate internal control policies and procedures operate effectively. A lax policy adopted by the directors cannot be considered as an excuse to alleviate their responsibilities. It also conveys the message to the directors and audit committees that they should be mindful of their duties to prevent loss or misuse of listed corporations’ assets. 12. MMT sanctions chauffeur and wife for insider dealing before a takeover announcement The Market Misconduct Tribunal (“ MMT ”) had ordered Ms Choi Ban Yee (“ CHOI ”), the wife of a chauffeur, Mr Sit Yuk Yin (“ SIT ”), who worked for the family of the chairman of Tian An China Investments Company Limited at the material time, to disgorge illicit profit gained from insider dealing in the shares of Asiasec Properties Limited, formerly known as Dan Form Holdings Company Limited (“ Dan Form ”) ( 00271.HK ), before a takeover involving the companies was announced. The MMT was satisfied that SIT was in possession of inside information about the takeover by 13 September 2016 before the announcement was made on 22 September 2016, and he procured his wife to trade the Dan Form shares for a profit of HKD106,968. As a result of the judgement, the MMT imposed against CHOI and SIT cold shoulder orders for 16 months, cease and desist orders and to pay the costs incurred by the government and the SFC. [End of ComplianceOne Newsletter –January 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – August 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES IPO and securities trading growth powers Hong Kong ahead as global financial hub: SFC Quarterly Report Latest updates on Stablecoin-related Development MARKET NEWS SFC and HKMA to co-organise Hong Kong Fixed Income and Currency Forum 2025 ENFORCEMENT NEWS SFC Fines HSBC $4.2 Million for Disclosure Failures in Research Reports SFC Fines Deutsche Bank $23.8 Million for Various Regulatory Breaches during 2020 to 2023 Regulatory Action Against Nerico Brothers Limited involving Misappropriation of Client Assets SFC Revokes Amber Hill Capital’s License and Bans Senior Management for Life Due to Misappropriation of Client Funds and Dishonest Fund Management Practices SFC Seeks Court Order to Freeze $62.5 Million in Assets for Investor Compensation in Eggriculture Ramp-and-Dump Case SFC and HKEX Take First-Ever Joint Action Against Former TOMO Directors for Non-Cooperation SFC Bans Zhu Hong for 12 Months and Fines Her $400,000 for Fund Management Failures Regulatory Updates 1. IPO and securities trading growth powers Hong Kong ahead as global financial hub: SFC Quarterly Report The SFC published its second Quarterly Report (April to June 2025) in August with promising figure. Below are key takeaways of the achievements : Hong Kong solidified its global leadership in IPO , with 51 IPOs and total funds raised surging over 60% year-over-year (“yoy”) to HKD128 billion; The securities market demonstrated with resilience against the extreme volatility in April to restore orderly and normal operations; the HSI rebounded and reached 3-year high with average daily turnover up 85% to HKD243.7 billion in the first seven months; The number of license applications increased 16% yoy for the second quarter; For the asset management sector, the HK-domiciled funds recorded with a growth of 39% in AUM, and the number of open-ended fund (OFC) was up 56%; For virtual asset (“VA”) , the number of SFC-authorized VA spot ETF increased from six to nine, with further steps forward for approval of three VA spot ETF to engage in staking service with investor safeguards; and the number of SFC-licensed VATP increased to 11 together with 57 licensed corporations approved to provide VA dealing service; SIGNIFICANCE: The SFC plays a proactive role as a regulatory institution to provide full-fledged obligations in monitoring and revitalizing the regulatory regime in Hong Kong, balancing the drive for innovation and the indispensable mission of investor protection. 2. Latest updates on Stablecoin-related Development Reminder from Regulatory Institutions in the joint statement Regulatory bodies like SFC and the HKMA issues a joint statement on the recent market movements in relation to stablecoins. Investors are advised to pay attention to the following reminders in making an informed investment decision when encountered with a corporation/ entity which: demonstrates its intention to explore the feasibility of stablecoin issuance; indicates an interest to apply for stablecoin license; claims to have any ongoing communication with the HKMA; Investors should remain cautious that the above procedures are merely part of the licensing process, and the granting of license will be determined by