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 are as follows: ComplianceOne Newsletter – Apr 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES The SFC Enforcement Reporter is back in action SFC sets out staking guidance for licensed VATPs and authorised VA funds MARKET NEWS A Revised grant scheme for Open-ended fund companies and Real estate investment trusts Uncertificated Securities Market Regime to be launched in early 2026 SFC and HKEX co-organise inaugural International Carbon Markets Summit ENFORCEMENT NEWS Interactive Brokers Hong Kong is Fined HK$4.2 Million for mishandling of Client Assets SFC Takes Disciplinary Action Against CSC Futures and Former Executive for Inadequate Due Diligence on Customer Supplied Sysytems Regulatory Updates 1. The SFC Enforcement Reporter is back in action In March, the SFC announced that the “Enforcement Reporter” is back in action again. A snapshot of focus on the highlights of the “New Market Scanning Initiative” and the “SFC & AFRC# Joint Statement and Enforcement Actions on Dubious Loans” are as follows. # Accounting and Financial Reporting Council (AFRC): The independent regulator of the accounting profession. A. New Market Scanning Initiative The SFC is of the view that early intervention is the key to prevent governance failures, and the Commission is leveraging the use of artificial intelligence (AI)-empowered analytics to: (i) identify red flags in listed companies engaged in money-lending activities including: e.g. granting substantial loans with insufficient due diligence and internal control; (ii) through the adoption of “Market Scanning Detection Model” and to engage with boards and audit committees to highlight key risk areas and governance concern before the issues are worsened. The goal is to prevent rather than to discipline , the SFC aims to achieve: (i) Early Intervention to identify, prevent and mitigate. (ii) Behavioural Change in management culture to take proactive steps to address issues. (iii) Market Confidence from investors through promoting transparency and accountability. B. SFC & AFRC Joint Statement and Enforcement Actions on Dubious Loans It was found that in recent years, corporate executive at listed companies may use loan arrangements to divert corporate funds to related parties which usually lack genuine commercial purpose, and not for interest of the company itself. In the light of this, the SFC and the AFRC had issued a joint statement in July 2023, signalling to the public their collaboration in addressing the trend in capital market in Hong Kong. The statement highlighted an observed increase in suspected misconduct by listed issuers using dubious loans, some red flags are: (i) Loans granted without sound commercial rationale. (ii) Poor Due Diligence with insufficient risk assessments or supporting documentation. (iii) Weak Internal Controls in managing loan approvals. The SFC & AFRC had set out some guidelines in addressing the issue of dubious loans with expected standards as below: (a) Expectation on Management (i) undergo effective vetting of loans; (ii) act with duty of good faith; (iii) ensure proper documentation; (iv) report material issues timely to the board. (b) Expectation on Audit Committees (i) ensure oversight of internal controls; (ii) ensure accurate financial reporting of the loans in the financial statements; (iii) engage with auditor to ensure a robust audit on the loans. (c) Expectation on Auditors (i) design responsive audit procedures to evaluate the effectiveness of internal controls over the loans granted; (ii) heighten professional scepticism when come across loans without proper commercial rationale; (iii) timely report any observed or suspected fraud to the audit committee. For more details of the highlights in the Reporter, please click Enforcement Reporter Returns . Source: Enforcement Reporter Returns of SFC 2. SFC sets out staking guidance for licensed VATPs and authorised VA funds The SFC provided on 7 April 2025, together with two additional circulars of regulatory guidance, to: (i) licensed virtual asset trading platforms (“ VATP ”s) on their provision of staking services; (ii) SFC-authorized funds with exposure to virtual assets (“ VA Funds ”) on their engaging in staking. “ Staking refers to the process of committing or locking client virtual assets for a validator to participate in a blockchain protocol’s validation process based on a proof-of-stake consensus mechanism, with returns generated and distributed for that participation ”. The SFC recognised the potential benefits of staking in enhancing the security of blockchain networks and allowing investors to earn yields on virtual assets within a regulated market environment . The guidelines allow VATPs to expand the product and service offerings which are in line with one of the five pillars (“ Products ” as one of the Pillar P ) set out in the “ ASPIRe ” roadmap to develop the VA ecosystem in Hong Kong. In the circular to VATPs, clear guidance is provided to licensed platforms when providing staking services. To further protect investors, VATPs should maintain measures to prevent any errors associated with provision of the services, to safeguard the staked client virtual assets, and ensure proper risks disclosure of staked assets to investors. Also, VATPs interested in providing staking services have to acquire SFC’s prior written approval, and be subject to specific conditions imposed by the SFC. The “ Terms and conditions for providing staking services ” have already been enclosed as Appendix in the relevant circular for reference to interest parties. In the revised circular on SFC-authorized VA Funds to facilitate their engagement in staking, these funds are required to stake virtual assets holdings only through SFC-licensed VATPs or authorized institutions, and be subject to a cap to manage the liquidity risk. Also, the VA Funds have to seek prior consultation with and approval of the SFC before engaging in VA-related staking activities. SIGNIFICANCE: The perspective of SFC is clear as Ms Julia Leung, the SFC’s CEO, has said, “ Broadening the suite of regulated services and products is crucial to sustain the healthy advancement of Hong Kong’ s virtual asset ecosystem ”; yet she also added that such mission should be done in a regulated environment to safeguard clients’ interests in virtual assets in order to uphold the compliance framework. Market News 3. A Revised grant scheme for Open-ended fund companies and Real estate investment trusts Since the launch of the grant scheme in May 2021, which gained overwhelming industry support for its vision to support the setting up of open-ended fund companies (“ OFC ”s) and real estate investment trusts (“ REIT ”s) in Hong Kong, the SFC has recorded a strong growth in the number of OFCs. As of the end-February 2025, the number of OFCs in Hong Kong was recorded with a year-over-year increase of 81% to 502, among which 430 OFCs and one REIT have benefitted from the grant scheme. In the light of keen industry demand, the Hong Kong Government announced in the 2024-25 Budget with an extension of the grant scheme for another three years to 2027 to facilitate continued development of the industry and adoption of OFC structure in Hong Kong. In order to benefit more participants, the eligibility criteria of the grant scheme have been adjusted. With effect from 11 April 2025 , for OFCs incorporated in or re-domiciled to Hong Kong and any SFC-authorized REITS newly listed on the Stock Exchange of Hong Kong Limited, they will be subject to the following criteria under the “adjusted” grant scheme (the “ New Scheme ”): The New Scheme will cover 70% of eligible expenses paid to HK-based service providers with a cap of HKD300,000 for a public OFC ( down from HKD1 million before ), HKD150,000 for a private OFC ( down from HKD500,000 ) and HKD5 million ( down from HKD8 million ) for a REIT, with a maximum of one OFC per investment manager. Details of the eligibility criteria of the New Scheme are set out in the Attachment under the circular. SIGNIFICANCE: It should be noted that a “ first-come-first-served ” basis is adopted by the grant scheme, and the scheme will expire when the funding is fully disbursed or in May 2027, whichever is earlier. Upon full utilisation of the funding, an applicant may not receive a grant at all or may only receive less than the original eligible grant amount. Despite reduction in subsidies, the scheme undoubtedly continues to help sustain the momentum of the development of the OFC and REIT regimes in Hong Kong. 4. Uncertificated Securities Market Regime to be launched in early 2026 The SFC is pleased to announce the enactment of all necessary legislation to get readiness for implementation of the uncertificated securities market initiative (“ USM ”) in early 2026. From recent consultations during previous years, the SFC found that the launch of USM gained wide support from market participants and investors as the USM not only increases efficiency in the securities market and also provides better protection and trading convenience to investors. A dedicated USM webpage is introduced to provide one-stop access to all useful information with FAQs for illustrations. Among the key changes under USM are: (i) for newly listed securities , they will have to be in paperless form upon listing, securities in paper form are no longer available to investors; (ii) for existing securities , paper certificates will not be invalidated. Yet, each issuer has to take steps to ensure investors can hold and transfer the securities in their own names without paper before a specific deadline after which the issuers will no longer be able to issue new paper certificates. The SFC is working with Hong Kong Exchanges and Clearing Limited (“ HKEX ”) and the Federation of Share Registrars Limited (“ Federation of Share Registrars ”) on a detailed five-year implementation timetable which will cover around 2,500 issuers from Hong Kong, Mainland China, Bermuda and Cayman Islands for a gradual participation in the USM scheme. SIGNIFICANCE: The USM provides an efficient means for investors to hold and manage securities in their own names electronically, using platforms that are operated by approved securities registrars and connected to systems of Hong Kong Securities Clearing Company Limited (“ HKSCC ”). Precisely, under the USM : (i) investors hold legal title to securities but in uncertificated form; (ii) investors enjoy full shareholder rights directly and can transfer and manage their securities electronically online; (iii) enables a faster and more efficient processing, effecting of transfers as quickly as within the same business day; (iv) this option is available to all investors, regardless of how they currently hold their securities. Source: Uncertificated Securities Market | Securities & Futures Commission of Hong Kong of SFC 5. SFC and HKEX co-organise inaugural International Carbon Markets Summit The SFC and HKEX co-organized the inaugural International Carbon Markets Summit in Hong Kong, signalling as a pioneer in hosting this kind of Summit in Hong Kong. More than 200 participants with representatives from local and overseas regulators, carbon trading venues, corporates and investors attended the forum. Key takeaways in discussion are: (i) the challenges in scaling global voluntary carbon markets; (ii) expansion of cross-border carbon transactions; (iii) the role of technology in facilitating linkages. Below is a concluding highlight from Ms. Julia Leung, the SFC’s CEO: “ Today marks the start of a collaborative effort where stakeholders across the carbon market ecosystem come together to discuss the scaling of voluntary carbon markets. Adhering to best practices and international principles is fundamental to building a harmonized, credible and transparent carbon market ecosystem. ” Enforcement News 6. Interactive Brokers Hong Kong is Fined HK$4.2 Million for mishandling of Client Assets SFC has reprimanded and fined Interactive Brokers Hong Kong Limited (“ IBHK ”) HK$4.2 million for regulatory breaches in relation to the handling of client assets. Key Findings Between December 2017 and October 2020, IBHK loaned client securities worth approximately HK$586 billion without valid standing authorities, affecting 7,911 clients. The issue arose due to a programming error that prevented the distribution of renewal notices for Client Securities Standing Authority (“ SLOA ”) documents, which are required to remain valid for no more than 12 months under the Securities and Futures (Client Securities) Rules (“ CSR ”). IBHK's system was designed to send renewal notices to clients to extend the validity of SLOAs. However, a staff error in December 2017 left updated notice templates inactive, halting their distribution. As a result, IBHK relied on expired authorities to lend securities listed on the Stock Exchange of Hong Kong (“ SEHK ”) under a securities borrowing and lending agreement. Remedial Actions Upon discovering the error on 27 October 2020, IBHK promptly activated the revised templates and obtained updated standing authorities from clients by Q2 2021. Further remedial actions included: Distributing renewal notices every 11 months to ensure timely renewals. Removing expired or deactivated templates to prevent future errors. Enhancing its compliance assurance program to ensure accurate and timely notice distribution. IBHK confirmed that no clients suffered financial losses due to the incident. SFC's Decision SFC considered IBHK’s self-reporting, remedial efforts, cooperation, and the absence of deliberate misconduct or client harm in determining the sanction. The fine and reprimand underscore the importance of robust compliance systems to protect client assets and adhere to regulatory standards. SIGNIFICANCE: This enforcement action serves as a reminder for licensed entities to maintain rigorous internal controls and ensure compliance with client asset protection rules. The SFC continues to prioritize investor protection and market integrity through vigilant oversight. For more details, please refer to the Statement of Disciplinary Action from the SFC. 7. SFC Takes Disciplinary Action Against CSC Futures and Former Executive for Inadequate Due Diligence on Customer Supplied Systems SFC has taken disciplinary action against CSC Futures (HK) Limited and its former responsible officer, Mr. KAO Cheng Yung, for compliance failures occurring between January 2017 and December 2018. These failures were attributed to Mr. KAO’s inability to effectively discharge his duties as a responsible officer and member of senior management. Key Findings The compliance issues centred on two key areas: inadequate due diligence on customer supplied systems (“ CSSs ”) and insufficient monitoring of client accounts for suspicious activities. 1. Customer Supplied Systems : CSC permitted 100 clients to use their own trading software without proper oversight. Specific shortcomings included: Allowing CSSs, such as Xinguanjia , which enabled sub-accounts, potentially facilitating unlicensed trading and increasing money laundering risks. Conducting only compatibility checks, neglecting to assess the software’s features or associated risks. 