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SFC-HKMA Joint Survey on the Sale of Non-exchange-traded Investment Products 2024 SFC-HKMA Joint Survey on the Sale of Non-exchange-traded Investment Products 2024 Sep 2025 The Securities and Futures Commission (“ SFC ”) and the Hong Kong Monetary Authority (“ HKMA ”) published the conducted annual joint survey on the distribution of non-exchange-traded investment products, showing record sales and level of market participation of these products during 2024. The survey reports a 40% surge, reaching a record HKD 6.07 trillion in non-exchange-traded investment product sales in Hong Kong in 2024, reflecting robust market participation and investor confidence. The SFC and HKMA polled 2,477 responded firms, including 2,368 licensed corporations and 109 registered institutions licensed or registered for Type 1 (dealing in securities), Type 4 (advising on securities) or both regulated activities. The survey covered the sale on non-exchange-traded investment products from 01 January to 31 December 2024 (“ reporting period ”) by licensed corporations and registered institutions to non-professional investor clients, individual professional investors, and certain corporate professional investors where intermediaries cannot make use of a waiver of the suitability obligation. The survey indicates that all major non-exchange-traded investment product types recorded “significant” sales growth last year, according to a joint statement issued by the two regulators in September 2025. Product Type Sales Growth (%) Collective Investment Scheme 76% Structured Products 30% Debt Securities 29% According to the finding, sales of authorized collective schemes (“ CIS ”) grew 76% in 2024. Based on the survey, money market funds remained to be the top-selling CIS, followed by bond funds with an increase of 80% in 2024. Meanwhile, sales of structured products and debt securities increase by 30% and 29% year-on-year, respectively. In terms of overall transaction amount sold in 2024, the top product type sold by licensed corporation and registered institutions during the reporting period was structured products (HKD 2.567 trillion or 42%), followed by CIS (HKD 2.244 trillion or 37%) and debt securities (HKD 941 trillion or 15%). Product Type Total Sales (%) Amount in HKD Structured Products 42% $ 2.567 trillion CIS (Authorised Product) 23% $ 1.4 trillion Debt Securities 15% $ 941 trillion CIS (Non-Authorized Product) 14% $ 844 billion Swaps 4% $ 221 billion Repos and others 2% $ 100 billion Market participants observed a notable improvement in market conditions and investor sentiment throughout 2024. This shift was driven by favourable factors, including supportive policy measures from Mainland authorities, anticipations of monetary easing by major central banks, robust performance in global equity markets, and a more optimistic global economic outlook. These conditions encourage investors with a higher risk tolerance to increase their market exposure and allocate capital towards higher-yield instruments, such as equity linked structured products. On the other hand, significant downside risks including ongoing political tensions, prolonged regional conflicts, uncertainty surrounding the trade and foreign policies of the new U.S. administration, and the latent risk of a market correction prompted a more risk-averse segment of the investor base to seek shelter in lower-risk, income-oriented products. This included CIS and debt securities, such as money market funds and sovereign bonds. What to expect from the Regulators? The SFC and the HKMA will initiate a new round of concurrent thematic review of the distribution of non-exchange traded investment products by intermediaries. The upcoming concurrent thematic review will examine selected intermediaries’ policies and procedures, systems and controls, and management oversight concerning the distribution of CIS. The objectives of this review include evaluating intermediaries’ compliance with the suitability requirement under the Code of Conduct, including their practices in performing product due diligence, conducting suitability assessments and providing information to clients. If you have any questions, please feel free to Contact Us .

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

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

Ensuring Effective Compliance of MSO Licenses - Through Internal Audit and The Achievement of Business Sustainability Join us and the Association of International Accountants (AIA) for this year's seminar! We'll be discussing the topic of Ensuring Effective Compliance of MSO Licenses - Through Internal Audit and The Achievement of Business Sustainability . Topics: (Part 1) 1. MSO License Guide 2. MSO License Compliance 3. Payment Security and Compliance of Cross-border Payments (Part 2) 4. Current Status of MSO License Compliance 5. Key Aspects of CE&D's Annual Reviews and Interviews 6. Internal Audit and Business Sustainability Event Details: Date: 3 August 2024 (Saturday) Time: 14:00 – 16:30 Fee: $ 200 for AIA or ACIA / $ 250 for non-members (Free for PolyU HKCC and SPEED students) Language: Cantonese 廣東話 (Supplemented with English PPT) Venue: PolyU Hong Kong Community College (West Kowloon Campus) Address: 9 Hoi Ting Road, Yau Ma Tei, Kowloon Training hours: 2.5 * Training Certificate will be sent via email after the seminar Speakers: Tao Wong, Co-founder & Partner, ComplianceOne Consulting Limited Boris Luk, Chief Compliance Officer and Money Laundering Reporting Officer (MLRO), with qualifications including Master of Business Administration, Master of Laws, and Forensic CPA. Don't miss out on this informative and valuable event! Register now to secure your spot. https://forms.gle/TMouCWJ8THssBspJ7 For further information, please contact Tiffany Chan at WhatsApp +852 54908117. ComplianceOne Consulting Limited

Guideline on Streamlined approach for SPI

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