the fulfilment of the licensing requirements of the entity where uncertainties of the final outcome remain. The SFC and HKMA further urge the public to exercise caution and refrain from making irrational investment decision based on the recent euphoria over movements in the market. Recent Updates Since the Stablecoin Ordinance came into effect on 1 st August 2025, all issuers of stablecoin are required to obtain licenses from the Hong Kong Monetary Authority (“HKMA”) in accordance with the “Explanatory Note on Licensing of Stablecoin Issuers”. This regulatory requirement poses a hurdle for the OTC (Over-the-Counter) crypto shops which would find it difficult to comply; yet transactions through the OTC play a significant role as well, particular in providing liquidity of stablecoins like USDT and USDC. There is a common belief that OTC crypto shops are not allowed to “offer” stablecoins, either to retail or professional investors. And the meaning of offering stablecoin is also subject to ambiguities in interpretation. According to the Ordinance, between two individuals, person A communicates with person B and presents sufficient information on all of the following matters enabling person B to acquire the stablecoins; namely: the stablecoins to be offered; the terms on which the stablecoin will be offered; the channels through which the stablecoin will be offered; then the action of person A will be constituted as “ making an offer ” (“要約提供”) to person B. To avoid the action of “making an offer”, some OTC shops do not explicitly display the quotes of the stablecoins, whereas the making of offer is initiated by the clients; it is still considered as a “breach” for reason that the Ordinance does not specify whether person A is the services provider or the client. Ambiguities in comprehending the ordinance pose more uncertainties to market participants. Conditions where the requirement for a stablecoin license is triggered Engaging in “regulated stablecoin activity” means: issuing a specified stablecoin in HK in the course of business; issuing a specified stablecoin in a place outside HK and the specified stablecoin derive its value with reference to HK dollars ; holding out itself as carrying a regulated stablecoin activity, including marketing to HK public, either in or outside HK. Please be noted that only specified stablecoins issued by stablecoin licensees can be offered to retail investors. And a licensee can engage a “ permitted offeror ” to offer specified stablecoins, currently, a permitted offeror can be: (i) a licensee itself; (ii) an authorized institution; (iii) an SFC type 1 licensed corporation (iv) a licensed virtual asset trading platform (“VATP”); (v) a Stored Value Facilities licensee (“SVF”) SIGNIFICANCE: Alike the virtual asset regime, development and evolution of the stablecoin regime is no exception, more mutual communication and interaction at inception stage is indispensable while regulations and guidelines are being finetuned to navigate and rectify any deviations throughout the process. Market News 3. SFC and HKMA to co-organise Hong Kong Fixed Income and Currency Forum 2025 The Hong Kong Fixed Income and Currency (“FIC”) Forum 2025, jointly organised by the Securities and Futures Commission (“SFC”) and the Hong Kong Monetary Authority (HKMA), will take place on 25 September 2025. As a leading Asian international bond issuance hub and the 4 th largest global foreign exchange market, Hong Kong is actively exploring ways to solidify and advance its position in the FIC markets. Many FIC market participants, senior executives from financial institutions, senior government official and regulators are invited to join this dynamic and multilateral forum, with the intention to facilitate sharing of strategic insights and vision for development of the FIC markets in HK. Details of the event programme and other relevant information can be accessed via our dedicated webpage and the Event Progromme webpage . Enforcement News 4. SFC Fines HSBC $4.2 Million for Disclosure Failures in Research Reports On 26 Aug 2025, the SFC in collaboration with the HKMA, has reprimanded and fined the Hongkong and Shanghai Banking Corporation Limited (“HSBC”) $4.2 million for failing to comply with disclosure requirements in research reports on Hong Kong-listed securities. The breaches, spanning from 2013 to 2021, highlight significant lapses in HSBC’s data systems and controls. Key Details of the Case Nature of the Breach: Following a self-report by HSBC, an investigation by the SFC and HKMA revealed that HSBC failed to disclose, or made incorrect disclosures about, its investment banking relationships with companies featured in