2. Client Account Monitoring : CSC also failed to implement an effective system to detect suspicious activities in client accounts. Notable lapses were: Lacking procedures to ensure deposits aligned with clients’ declared financial profiles. Failing to investigate suspicious deposits in five client accounts that were disproportionate to their declared financial situations. SFC's Decision As a result, SFC has imposed a six-month prohibition on Mr. KAO from engaging in regulated activities, effective from 19 April 2025 to 18 October 2025, and fined CSC Futures $4.95 million. In determining these sanctions, the SFC weighed the seriousness of the failures against Mr. KAO’s otherwise clean disciplinary record. SIGNIFICANCE: The SFC concluded that these failures breached the Code of Conduct and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, demonstrating a lack of due skill, care, and diligence, as well as inadequate internal controls. This enforcement action emphasizes the vital role of robust compliance systems in preventing financial crimes and upholding the integrity of Hong Kong’s financial markets. For more details, please refer to the Statement of Disciplinary Action from the SFC. [End of ComplianceOne Newsletter –April 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

在此次分享中，我們講解了香港金融監管機構的結構及其監管下的香港金融牌照，以及持續合規的重要要點。 感謝全球惠商邀請天匯合規分享“金融出海新方略”。在此次分享中，我們講解了香港金融監管機構的結構及其監管下的香港金融牌照，以及持續合規的重要要點。 天匯合規期待繼續為大家帶來更多有關香港金融牌照和合規的資訊。 Thank you to QuanQiu HuiShang for inviting ComplianceOne to share insights on "New Strategies for Financial Expansion." During this presentation, we discussed the structure of Hong Kong's financial regulatory institutions and the financial licenses under their supervision, as well as key points on maintaining ongoing compliance. ComplianceOne looks forward to continuing to provide more information regarding Hong Kong financial licenses and compliance.

2022年5月26日，政信產業聯盟與中國政信國際開發集團有限公司聯合舉辦的「跨境投融資實務操作系列講座之香港金融牌照優勢解析」在線上成功 聚焦出海之路|「跨境投融資系列講座之香港金融牌照優勢」線上成功舉辦 2022年5月26日，政信產業聯盟與中國政信國際開發集團有限公司聯合舉辦的「跨境投融資實務操作系列講座之香港金融牌照優勢解析」在線上成功舉辦。 本次講座特別邀請天匯合規顧問有限公司合夥人王陶浚先生為大家解析香港金融牌照優勢，帶來更多創富靈感和投資機會。 王陶浚先生畢業於美國堪薩斯大學工商管理與金融學系，曾任職海通國際十餘年，有全方位牌照公司運營管理經驗，並專業為客戶設計策略性規劃、提供量身企業服務方案、申請相關金融牌照服務等，具備專業、豐富的金融實操經驗。 香港作為中資企業出海的橋梁，在公開交易市場完善度、經營環境成熟度以及金融產品豐富度等層面，都處在國際金融市場的優勢地位。隨著中國經濟的快速發展，不少中資企業通過赴港開展金融業務，獲得了參與國際金融活動的機會。而後疫情時代，眾多投資者希望通過香港作為跳板投資海外市場。 王陶浚先生分別從香港金融牌照「申請概況」「申請要求」等環節，介紹了香港主要金融監管機構、金融牌照的基本情況，重點闡述了香港金融牌照的優勢。他表示，香港金融牌照具備成本低、國際背書效果強、可承接承做更多國際業務、背靠全球頂尖的資本市場的優勢。 最後，結合具體案例講解，王陶浚先生進一步講解，如何通過香港的美元債券市場，為各省市的基建項目籌集到低成本的資金；如何通過香港的金融市場，為國內高凈值的客戶進行海外資產配置及家族顧問服務等，通過對案例進行分析拆解，讓與會嘉賓對跨境投融資業務有了更加直觀具體的認識，為企業開展境外發債、拓展跨境融資渠道提供了經驗分享和專業建議。 當下，隨著「走出去」步伐加快，跨境融資是眾多中資企業拓寬融資渠道、降低融資成本、優化境內外兩個市場資源配置的「新藍海」。作為政信投資集團海外業務中心，中國政信國際開發集團有限公司，以香港地區為戰略支點，依托政信面向全球開展國際開發，發揮香港節點作用，促進「外循環」，為內地政信項目構建基金融資平臺，對接海外機構投資者，致力實施集團國際化戰略。 未來，中國政信國際開發集團有限公司也期待與更多合作夥伴積極溝通交流，探索多樣化的活動形式，共同賦能更多中資企業出海。

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – October 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES PIBA Urges Compliance with IA's Referral Fee Guidelines for Participating Policies and Warns Against High-Risk Practices MARKET NEWS IA Introduces Framework for Domestic Systemically Important Insurers (D-SIIs) JD.com (京東集團) Obtains Insurance Brokerage License in Hong Kong ENFORCEMENT NEWS ICAC Charges Six Individuals, Including Police Officers, in HK$3 Million Insurance Fraud Scheme IA imposed 30-year ban on WONG Ka Keung for conspiring to defraud HK$27 million Regulatory News 1. PIBA Urges Compliance with IA's Referral Fee Guidelines for Participating Policies and Warns Against High-Risk Practices On 13 October 2025, the Professional Insurance Brokers Association (“ PIBA ”) issued the Memo, regarding to the IA circular dated 1 September 2025 , which sets out regulatory expectations for referral fees paid by licensed insurance broker companies on participating policies (those involving profit-sharing). For more detail, please refer to the Memo: PIBA Circulars - IA's regulatory expectation on referral fees Summary of the IA circular Effective from 1 October 2025, all licensed brokers and insurers must fully comply with these rules, which include a 50% benchmark limit on fees to unlicensed referrers to prevent excessive payments and promote fair practices. For more detail, please refer to ComplianceOne Insurance Newsletter – August 2025 (Topic 1) Summary of the PIBA Memo PIBA, having engaged closely with the IA during the guideline development, stressed the need for immediate action: reviewing and revising existing referral contracts to ensure alignment, confirming all arrangements (new or ongoing) meet the expectations, and establishing strong internal controls to avoid non-compliance. The IA has already contacted several broker companies and their Responsible Officers (“ RO ”) in September 2025 to emphasize adherence, indicating potential for stricter enforcement if violations occur. To enhance oversight, the IA plans to issue questionnaires on referral details, conduct on-site and off-site inspections for high-risk cases, scrutinize referral arrangements during license renewals, and apply similar reviews to insurers' due diligence processes. Focus areas include unusual financial statement items like Business Expenses; Large Marketing or Administrative Costs; Rapid Growth in Broker Volumes Reported by Insurers; and Market Intelligence from Complaints. High-Risk Practices The memo also includes an annex outlining high-risk practices to evade the rules, which PIBA strongly advises against due to their legal and regulatory risks. These include: Rumoured Fee Arrangement Potential Risk and Consequences (i) Pass-through payments via technical representatives Detectable through abnormal volumes and triggering AML scrutiny (ii) Misclassifying fees as fictitious services Exposed in audits (iii) Splitting fees across multiple referrers per policy Assessed on total fees (iv) Using offshore companies Ineffective against due diligence requirements (v) Supplementing fees with private profit distributions Inefficient post-tax (vi) Applying for multiple agency licenses to shift business Violating Insurance Ordinance sections 64j and 64k, a criminal offense SIGNIFICANCE: This comprehensive guidance from PIBA reinforces the IA's push for ethical referral frameworks, reducing risks of misconduct and supporting sustainable industry growth. By consolidating reminders on compliance, upcoming regulatory actions, and avoidance of evasion tactics, it equips brokers to prioritize professional standards, enhance transparency, and protect policyholders, ultimately bolstering trust in Hong Kong's insurance sector amid evolving market dynamics. Market News 2. IA Introduces Framework for Domestic Systemically Important Insurers (D-SIIs) On 17 October 2025, the IA announced the implementation of a new framework for classifying Domestic Systemically Important Insurers (“ D-SIIs ”). This macroprudential approach identifies insurers whose potential failure could significantly disrupt Hong Kong's local financial system, necessitating enhanced supervisory measures. The IA will recommend to the Financial Secretary that all D-SIIs be included under the Financial Institutions (Resolution) Ordinance (“ Cap. 628 ”) to enable comprehensive resolvability assessments and resolution planning. The list of Insurers classified as D-SIIs Under this framework, AIA Group Limited (“ AIA ”) and Prudential Corporation Asia Limited (“ Prudential ”) have been designated as D-SIIs. Both entities are recognized as Internationally Active Insurance Groups (“ IAIGs ”), complying with stringent standards within the IA's group-wide supervision framework. Annual assessments will be conducted to review and update classifications, aligning with international best practices. The following table summarizes the classified D-SIIs ( Last update 17 Oct 2025 ): Insurer Remarks AIA Group Limited Internationally Active Insurance Group; subject to group-wide supervision. Prudential Corporation Asia Limited Internationally Active Insurance Group; subject to group-wide supervision. The list shall be updated by the IA when needed, for the latest version, please visit: Domestic Systemically Important Insurers What is a D-SII? D-SIIs are insurers whose failure could cause significant disruption to Hong Kong's financial system due to their size, market importance, and interconnectedness. The IA's D-SII framework uses a two-step assessment process: Quantitative (evaluating size, substitutability, interconnectedness, and liquidity); and Qualitative (considering additional risks and mitigating factors). Designated D-SIIs face enhanced supervision, including resolution planning under the Cap. 628 and integration with frameworks like the IAIS Holistic Framework for systemic risk management. SIGNIFICANCE: This framework enhances financial stability by proactively addressing systemic risks in the insurance sector, ensuring that critical insurers are resilient and resolvable without widespread economic fallout. By designating AIA and Prudential as D-SIIs, the IA reinforces Hong Kong's alignment with global regulatory standards, such as those from the International Association of Insurance Supervisors. Insurers and stakeholders should prepare for heightened oversight, which promotes long-term market integrity and policyholder protection. 3. JD.com (京東集團) Obtains Insurance Brokerage License in Hong Kong On 23 October 2025, JD.com (京東集團) Hong Kong subsidiary - Jingdong Insurance Consultants (Hong Kong) Limited, was granted an insurance brokerage license by the IA in Hong Kong. Spotlight on the Climate Modelling Project Name (EN) Jingdong Insurance Consultants (Hong Kong) Limited Name (CN) 京東保險顧問（香港）有限公司 Licence No. GB1101 Line(s) of Business General & Long Term Business (including Linked Long Term Business) Licence Period Start Date: 14 Oct 2025End Date: 13 Oct 2028 Business Address Suite 603, 6/F., Laws Commercial Plaza, 788 Cheung Sha Wan Road, Kowloon, Hong Kong Responsible Officer(s) LAM Che Chuen (林志全) License No.: IA5762 For more details, please refer to Register of Licensed Insurance Intermediaries The license, which remains valid until October 2028, positions JD.com to expand into the local insurance market by offering brokerage services. The responsible officer for the licensed entity is LAM Che Chuen, a seasoned professional in the sector. This development follows reports of JD.com actively recruiting insurance personnel with relevant licenses and experience in Hong Kong's insurance industry, signalling a strategic push to build a local team. SIGNIFICANCE: JD.com , a major Chinese e-commerce giant with a market value of approximately US$52 billion, is leveraging this license to tap into Hong Kong's robust insurance landscape, which has seen significant growth from Mainland Chinese visitors contributing HK$62.8 billion in new business premiums in 2024. The move aligns with broader efforts by tech firms to integrate financial services, including insurance, into their platforms. JD.com 's entry into Hong Kong's insurance brokerage market enhances competition and innovation, potentially offering digital-first solutions to consumers amid rising demand from cross-border clients. This could drive product diversification and efficiency but also underscores the need for rigorous regulatory oversight to ensure compliance and protect policyholders. Licensed intermediaries and insurers should monitor such expansions for partnership opportunities while reinforcing internal controls against emerging risks in tech-integrated financial services. Enforcement News 4. ICAC Charges Six Individuals, Including Police Officers, in HK$3 Million Insurance Fraud Scheme On 8 October 2025, the Independent Commission Against Corruption (“ ICAC ”) charged LAM Hin Ho (林顯豪) (“ LAM ”), a 36-year-old police sergeant, along with five others, in connection with a fraud scheme that allegedly defrauded two insurance companies: Sun Life Hong Kong (香港永明金融) (“ Sun Life ”); and China Taiping Life Insurance (Hong Kong) (中國太平人壽保險(香港) (“ China Taiping ”)) The fraud scheme with approximately HK$3 million in commissions, bonuses, and allowances. The scheme involved recruiting dummy insurance agents and policyholders to submit 20 fraudulent policy applications between December 2016 and June 2024. The following table outlines the key timeline of events based on official ICAC disclosures: Timeline Event/Action Source/Link Dec 2016 - Jun 2024 Allegedly recruited dummy agents (family, friends, colleagues) and submitted 20 false policy applications; arranged falsified credentials for one participant. ICAC Press Release (8 Oct 2025) 8 Oct 2025 Charged by ICAC along with five co-defendants; bail granted. ICAC Press Release (8 Oct 2025) 9 Oct 2025 Court appearance at Eastern Magistrates' Court; case transferred to District Court. Case Number: ESCC 2632/25 ICAC Press Release (8 Oct 2025) 6 Nov 2025 ICAC update on ongoing case; confirmation of two fugitives implicated with arrest warrants issued. ICAC Press Release (6 Nov 2025) LAM faces 21 charges: 20 counts of fraud under Section 16A of the Theft Ordinance and one count of conspiracy to make false instruments. He allegedly conspired with an insurance company mid-level manager (who remains at large) to recruit family members, friends, and police colleagues as dummy insurance agents. False representations were made to induce the insurers to underwrite the policies and release payments totalling around HK$1 million from Sun Life and HK$2 million from China Taiping. Additionally, LAM is accused of arranging falsified academic credentials for one co-defendant to join China Taiping to facilitate the scheme. A recent ICAC update on 6 November 2025 confirmed the ongoing proceedings against the six charged individuals, with two additional suspects—a former mid-level manager at the involved insurers and another individual—implicated but currently at large. Arrest warrants have been issued for these fugitives. The defendants were granted bail and appeared in Eastern Magistrates' Court on 9 October 2025, with the case transferred to the District Court for further handling. SIGNIFICANCE: This case highlights the persistent risks of insurance fraud through manipulated agency structures and falsified documents, which undermine industry integrity and policyholder trust. It underscores the need for insurers to enhance due diligence in agent recruitment, policy verification, and commission disbursement processes. Regulatory bodies like the ICAC and Insurance Authority continue to prioritize enforcement to deter such schemes, reinforcing Hong Kong's reputation as a transparent financial hub. Insurers are advised to review internal controls and collaborate with authorities to mitigate similar vulnerabilities. 