over 4,200 research reports . These reports, published between 2013 and 2021 , covered Hong Kong-listed securities. The issues stemmed from deficiencies in HSBC’s data recording and mapping systems. Regulatory Violation: The breaches violated Paragraph 16.5(d) of the Code of Conduct for Persons Licensed by or Registered with the SFC, which mandates that firms disclose any investment banking relationships with issuers or new listing applicants in their research reports. The SFC found that HSBC did not exercise due skill and care or implement effective systems to ensure compliance and accuracy in these disclosures. Disciplinary Action: The SFC imposed a $4.2 million fine and a reprimand, reflecting HSBC’s failure to meet regulatory standards. For more details of the case, please refer to the Statement of Disciplinary Action . SIGNIFICANCE: In determining the penalty, the SFC considered: No evidence of client losses resulting from the disclosure failures. HSBC’s proactive reviews to identify the root causes and scope of the breaches. Steps taken by HSBC to enhance its systems and controls to prevent future issues. HSBC’s cooperation with the SFC and HKMA during the investigation. This case underscores the importance of robust systems and controls in ensuring accurate disclosures, which are critical for maintaining transparency and investor trust in financial markets. The SFC’s action serves as a reminder to financial institutions to prioritize compliance with regulatory standards to avoid similar penalties. 5. SFC Fines Deutsche Bank $23.8 Million for Various Regulatory Breaches during 2020 to 2023 On 28 Aug 2025, the SFC reprimanded and fined Deutsche Bank Aktiengesellschaft (“ DB ”) $23.8 million for multiple regulatory violations spanning several years. The breaches include overcharging clients on fees, incorrect valuations of debt instruments and funds, failure to disclose investment banking relationships in research reports and incorrect assignment of product risk ratings. These issues, identified through DB’s self-reports between December 2020 and December 2023, highlight significant lapses in compliance and internal controls. Key Details of the Case Between November 2015 and November 2023, DB’s operational shortcomings led to significant overcharges totalling approximately $39 million: Overcharging management fees in Discretionary Portfolio Management accounts: In 39 Discretionary Portfolios managed by DB, the clients were overcharged with management fees due to DB’s failure to apply agreed discounted rates, caused by flawed processes and implementation. Incorrect valuations of floating rate debt instruments: 392 floating rate debt instruments were incorrectly valued using “fixed” interest rates, inflating portfolio valuations and leading to overcharged custodian and management fees for 92 clients. Incorrect valuation of funds: Valuations of 16 private equity funds and three real estate funds were misstated in monthly statements to 233 clients due to an external vendor’s oversight and DB’s lack of controls, resulting in overcharged custodian fees for 32 clients. Failure to disclose investment banking relationships in research reports: Failed to disclose investment banking relationships in 261 single stock company reports and 1,590 industry reports on Hong Kong-listed companies. This was due to deficiencies in DB’s research disclosure system, which did not account for certain investment banking mandates. Incorrect assignment of Product Risk Ratings: From August 2012 to December 2020, DB assigned incorrect lower risk ratings to 40 exchange-traded funds (“ETFs”), affecting 93 clients and 265 transactions. After correcting the ratings, 10 transactions were found to have risk levels exceeding clients’ risk tolerance. For more details of the case, please refer to the Statement of Disciplinary Action . SIGNIFICANCE: The SFC concluded that DB failed to: Act with due skill, care, and diligence in the best interests of clients and market integrity. Ensure accurate and non-misleading representations to clients. Comply with disclosure requirements for research reports. Adhere to regulatory requirements to promote clients’ best interests. The SFC imposed a $23.8 million fine and a reprimand, taking into account: DB’s reviews to identify the root causes and extent of the breaches. Remediation efforts, including strengthened internal controls and systems. Full refunds of overcharged fees to affected clients. The inadvertent nature of the breaches, with no evidence of deliberate misconduct. DB’s cooperation with the SFC and acceptance of the findings and disciplinary action. This case emphasizes the SFC’s commitment to enforcing compliance with regulatory standards, particularly in ensuring accurate client information and transparent disclosures. Financial institutions must prioritize robust systems to prevent similar lapses, which can undermine investor trust and market integrity. 