5. IA imposed 30-year ban on WONG Ka Keung for conspiring to defraud HK$27 million On 3 November 2025, the IA imposed a 30-year ban on Mr. WONG Ka Keung (王家強) (“ WONG ”) (Licence number: IE9049), prohibiting him from acting as an insurance intermediary. This disciplinary action stems from his involvement in a large-scale fraud scheme where he conspired with at least nine other individuals to defraud his appointed authorized insurer of approximately HK$27 million over a three-year period. Reasons for the Ban Imposed WONG arranged for patients suffering from critical illnesses to impersonate policyholders and submit false claims, personally profiting around HK$13.5 million. He also forged three sick leave certificates for one patient to support the deception, including forged medical records for a pair of sisters to fraudulently obtain insurance payouts and extend sick leave. Details of the Case - HCCC 182/23 : WONG was charged by the Independent Commission Against Corruption (“ ICAC ”). High Court Judge described WONG as the mastermind, noting that his critical role as an insurance agent constituted a severe breach of fiduciary duty. The judge highlighted that the fraud could have continued indefinitely if undetected, causing ongoing harm to AIA Group Limited (友邦保險香港). As a result, he was sentenced to six years and four months in prison. The IA highlighted that such misconduct constitutes a criminal offense, disrupts market operations, and undermines the legitimate interests of policyholders. The lengthy ban underscores the gravity of the violations. SIGNIFICANCE: This case exemplifies the IA's zero-tolerance approach to fraudulent activities within the insurance sector, reinforcing regulatory enforcement to maintain market integrity and protect policyholders. By imposing one of the longest bans on record, the IA sends a clear deterrent message to intermediaries, emphasizing the severe consequences of criminal involvement in false claims. This action supports broader efforts to enhance trust in Hong Kong's insurance industry, particularly amid rising concerns over misconduct, and aligns with ongoing initiatives to strengthen compliance and ethical standards. [End of ComplianceOne Insurance Newsletter – October 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1605, 16/F, West Tower, Shun Tak Centre,168-200 Connaught Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – Feb 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES 1. SFC convenes inaugural VA Consultative Panel meeting 2. SFC sets out ASPIRe roadmap as blueprint to navigate Hong Kong as a global virtual asset hub 3. Hong Kong's market watchdog reviews 8 brokerages amid IPO oversubscription frenzy 4. SFC Supports Listing of Alternative Funds to Boost Investor Options 5. SFC Leads Regional Consensus on Sustainability, Tech, and Investor Protection 6. SFC proposes to relax position limits for key exchange-traded derivatives 7. SFC flags cybersecurity incidents in a thematic review report MARKET NEWS 8. SFC supports government budget measures 9. HashKey Capital is granted approval for VA discretionary accounts management services ENFORCEMENT NEWS 10. SFC Imposes Restriction Notices on Money Concepts Entities 11. SFC Launches Insider Dealing Case Against Wong Pak Ming Regulatory Updates 1. SFC convenes inaugural VA Consultative Panel meeting Earliest on 14 FEB, the SFC had convened an inaugural meeting of the Virtual Asset Consultative Panel (“ VACP ”) for the licensed virtual asset trading platforms (“ VATP ”s). Chaired by the SFC’s Executive Director of the Intermediaries Dr Eric Yip, the VACP comprises all the licensed VATPs represented by members of their senior management, and is expected to provide invaluable contribution to the SCF’s formulation of regulatory policy to further facilitate the development of a sustainable and resilient virtual asset ecosystem. Members of the VACP will collaborate towards the aim of identifying policy priorities, paving way for market and regulatory developments. As added by Dr Eric Yip, “The SFC looks forward to close collaboration with the members to encourage and develop innovation while ensuring adherence to regulatory standards in this rapidly changing landscape”. SIGNIFICANCE: The VACP is a good example of SFC’ s proactive engagement with the licensed VATPs in addition to its previous engagement in launching the swift licensing process for new VATP applicants with a streamlined approach. 2. SFC sets out ASPIRe roadmap as blueprint to navigate Hong Kong as a global virtual asset hub The SFC outlined 12 major initiatives to enhance the security, innovation and growth of Hong Kong’ s virtual asset (“ VA ”) market under a five- pillar “ ASPIRe ” roadmap, which stands for Access, Safeguards, Products, Infrastructure and Relationships. A snapshot of the pillars and initiatives: FIVE-pillars (incorporating the TWELVE initiatives) “ A-S-P-I-Re ” Roadmap for a Resilient Virtual Asset Ecosystem (1) Pillar A (Access) – Streamline market entry through regulatory clarity Key objectives: (i) Expand market accessibility (ii) Encourage responsibility participation (iii) Enhance investor opportunities Initiative 1 : Establish licensing regimes for OTC trading and custody services Initiative 2 : Attract global platforms, order flows and liquidity providers (2) Pillar S (Safeguards) – Optimising compliance burdens without compromising security Key objectives: (i) Align compliance requirements (ii) Adopt risk-proportionate oversight (iii) Promote regulatory clarity Initiative 3 : Explore adopting a dynamic approach to custody technologies and storage ratios Initiative 4 : Enhance insurance and compensation frameworks Initiative 5 : Clarify investor onboarding and product categorization (3) Pillar P (Products) – Expand product offerings and services based on investor categorisation Key objectives: (i) Enable risk-appropriate investment tools (ii) Safeguard retail investors (iii) Mitigate potential risks Initiative 6 : Explore regulatory framework for professional investor-exclusive new token listings and virtual asset derivative trading Initiative 7 : Explore virtual asset margin financing requirements aligned with securities market risk management safeguards Initiative 8 : Consider allowing staking and borrowing/lending services under clear custody and operational guidelines (4) Pillar I (Infrastructure) – Modernise reporting, surveillance and cross-agency collaboration Key objectives: (i) Strengthen market-wide oversight capabilities (ii) Early detection of illicit activities and misconduct (iii) Safeguard investor assets Initiative 9 : Consider solutions for efficient regulatory reporting and deploy advanced surveillance tools to detect illicit activities Initiative 10 : Strengthen local cross agency collaboration and promote cross border cooperation with global regulators (5) Pillar Re (Relationships) – Empower investors and industry through education, engagement and transparency Key objectives: (i) Enhance investor understanding (ii) Foster industry participation (iii) Promote fit-for-purpose policy making Initiative 11 : Consider regulatory framework for financial influencers (Finfluencers) to address new investor engagement channels Initiative 12 : Cultivate sustainable communication and talent network SIGNIFICANCE: Encountered with the ever-changing VA ecosystem, market participants are facing challenges from all edges: institutional-retail bifurcation, fragmented liquidity, and regulatory arbitrage risk due to discrepancies in development of VA regulatory regimes across regions; the SFC is pioneering itself with a pragmatic ASPIRe roadmap to secure and gradually materialize the mission of positioning Hong Kong as an international VA hub. 3. Hong Kong's market watchdog reviews 8 brokerages amid IPO oversubscription frenzy On 14 February 2025, a press release showing the SFC’s explicit concern with the oversubscription frenzy in IPO offering observed recently from eight brokers. Some key points are worth noted: the SFC will examine the brokers IPO financing policies, and advise that brokers should take into consideration the clients’ repayment ability, and set appropriate loan limit to avoid overfinancing; in November 2023 a couple of years ago, a circular form the SFC had been posted to remind brokers of the need to adopt a prudent risk management policy in providing IPO subscription services to its clients, in particular after the launch of FINI on 22 November then; since under the new FINI settlement, brokers are only required to pay for the maximum number of shares allotted in the IPO instead of the “full amount” of the subscriptions, thus allowing opportunities to further scale up the leverage offered to the clients. It is observed that some brokers tend to accept large subscription orders without collecting sufficient initial subscription deposits from clients as minimum upfront payments; brokers tend to take advantage of “the exemption to pay the full amount” to grant more IPO loans to the clients with larger multiples which further add fuel to boost up the oversubscription frenzy. SIGNIFICANCE: The FINI mechanism shortens the settlement period from “t+5” to “t+2” while at the same time alleviating the financial costs burden of having to pay the full amounts of subscription in previous arrangements. Though initial intention of the FINI is to streamline the IPO settlement process, it unexpectedly allows the possibility for more speculative IPO overfinancing activities. Market participants also expect the SFC to provide more clear guidelines on the margin-financing policies, not only as reference for prudent risk management, but also as a note of reminder to brokers of the potential risk of breaching the financial resources requirements amid the vehement buoyancy of IPO offerings. 4. SFC Supports Listing of Alternative Funds to Boost Investor Options The SFC of Hong Kong has issued new regulatory circular to encourage the listing of closed-ended alternative funds on the Stock Exchange of Hong Kong Limited (“ SEHK ”). Announced on 17 February 2025, this move aligns with the HKSAR Government’s 2024 Policy Address to expand private equity fund distribution and solidify Hong Kong’s position as a global asset management hub. Key takeaways: Funds already listed on recognized international exchanges may also qualify, subject to comparable regulations. Size & Scale: Funds must be sizeable (HK$780 million market cap), with management companies managing at least HK$780 million in alternative assets. Diversification: Funds should invest in well-balanced portfolios, with borrowing capped at 30% of net asset value (NAV). Transparency: NAV must be published quarterly, and offering documents must detail investment strategies, risks, and valuation methods. Investor Education: Management companies are urged to educate investors before launching these funds in Hong Kong. SIGNIFICANCE: “We’ve always welcomed closed-ended alternative funds,” said Ms. Christina Choi, SFC’s Executive Director of Investment Products. “This clarity will help investors tap into opportunities managed by top-tier asset managers.” This initiative broadens Hong Kong’s investment landscape, offering sophisticated investors access to alternative assets while maintaining robust safeguards. The SFC aims to balance innovation with investor protection, reinforcing the city’s financial competitiveness. 5. SFC Leads Regional Consensus on Sustainability, Tech, and Investor Protection The SFC has taken a pivotal role in shaping the future of capital market regulation across the Asia-Pacific, forging a united front with regional counterparts at the International Organization of Securities Commissions (“ IOSCO ”) Asia-Pacific Regional Committee (“ APRC ”) meetings held from 19 Feb 2025 to 21 Feb 2025, in Da Nang, Vietnam. Key takeaways: Collaborative Roadmap: Chaired by SFC CEO Ms. Julia Leung, the APRC brought together over 70 regulators from 19 jurisdictions to align on tackling scams, online harm, and investment fraud, while leveraging technology for regulatory innovation. Supervisory Cooperation: Vietnam’s State Securities Commission (“ SSC ”) joined as the 14th signatory to the APRC Multilateral Memorandum of Understanding (“ SMMoU ”), a milestone witnessed by Vietnam’s Finance Minister Mr. Nguyen Van Thang and celebrated during a signing ceremony. Global Dialogue: Ms. Leung co-chaired the EU-Asia-Pacific Forum on Financial Regulation, driving discussions on digitalization, fintech, and sustainable finance with European and regional financial leaders. Unified Approach to Emerging Challenges Regulators agreed on strategies to combat scams and harness generative AI and other technologies to enhance oversight. SFC senior executives also contributed to Enforcement and Supervisory Directors’ Meetings, sharing insights on enforcement trends, virtual asset safekeeping, and tech-driven supervision. Ms. Leung, in her keynote at the SSC Vietnam Symposium, underscored the APRC’s role: “This platform fosters collaboration essential for trust in our growing markets. Together, we can navigate emerging trends and risks effectively.” SIGNIFICANCE: As capital markets evolve with technology and sustainability at the forefront, the SFC’s leadership in the APRC reinforces Hong Kong’s role as a regulatory hub. This consensus sets the stage for stronger investor protection and innovation-friendly frameworks across the region. On the sidelines, Ms. Leung met with SSC Chairwoman Ms. Vu Thi Chan Phuong to deepen supervisory ties, focusing on crypto regulation and shared capital market priorities. Vietnam’s SMMoU entry marks a step forward in regional cooperation, enhancing information-sharing among Asia-Pacific regulators. For Ms. Leung’s full speech and more details, visit the SFC website . 6. SFC proposes to relax position limits for key exchange-traded derivatives On 27 February 2025, the SFC launched a Consultation proposing to increase the position limits for exchange-traded derivatives based on the three major stock indices in Hong Kong to keep pace with market development. To facilitate hedging activities of market participants, the proposals will lift the current position limits for the futures and options contracts as the table shown below: Underlying Index Existing position limit (net long/short position delta) Proposed position limit (net long/short position delta) Hang Seng Index (HSI) 10,000 15,000 (↑50%) Hang Seng China Enterprises Index (HSCEI) 12,000 25,000 (↑108%) Hang Seng TECH Index (HSTECH) 21,000 30,000 (↑43%) SIGNIFICANCE: These will enable Hong Kong’ s derivatives markets to keep pace with the growth in the market capitalisations of major stock indices and trading volumes of their constituents over the past years, without introducing additional risks to the markets. As Ms Julia Leung said, “ The relaxation of position limits will not only allow market participants to enjoy greater flexibility in managing positions, but also promote the liquidity and efficiency of both the derivatives and broader markets. ” 7. SFC flags cybersecurity incidents in a thematic review report Material cybersecurity incidents in recent years involving cyberattacks against licensed corporations (“ LC ”s) aroused attention of the SFC as LCs were vulnerable to significant business disruptions or hacking of client accounts. A Report on the 2023/24 Thematic Cybersecurity Review of Licensed Corporations (“ Report ”) was issued by the SFC on 6 February 2025 where eight incidents of material cybersecurity breach were reported to SFC between 2021 and 2024, examples identified are: unauthorized access to trading in clients’ account through loopholes in the network security of the LCs; end-of-life (“ EOL ”) software and weak algorithm for encrypting client data. In the light of