6. Regulatory Action Against Nerico Brothers Limited involving Misappropriation of Client Assets On 28 August 2025, the SFC revoked the licence of Nerico Brothers Limited (“ NBL ”) due to severe misconduct involving the misappropriation of client assets and the provision of false or misleading information. Additionally, the SFC imposed a lifetime ban on NBL’s director, Jerff Lee Cheuk Fung (“Jerff Lee”), prohibiting him from engaging in any regulated activities. Key Details of the Case: Misuse of Client Funds Between June 2020 and January 2021, NBL allegedly misused over US$68 million from a client's account on six occasions. These funds were used to subscribe for shares in two segregated portfolios of a Cayman-incorporated fund for NBL's own benefit. The firm retained profits from these subscriptions and only returned the principal amounts by June 2021—all without the client's knowledge, authorization, or consent, violating the client agreement. Facilitation of Misappropriation NBL is accused of aiding a scheme led by Neo Ng Yu (“Neo Ng”) and his associates, resulting in the misappropriation of approximately US$154 million from the same client's funds starting in January 2021. From January to August 2021, NBL transferred nearly all the client's assets to a sub-fund for the supposed purchase of "liquidity provider units." However, no such units were issued or held by the sub-fund. Instead, a large portion of the funds was diverted to Neo Ng and his entities. To cover this up, NBL used fabricated transaction documents and account statements. False Information to Regulators During the SFC's inquiry, NBL provided two conflicting explanations about the funds' usage, supported by fabricated documents. Both narratives were proven false, confirming that the funds were misappropriated rather than invested as claimed. Senior Management Accountability The SFC attributes NBL's misconduct directly to Jerff Lee, who was the key figure orchestrating these actions and had close ties to Neo Ng. Lee also personally violated the SFO by providing false or misleading information in SFC interviews. The firm was wound up by the Hong Kong High Court on 3 May 2022. Although Jerff Lee was not personally licensed during the period, he qualifies as a "regulated person" due to his management role. For more details of the case, please refer to the Statement of Disciplinary Action . SIGNIFICANCE: Neo Ng became a substantial shareholder in the client's holding company in December 2020 and briefly served as a director from July 2021 to January 2022. NBL claimed clients needed "liquidity provider units" from a fund to trade currencies, but this was part of the deceptive scheme. This case highlights the SFC's zero-tolerance approach to asset misuse and fraud in the financial sector. It also connects to related actions against Amber Hill Capital Limited and its former executives, Neo Ng and Simon Ng She Chun (see SFC press release dated 28 August 2025 , for details).” 7. SFC Revokes Amber Hill Capital’s License and Bans Senior Management for Life Due to Misappropriation of Client Funds and Dishonest Fund Management Practices On 28 Aug 2025, the SFC took a decisive action against Amber Hill Capital Limited (“ AHCL ”), revoking its license and imposing lifetime bans on its former senior management, Neo Ng Yu and Simon Ng She Chun, for facilitating the misappropriation of funds and engaging in dishonest practices. These measures address serious misconduct that undermined market integrity and caused significant investor losses. Key Details of the Case License Revocation and Bans: The SFC revoked AHCL’s license for its role in facilitating the misappropriation of approximately US$154 million from a client of Nerico Brothers Limited (“ NBL ”) through a Cayman-incorporated fund’s segregated portfolio (Sub-fund), managed by AHCL from October 2017 to September 2021. Neo Ng and Simon Ng, key figures in AHCL’s management, have been permanently banned from all regulated activities due to their direct involvement. Misappropriation Scheme: The SFC investigation revealed that Neo Ng orchestrated a scheme to misappropriate funds through the Sub-fund. Between January and August 2021, NBL transferred client funds to the Sub-fund for the purported purchase of “liquidity provider units,” which did not exist. AHCL accepted these funds and directed the Sub-fund to transfer a significant portion to a corporate vehicle owned by Neo Ng, with most of the remaining proceeds used for the Sub-fund’s own purposes. False Information and Fabricated Documents: AHCL misrepresented to the Sub-fund’s auditors and administrators that NBL was a broker for the Sub-fund and that most of its cash assets were held in an NBL account. Additionally, AHCL claimed Neo Ng subscribed US$297 million for Sub-fund shares via his corporate vehicle, with proceeds held in the non-existent NBL account. These claims inflated the Sub-fund’s cash position by up to US$451 million between November 2019 and May 2021. AHCL also provided fabricated auditors’ reports and documents to mislead investors and prospective investors during this period. For more details of the case, please refer to the Statement of Disciplinary Action . SIGNIFICANCE: Neo Ng, a director and sole shareholder of AHCL, masterminded the scheme and personally benefited from the misappropriated funds and inflated Sub-fund valuations. Simon Ng, his brother and a senior manager, facilitated the scheme by processing the funds, authorizing their transfer to Neo Ng’s vehicle, and providing false information. Their actions were deemed profoundly dishonest, falling far below the standards expected of licensed corporation management. The SFC’s sanctions reflect: The egregious nature of the misconduct, damaging investor and public confidence in market integrity. Significant losses to NBL’s client. The clean prior disciplinary records of AHCL, Neo Ng, and Simon Ng. This case is linked to the SFC’s actions against NBL and its director, Jerff Lee Cheuk Fung, announced on the same date (see SFC press release, 28 Aug 2025 ). The SFC’s actions underscore its commitment to rooting out dishonest practices in the financial sector. The lifetime bans and license revocation send a strong message about accountability, particularly for senior management, in safeguarding investor interests and market integrity. 8. SFC Seeks Court Order to Freeze $62.5 Million in Assets for Investor Compensation in Eggriculture Ramp-and-Dump Case On 29 Aug 2025, the SFC took decisive action to protect investors by applying for a court order to freeze assets up to $62.5 million. This move aims to secure funds for compensating investors affected by a sophisticated ramp-and-dump scheme involving Eggriculture Foods Limited (8609.HK) (“ Eggriculture ”). Key Details of the Case: Asset Freeze Application: On 29 August 2025, the SFC filed an application with the Court of First Instance to restrain the disposal of assets belonging to one of the suspected ringleaders. The assets, valued up to $62,566,773, represent the estimated losses suffered by investors due to alleged market manipulation of Eggriculture shares between August and November 2018. Market Manipulation Allegations: The SFC's legal action targets six individuals, including suspected ringleaders, accused of manipulating Eggriculture Foods Limited’s shares. Eggriculture was listed on the Growth Enterprise Market (“ GEM ”) of the Stock Exchange of Hong Kong Limited on 7 September 2018. The manipulation allegedly occurred shortly after the listing, exploiting the market to the detriment of investors. Court Proceedings: The Court of First Instance held its first hearing on the SFC’s application, issuing directions and adjourning the substantive hearing to a later date to be determined. This ensures a thorough review of the application to freeze assets for investor compensation. Parallel Criminal Trial: In a related development, a criminal trial is scheduled to begin on 13 July 2026, at the District Court. Five of the six individuals involved in the SFC’s civil proceedings face charges of conspiracy to defraud and conspiracy to employ a scheme with intent to defraud or deceive in securities transactions. SIGNIFICANCE: As the legal proceedings are active, the SFC has stated it will refrain from further comments to maintain the integrity of the judicial process. This case underscores the SFC’s commitment to combating market misconduct and ensuring investor protection. By seeking to freeze assets, the SFC aims to secure potential compensation for affected investors, reinforcing trust in Hong Kong’s financial markets. The parallel civil and criminal proceedings highlight the multifaceted approach to addressing sophisticated financial crimes. 9. SFC and HKEX Take First-Ever Joint Action Against Former TOMO Directors for Non-Cooperation In a landmark enforcement action, the SFC and HKEX have collaborated to discipline two former directors of TOMO Holdings Limited (6928.HK) (“ TOMO ”) for failing to cooperate with regulatory investigations. This marks the first time the Exchange has taken disciplinary action against directors for non-cooperation, highlighting the strength of the SFC-HKEX partnership in upholding market integrity. Key Details of the Case Disciplinary Action On 12 August 2025, the Exchange publicly censured Ms. Ma Xiaoqiu, a former executive director, and Mr. Jin Lailin, a former independent non-executive director of TOMO, declaring them unsuitable to serve as directors or in senior management roles at TOMO or its subsidiaries. This action addresses their failure to cooperate with investigations by both the SFC and the Exchange’s Listing Division. Investigation Context The SFC investigated potential violations under the SFO involving TOMO and related parties, issuing notices under section 183 to Ma and Jin for relevant information and documents. Simultaneously, the Exchange’s Listing Division probed whether the directors fulfilled their obligations under the Listing Rules. Both Ma and Jin failed to respond to either investigation. Regulatory Breach The Listing Rules mandate that directors of listed issuers cooperate with SFC and Exchange investigations, an obligation that persists post-tenure. The Exchange’s Listing Committee found that Ma and Jin’s non-cooperation constituted a serious breach of these rules. The SFC’s investigation into TOMO-related matters continues, with further details pending. For more details of the case, please refer to the Disciplinary Action . SIGNIFICANCE: Christopher Wilson, SFC Executive Director of Enforcement , emphasized that non-cooperation undermines regulatory oversight and investor protection, highlighting the SFC’s commitment to robust enforcement through its partnership with the Exchange to ensure accountability. Catherine Yien, HKEX Head of Listing Regulation and Enforcement emphasized that collaboration plays a critical role in maintaining a fair and informed securities market, and underscored the HKEX's zero-tolerance stance on such misconduct and its commitment to market quality. This unprecedented joint action demonstrates the SFC and HKEX’s coordinated approach to tackling regulatory non-compliance. By leveraging the Exchange’s disciplinary powers under the Listing Rules, the regulators are sending a clear message: directors who fail to cooperate face severe consequences, including reputational and operational sanctions. 10. SFC Bans Zhu Hong for 12 Months and Fines Her $400,000 for Fund Management Failures On 18 Aug 2025, the SFC imposed a 12-month ban and a $400,000 fine on Ms. Zhu Hong, a substantial shareholder, director, and former manager-in-charge (“ MIC ”) of Kylin International (HK) Co., Limited (“ Kylin ”). The disciplinary action, effective from 16 August 2025, to 15 August 2026, addresses Zhu’s failures in managing private funds and ensuring compliance with anti-money laundering and counter-terrorist financing (“ AML/CTF ”) obligations. Key Details of the Case The SFC banned Zhu from engaging in any regulated activities and fined her $400,000 for lapses in her duties as a director and MIC at Kylin. Between August 2018 and July 2021, Kylin served as the investment manager and/or consultant for sub-funds of a Cayman-incorporated fund. Zhu was responsible for approving borrowing agreements and implementing AML/CTF internal controls but failed to discharge her duties as a director of Kylin and MIC for the AML/CTF in managing the funds. Kylin was licensed under SFO for Type 9 (asset management) activities from 4 April 2014, until its license was revoked on 22 January 2025, following its cessation of regulated activities on 31 December 2023. From 30 April 2019 to 22 January 2025: Zhu, while not a licensed person, qualifies as a “regulated person” under section 194(7) of the SFO due to her management roles: i. MIC of AML/CTF; ii. MIC of Risk Management; and iii. MIC of Finance and Accounting SIGNIFICANCE: The SFC considered Zhu’s acceptance of liability, her expressed remorse, and her clean disciplinary record in determining the sanctions. The disciplinary action against Zhu is linked to an ongoing SFC investigation into another related entity concerning the same funds, with further details to be released upon its conclusion. This case highlights the SFC’s commitment to holding individuals accountable for failures in fund management and compliance, particularly in critical areas like AML/CTF. It serves as a reminder to financial professionals of the importance of robust oversight and adherence to regulatory standards to protect investors and maintain market integrity. [End of ComplianceOne Newsletter – August2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – 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 . 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