these insufficient management oversight and inadequate controls on cybersecurity measures, the SFC has set out in the Report some standard of conduct expected of the LCs in relation to phishing detection and prevention, EOL software management, remote access control, third-party IT service providers management and cloud security. SIGNIFICANCE: As emphasized by Dr Eric Yip, the SFC’ s Executive Director of Intermediaries, that the LCs should take all necessary measures to tackle the sophisticated and prevalent cyberattacks, and failure to address these threats would cause detrimental influence on the LCs, their clients as well as the entire financial system in such a highly interconnected and digitalised world. Senior management should recognize the critical importance of safeguarding from and mitigating the cybersecurity risks by making reference to the Report for details. Market News 8. SFC supports government budget measures The SFC has expressed strong support for the Hong Kong government’s 2025-2026 budget measures, unveiled by Financial Secretary Paul Chan on 26 February 2025. These initiatives aim to solidify Hong Kong’s status as a leading international financial hub. Key takeaways: Boosting Securities and Derivatives Markets: SFC Chairman Dr. Kelvin Wong praised the budget for advancing Hong Kong’s securities, derivatives, and asset management sectors, reinforcing its competitive edge. Tech-Focused Listing Channel: The SFC will collaborate with Hong Kong Exchanges and Clearing Limited (“ HKEX ”) to launch a "technology enterprises channel," streamlining listings for tech and biotech firms. Listing Regime Refinement: A comprehensive review of listing rules, vetting processes, and market structures is underway, including exploring post-delisting trading mechanisms and optimizing dual/secondary listing thresholds. Risk Management Enhancements: The SFC will soon consult on raising position limits for key index derivatives to better serve investors. RMB Bonds and Fixed Income Hub: Partnering with the Hong Kong Monetary Authority, the SFC is crafting a roadmap to develop primary and secondary bond markets, alongside hosting a flagship forum in late 2025 to highlight Hong Kong’s strengths. Virtual Assets and Fintech: Following a mid-February regulatory roadmap, the SFC will guide the sustainable growth of Hong Kong’s virtual asset market, aligning with the government’s upcoming policy statement on blending traditional finance with innovative tech. SIGNIFICANCE: SFC CEO Ms. Julia Leung emphasized ongoing collaboration with regulators and stakeholders to strengthen Hong Kong’s role as a fixed income and currency hub, advance virtual asset markets, and deepen ties with Mainland China and global markets. The SFC’s proactive stance signals a dynamic year ahead for Hong Kong’s financial ecosystem. 9. HashKey Capital is granted approval for VA discretionary accounts management services Following the approval from SFC, Hashkey Capital is now able to offer discretionary account management services for virtual assets to professional investors (“ PI ”s) subject to type 9 license. This approval enables HashKey Capital to deliver customised services to professional investors subject to a pre-approved list of exchanges across the entire investment lifecycle ranging from: (i) tailored investment mandates: from spot investments to OTC trading and derivatives; (ii) flexibility in trading platforms: to offer discretionary account management service across a multiple of exchanges available to the clients taking into consideration the issues of compliance, operational efficiency; (iii) seamless strategy execution: providing a full-fledged discretionary account management from buying, selling, asset allocation, monitoring, rebalancing and final reporting. SIGNIFICANCE: Hindered by the complex virtual assets landscape, investors are always averse to the unforeseeable risks beyond their investment perspectives; discretionary account management services offer a bespoke solution by shifting the burden of regulatory and technical complexities from investors to professional market practitioners who are more conversant in the newly evolving regime. Enforcement News 10. SFC Imposes Restriction Notices on Money Concepts Entities The SFC took decisive action on 18 February 2025, issuing restriction notices to Money Concepts (Asia) Holdings Limited (“ MCAH ”) and its subsidiary, Money Concepts Asset Management Limited (“ MCAM ”). The SFC cited potential risks to the investing public and the broader public interest as key drivers for the restrictions. Restriction in Place: Both firms are barred from engaging in any licensed regulated activities—directly or via agents—without prior SFC approval, until further notice. SIGNIFICANCE: The move stems from concerns over their honesty, reliability, integrity, and competence in conducting regulated activities, raising doubts about their fitness to remain licensed. 11. SFC Launches Insider Dealing Case Against Wong Pak Ming The SFC kicked off criminal proceedings against businessman Wong Pak Ming on 27 February 2025, at the Eastern Magistrates’ Court. Wong, former chairman and controlling shareholder of Transmit Entertainment Limited (formerly Pegasus Entertainment Holdings Limited), faces charges of insider dealing tied to the company’s shares. Case Details Allegations : Wong is accused of counselling or procuring someone to trade Pegasus shares between 25 August 2017 and 17 October 2017, while possessing inside information about the company. Background : Pegasus, listed on Hong Kong’s Growth Enterprise Market in 2012 and later moved to the Main Board in 2015, was renamed Transmit Entertainment in March 2018 after Wong sold his controlling stake. Legal Basis : Insider dealing violates section 291 of the Securities and Futures Ordinance (“ SFO ”) . SIGNIFICANCE: No plea has been entered yet. The case is adjourned to March 27, 2025. Wong was released on $200,000 cash bail with conditions to stay at his provided address, notify police of any residence change, and inform the SFC 24 hours before leaving Hong Kong.This prosecution highlights the SFC’s ongoing efforts to combat market misconduct. [End of ComplianceOne Newsletter –February 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

證監會對期貨經紀行的新風險管理指引即將於2024年2月25日起生效，我們準備了以下快速指南以方便期貨經紀行能快速理解是次指引的重點及待辦事項。 適用於從事期貨合約交易持牌人的風險管理指引 (快速指南) [Feb 2024] A. 引言 1. 證券及期貨事務監察委員會（證監會）根據《證券及期貨條例》第 399 條於2023年8月25日發表了《適用於從事期貨合約交易的持牌人的風險管理指引》（下文簡稱“ 指引 ”）的諮詢總結，其旨在對適用於從事期貨合約交易的持牌人的現行監控規定作出補充。 2. 指引應與適用於期貨經紀行 [ 第 2 類受規管活動（期貨合約交易）持牌人] 的所有相關法律、法例、守則、規例或其他指引一併閱讀，並在不損害該等法律、法例、守則、規例或其他指引的原則下應用。 3. 指引於 2024年2月25日起生效 ，而 其後起計 12 個月的期間內為 過渡期的安排 。 過渡期的安排主是要給予期貨經紀行額外時間去完成相關系統的開發，例如： (a) 將客戶風險限額納入其風險管理系統、交易指示管理系統或交易平台之內，以識別或防止任何風險限額被突破；及 (b) 採用的假設的壓力情境應包括該行或其客戶交易的期貨合約出現極端但可能發生的價格變動或波幅變化的情境等。 如期貨經紀行未能於 2024年2月25日前 完成相關系統的開發便應採取其他臨時補償措施 (可參考以下列表的“參考 / 補償措施”一欄），這些措施可包括以人手方式監察風險限額的遵守情況，及使用審慎的簡化壓力情境來進行壓力測試以符合以上(a)或(b)所述的規定的風險管理目的等等。 我們準備了以下清單列表以方便期貨經紀行能快速理解是次指引的重點及待辦事項，建議期貨經紀行可根據以下清單去檢查是否已完成證監會最新的風險管理指引要求。我們以 藍色及底線標示的為是次證監會新指引中的重要項目及重點 ，需要特別關注。若期貨經紀尚未完成相關的待辦事項，便應從速處理並落實執行。 另外，由於指引較為繁複，且某些詞匯的定義亦必須參考回指引，我們亦建議客戶細閱指引原稿以作更深入的了解。 4. 我們準備了以下清單列表以方便期貨經紀行能快速理解是次指引的重點及待辦事項，建議期貨經紀行可根據以下清單去檢查是否已完成證監會最新的風險管理指引要求。我們以 藍色及底線標示的為是次證監會新指引中的重要項目及重點 ，需要特別關注。若期貨經紀尚未完成相關的待辦事項，便應從速處理並落實執行。 另外，由於指引較為繁複，且某些詞匯的定義亦必須參考回指引，我們亦建議客戶細閱指引原稿以作更深入的了解。 B. 定義 “指引” 指證監會於2023年8月發出的 《適用於從事期貨合約交易的持牌人的風險管理指引》。 “關連客戶組別” 根據 指引 中第20段註釋1的(a)至(f)的定義。 “聯屬客戶” 指與該期貨經紀行屬同一公司集團之內的任何公司。 “優惠保證金待遇” 指期貨經紀行與客戶之間就期貨合約作出的一種安排， 如客戶符合執行或結算有關期貨合約的交易所或結算所的規則所訂明的資格準則，則客戶無須遵守該等規則所訂明的預繳抵押品規定。 “資金流動性風險” 指期貨經紀行在某期貨合約到期時未能履行其在該合約下的財務責任的風險。 “保證金短欠＂ 指當客戶帳戶的權益淨額結餘低於期貨經紀行就有關帳戶內的未平倉持倉而設定的保證金規定時，便產生“保證金短欠＂。 “權益淨額結餘” 指在該帳戶內持有的抵押品、在該帳戶內的未平倉持倉的浮動利潤及記入該帳戶內的收入的總和，減去在該帳戶內的未平倉持倉的浮動虧損及從該帳戶扣除的費用、佣金、徵費及其他收費。 “貫徹符合保證金規定” 指有關客戶在下列期間: (a) （如有關帳戶開立達一年或以上）最近至少一年的期間內; 或 (b) （如有關帳戶開立少於一年）自帳戶開立日期起計，並至少三個月的期間內; 並無不符合保證金規定、被強制平倉或遭退回支票的紀錄。 “客戶保證金短欠數額” 指客戶分類帳內該帳戶的期貨合約買賣所須的保證金金額中，超出該帳戶內權益淨額結餘的數額。 “速動資金盈餘” 指根據《財政資源規則》，其速動資金減去規定速動資金後的數額。 “客戶分類帳” 指就“期交所交易”及“非期交所交易＂設有獨立分類帳的規定 “可用資金” 指由該行實益擁有的沒有產權負擔現金與其分配作期貨合約交易用途的未提取銀行信貸額的總和。 “ 量化基準 ” 設定為該行的速動資金盈餘與可用資金中較高者的 50% “超蝕款項” 指一個客戶帳戶的交易虧損超逾該帳戶的權益淨額結餘的任何金額。 “預計超蝕款項” 就某客戶帳戶而言，指任何預計虧損超逾該帳戶的權益淨額結餘的金額。 C. 清單列表 類別 指引下期貨經紀行應具備的政策/ 待辦事項清單 Checkbox 備註 參考 / 補償措施 1. 自營買賣及客戶買賣期貨合約所產生的風險管理 (1) 應建立有效的風險管治框架，以管理其本身及其客戶所承擔的風險，應將風險管理責任授予具備經驗及專業知識且擁有足夠權限以 實施政策及程序 的高級管理層。 ☐ 應確保其風險胃納及風險限額與其策略目標相符並與其財政及管理能力相稱。 (2) 就(1)的政策及程序實施持續風險監察、監控和匯報。 ☐ 須要制定風險限額及偏離 (deviation policy)的政策和匯報程序。 (3) 就(1)的政策及程序進行壓力測試及實施應變計劃。 ☐ 須要考慮如何建立/設計切實並可行的壓力測試場境及相關條件。 2. 市場價格水平或波幅出現不利變動而招致損失的風險（ 只適用於有參與自營買賣的期貨經紀行 ） (1) 確保期貨合約的自營買賣持倉均應以實時方式按市值計算。 ☐ 自營買賣持倉的日終重新估值應以獨立於前線部門的來源取得或經獨立核實的資料來源。 (2) 應定期將估計的自營買賣持倉的 實際及假設回報進行比較 。 ☐ 當發現估值誤差時須要進行調查及檢討 。 (3) 釐定與其財政及管理能力相稱且審慎的市場風險限額。 ☐ 採用的市場風險限額必須獲得其高級管理層及董事會妥為批准，出現違反限額的情況時應予及時上報。 3. 商品期貨買賣風險 (1) 備存獲得其高級管理層批准的一份＂ 其可 交易的商品期貨清單 ＂。 ☐ 當交易的商品期貨須要以實物交收時，須先制定／計劃清楚所附帶的運送，存倉及交付安排。 4. 客戶信貸風險 (1) 以單一客戶而言 ，為每名客戶制定審慎的交易限額及持倉限額； (2) 以每個關連客戶組別而言 ，從整體角度顧及該組別內所有客戶而設的合計基準風險限額，期貨經紀行可參考指引中第21段(c)的風險項目。 ☐ 言 ，為每名客戶制定審慎的交易限額及持交易限額及持 ☐ 設定(1)、(2)條件的目的在於防止任何違反適用的法定或監管持倉限額（如結算代理人或交易所的持倉限額）。 (3) 需設有識別關連客戶組別的措施，及評估相關組別的財務及信貸資料， 特別是如何識別相關帳戶的實益擁有人。 ☐ 為確定兩名或以上屬自然人（配偶除外）的客戶是否屬某個關連客戶組別， 期貨經紀行無須主動查核該等客戶的帳戶的實益擁有人 ，但當有跡象顯示某客戶並非為其本身行事時，便應作出適當查詢。 (1) 以聯屬客戶而言 ，須要考慮的風險項目與(1)、(2)類別大致相同，詳情可參考指引中的第22段(c) 。 ☐ 定期檢視該聯屬客戶及時向該期貨經紀行履行交收責任的能力，包括其交易模式，風險胃納給管理政策，財務狀況及分配作期貨合約交易用途的資金資源等。 5. 收取客戶基本保證金 (1) 除非客戶已提供充足的抵押品以符合其保證金規定，否則不應為該客戶買賣期貨合約。 (2) 對客戶施加保證金規定（可能包括開倉保證金規定及維持保證金規定） 不得低於其對手方所設定的金額 ， 不應向任何客戶授出任何信貸融通 或貸款或作出任何其他安排，以便任何客戶得以符合保證金規定。(例如，期貨經紀行不應向其聯繫公司提供財政支持，以便後者向該行的客戶授出信貸融通的安排。) ☐ 已提供充足的抵押品以符合其保證金規定，否則不應為該客戶買賣期則不應為該客 ☐ 施加保證金規定（可能包括開倉保證金規定及維持保證金規定） 不得低於其對手方所設定的金額 ， 不應向任何客戶授出任何信貸融通 或貸款或作出任何其他安排，以便任何客戶得以符合保證金規定。(例如，期貨經紀行不應向其聯繫公司提供財政支持，以便後者向該行的客戶授出信貸融通的安排。) i. 享有優惠保證金的客戶除外； ii. 期貨經紀行經考慮客戶及其自身的情況後，可向客戶施加較其對手方 (或交易所) 所設定的金額為高的保證金規定。 (3) 制定特殊保證金安排 ，以紓減因市場波動及公眾假期情況而可能引致的客戶信貸及資金流動性風險。 ☐ 可不時按市場情況暫時調高保證金規定或在公眾假期前席收取額外保證金。 6. 客戶出現保證金短欠 (1) 就以香港為基地的客戶而言，在發出追繳保證金通知起計 一個營業日內 向客戶收取任何到期應付的保證金數額； (2) 向每名客戶發出的追繳保證金通知備存詳細的紀錄，當中包括每項追繳保證金通知涉及的金額及發出的時間； (3) 嚴格執行其保證金和強制平倉的政策及程序。 ☐ 客戶而言，在發出追繳保證金通知起計 一個營業日內 向客戶收取任何到期應付的保到期應付的保到期應付的 ☐ 追繳保證金通知備存詳細的紀錄，當中包括每項追繳保證金通知涉及的金額及發出的金額及發出的金額及發 ☐ i. 須保存記錄關於客戶的回應和清繳詳情，以及就未清繳追繳保證金所採取的任何跟進行動。 ii. 評估在上一次向其客戶發出追繳保證金通知和下一次發出追繳保證金通知 之間的期間內的風險承擔 。 根據證監會諮詢總結第13段， 期貨經紀行要求在授出寬免方面享有較大的靈活性，證監會已修改了《指引》， 將焦點集中於所授出的寬免是否適當之上。 (4) 高級管理層須具有適當的充分理由，包括批准人 合理地信納有關偏離或寬免不會影響期貨經紀行的財務穩健性( 例如，在《財政資源規則》下的速動資金規定)，否則不應授予批准。 ☐ 當出現以下情況須取得高級管理層的批核 -偏離該政策的情況； -對追繳保證金或強制平倉的寬免。 具體而言，對於偏離或寬免期貨經紀行的保證金及強制平倉政策的情況，除非高級管理層具有適當的充分理由， 否則不應授予批准。 7. 給予優惠保證金待遇予客戶 (1) 如符合下列要求，期貨經紀行可就某客戶在期貨市場進行的買賣給予優惠保證金待遇 ： i. 該客戶有 貫徹符合保證金規定的紀錄 ，並維持著穩健的財務狀況，以及符合相關交易所或結算所的規則下就優惠保證金待遇所訂明的資格準則； ii. 期貨經紀行嚴格遵守該交易所或結算所規則中的所有要求； iii. 期貨經紀行具備充足的流動資金及財政能力， 以符合其對手方就所有獲得優惠保證金待遇的客戶的期貨合約買賣所施加的保證金規定。 備註: “ 貫徹符合保證金規定 ”指有關客戶在最近至少一年的期間內；或自帳戶開立日期起計， 並至少三個月的期間內，並無不符合保證金規定、被強制平倉或遭退回支票的紀錄。 (1) 如符合下列要求，期貨經紀行可就某客戶在期貨市場進行的買賣給予優惠保證金待遇惠保證金 ☐ 如符合下列要求，期貨經紀行可就某客戶在期貨市場進行的買賣給予優惠保證金待遇惠保證金 如符合 下列要求，期貨經紀行可就貨經紀行可紀行可就貨經紀 ☐ 當市況出現大波動， 享有優惠保證金優惠的 優惠的客戶出 ☐ 當市況出現大波動， 享有優惠保證金優惠的客戶出現追加保證金時的處理方案。 (2) 以個別客戶而言， 為每名獲得優惠保證金待遇的客戶訂立一個審慎的交易限額 。期貨經紀行應充分考慮其財政能力及該客戶的具體情況， 並避免訂立過高的交易限額 。 ☐ 定期檢視獲得優惠保證金待遇的客戶的財務狀況、清繳紀錄、投資目標、風險胃納和交易模式或策略; 以釐定相稱的交易限額。 (3) 當 客戶分類帳 內出現“客戶保證金短欠數額”須要計算時， 可參照以下其中一項： i. 存放於其對手方的保證金總額；或 ii. 客戶須存放於該經紀行的保證金總額。 ☐ 如期貨市場的某個交易時段的 交易時間跨越該交易日的午夜 ，期貨經紀行便無須將在該交易時段內的期貨合約買賣計算在內。 (4) 期貨經紀行應計算截至每個交易日結束時所有獲得優惠保證金待遇的客戶的分類帳內的客戶保證金短欠數額的總額，及將該總額與量化基準 （ 設定為該行的速動資金盈餘與可用資金中較高者的50%）進行比較。當發現超出量化基準時， 應確保不會出現過度風險承擔及採取及時及適當的行動，並在下一個交易日及時向證監會作出匯報。 ☐ 期貨經紀行應具備充足的速動資金盈餘與可用資金，並衡量其可承受的風險，及其對財政能力的影響。可使用 i. 其最近期的速動資金盈餘或可用資金的金額；或 ii. 其在向證監會提交的最近期的財務申報表中所匯報的速動資金盈餘或可用資金的金額，以進行(4)的比較。 跟據證監會諮詢總結第15段， 證監會不會強制規定超逾該限額的期貨經紀行須在下一個交易日糾正有關情況，但它們仍須及時向證監會作出匯報。 8. 資金流動性風險 (1) 應實施相應措施審慎管理現金流，及確保其持有的客戶款項或抵押品具備充足的流動性，以代表客戶為期貨合約買賣符合其對手方的保證金規定。 ☐ 具備可行的壓力測試環境； 在某些情況下，期貨經紀行或許未能在限期前履行其對手方就有關期貨合約發出的追繳保證金通知，原因可能是相關客戶沒有及時履行該行的追繳保證金通知 (例如本地農歷新年假期間)，以及該行並無充足資金代該客戶清繳該追繳保證金。 (2) 應定期評估其在承受影響全個市場的壓力或影響特殊情況的壓力時的流動資金需要，及 制定適當的緊急融資方案 。 ☐ (3) 在緊急情況下如何可獲取足夠的新資金，應 避免依賴單一資金來源 。 ☐ 9. 委聘執行或結算代理人為客戶執行或結算期貨合約 (1) 制定書面政策及程序，以確保該行及其客戶對該代理人的風險承擔獲得妥善管理； ☐ 有關建議沒有規定期貨經紀行必須與後備代理人訂立正式協議或開立帳戶， 與該候選代理人就後備安排確立和維持相互諒解便已足夠。 就客戶保證金溢差(client margin excess)的建議限額及分隔規定(segragation requirements)所識別出的實際問題 (2) 在該代理人並非持牌法團、註冊機構、認可交易所的交易所參與者或認可結算所的結算所參與者的情況下，須定期對該代理人進行盡職審查覆核並評估該代理人的能力； ☐ 期貨經紀行可以設下一個特定時段（例如一個月以25個交易天為樣本），估算主要活躍客戶在這個時段內的平均交易量和平均持倉量的保證金要求，並以此作為參考標記。 (3) 實施適當的安排和後備措施，物色至少一名後備執行或結算代理人的候選人 ，並盡可能就後備安排與該候選人確立和維持相互諒解或正式協議。 ☐ 並根據此參考標記的成交量和持倉量的波動情況，設定上下120%-80%的緩衝區。 當存放於結算代理人的客戶保證金超出參考標記的120%時，期貨經紀行向結算代理人執行提取超額的保證金。如果保證金低於 80%時，則可向結算代理人存入額外保證金以維持至 100% 的平均水平（參考標記），以方便客戶隨時建立任何新倉的保證金要求。 10. 因委聘執行或結算代理人而產生保障客戶資產風險 (1) 應確保在其於對手方開立的帳戶內，客戶的期貨合約持倉及該等持倉的相關保證金是與期貨經紀行自營買賣持倉及該等持倉的相關 保證金分開記帳的; ☐ 自營資金與客戶資金必須完全分隔。 (2) 不應使用屬於某客戶的資產為另一客戶的交易提供保證或進行交收; ☐ 某客戶帳戶的資產 不能被用於抵銷 或清繳另一客戶帳戶的“超蝕款”。 (3) 當期貨經紀行在於某對手方（代理人）開立的綜合帳戶內持有客戶持倉及資產，便應採取合理步驟， 防止屬於某客戶帳戶的資產被用於抵銷或清繳另一客戶帳戶的“超蝕款項” 。 ☐ (4) 若出現以上(3)的情況，應盡快將其收到用來清繳出現超蝕款項的客戶帳戶的追繳保證金的任何資產， 以及一筆數額相等於上述追繳保證金尚未獲清繳的金額的自身現金 ，存入該綜合帳戶或指定的信託銀行帳戶或獨立帳戶內， 以彌補因該抵銷而令其他客戶帳戶的資產出現的短欠。 ☐ 使用自身資金時， 須要計算速動資金盈餘或可用資金的金額。 11. 進行壓力測試環境下所產生的潛在虧損風險 (1) 制定妥善的壓力測試政策及程序，清楚地列明壓力測試的方法和頻密程度，以及檢討和匯報機制。這些政策及程序應獲高級管理層批准。 (2) 自行進行壓力測試應至少每周及在市況波動時進行壓力測試 。 特別安排： (3) 若客戶屬i. 持牌法團，ii. 註冊機構；或iii. 在香港以外地方的期貨交易商，其帳戶內的持倉是由該金融機構代其客戶持有的， 可將該帳戶內的任何持倉排除在根據本“指引”進行的壓力測試的範圍之外。 ☐ 的壓力測試政策及程序，清楚地列明壓力測試的方法和頻密程度，以及檢討和匯報機制。這些政策及程序應獲高級管理層批 准。 獲高級管理層批 ☐ 行壓力測試應至少每周及在市況波動時進行壓力測試 。 波動時進行壓力動時進行壓力 ☐ i. 應採用與其自營或其客戶買賣的產品的風險特性相稱的適當壓力測試方法。 ii. 預計 每個客戶帳戶 在 該壓力測試假設的壓力情境（假設的壓力情境）下可能產生的虧損金額（預計虧損）， 並估計 客戶帳戶的大額 預計超蝕款項 對期貨經紀行的速動資金盈餘及可用資金造成的影響。 iii. 預計期貨經紀行的 自營買賣持倉 在該假設的壓力情境下可能引致的交易虧損及追繳保證金金額， 並估計該等預計交易虧損及追繳保證金的總額 對其速動資金盈餘及可用資金造成的影響。 當擬備本“指引”時， 壓力測試中採用的假設的壓力情境在期交所買賣的指數期權的相關價格變動 被假設為±20%。 (4) 在其 壓力測試中採用的假設的壓力情境 應包括該行或其客戶交易的期貨合約 出現極端但可能發生的價格變動或波幅變化(期權合約的持倉)的情境， 並應參考或基於下列因素來釐定有關情境： i. 過去的期貨市場受壓事件；及 ii. 其對潛在且令期貨合約的價格或波幅產生重大影響的風險所作出的評估。 (4) 在其 壓力測試中採用的假設的壓力情境 應包括該行或其客戶交易的期貨合約 出現極端但可能發生的價格變動或波幅變化(期權合約的持倉)的情境， 並應參考或基於下列因素來釐定下列因素來 ☐ 去的期貨市場受貨市壓事件；及 ☐ 若期貨經紀行為某交易所或結算所的會員或參與者 ， 便應確保為在該交易所或結算所買賣或結算的期貨合約持倉進行的壓力測試所採用的 假設的壓力情境， 至少與該交易所或結算所為其會員或參與者指明或建議的假設的壓力情境同等嚴謹。 期貨經紀行在預計虧損應出現極端但可能發生的價格變動或波幅變化的假設來進行估算，或以 “替代方案”假設為相等於期貨經紀行的對手方所設定的保證金規定的 200%。 (5) 在 集團層面集中進行的壓力測試 : i. 已考慮到該期貨經紀行的風險承擔及財務狀況，並適當地預計壓力情境對該行的速動資金盈餘及可用資金造成的影響； ii. 採用的方式與自行進行壓力測試所載列的規定大致上一致或在嚴謹程度上高於該等規定； iii. 在證監會提出要求時，向該會提交有關其集團層面壓力測試的報告。 (5) 在 集團層面集中 (5) 在 ☐ 考慮到該期貨經紀行的風險承擔及財務狀況，並適當地預計壓力情境對該行的速動資金盈餘及可用資金 ☐ 用的方式與自行進行壓力測試所載列的規定大致上一致或在嚴謹程度上高一致或在嚴謹程 ☐ (6) 及時和勤勉盡責地評估壓力測試結果，以識別任何對其財政穩健性構成的潛在威脅 ，以及採取及時的跟進行動。進行評估的最低要求： a. 將客戶帳戶的預計虧損總額及自營帳戶的預計交易虧損總額 與過往的壓力測試結果進行比較 ， 並識別： i. 預計超蝕款項超逾該行的速動資金盈餘或可用資金的30% 的任何客戶或關連客戶組別； ii. 該行認為 使其承擔過高風險 的任何其他客戶或關連客戶組別； b. 評估該行的速動資金盈餘或可用資金是否足以承受帳戶內有著最大金額的預計超蝕款項的兩個客戶或關連客戶組別的預計超蝕款項造成的綜合影響。 特別安排： 根據以上(6)的條件， 具有貫徹符合保證金規定的紀錄或維持著相對其投資組合及交易規模而言屬穩健的財務狀況的客戶或關連客戶組別 可被排除在外。 (6) 及時和勤勉盡責地評估壓力測試結果，以識別任何對其財政穩健性構成的潛在威脅 ，以及採取及 以及採取及 及 以及採取及 及 以及採 ☐ 戶帳戶的預計虧損總額及自營帳戶的預計交易虧損總額 與過往的壓力測試結果進行比較 ， 並識結果進行比 ☐ 計超蝕款項超逾該行的速動資金盈餘或可用資金的30% 的任何客戶或關任何客戶或關 ☐ 行認為使其承擔過高風險的任何其他客戶或關其他客戶或關 ☐ (7) 當在壓力測試下可能出現威脅時的應變措施: i. 採取及時和有效的跟進行動，例如調整其風險管理措施； ii. 擬備詳細的應變計劃，以免在市場受壓的情況下出現交收失敗、無力償債；或 iii. 避免違反《財政資源規則》下的最低速動資金規定的情況 。 (7) 當在壓力測試下可能出現威脅時的出現威脅時的 ☐ 取及時和有效的跟進行動，例如調整其風險管理措 ☐ 備詳細的應變計劃，以免在市場受壓的情況下出現交收壓的情況下出現交收 ☐ 免違反《財政資源規則》下的最低速動資金規定的情況 。 應確保應變計劃採用的假設能切合付諸實行。 (8) 壓力測試的文檔記錄包括： i. 所進行的每個壓力測試的詳情，包括該壓力測試所採用的方法、數據來源、數據紀錄、假設和假設的壓力情境； ii. 每個壓力測試的結果，包括但不限於每個客戶帳戶的預計虧損金額及預計超蝕款項，及其每個自營帳戶的預計交易虧損； iii. 就壓力測試結果進行的評估的結果；及 iv. 就評估結果採取的任何跟進行動。 (8) 壓力測試的文 (8) 壓力測試的文 ☐ 進行的每個壓力測試的詳情，包括該壓力測試所採用的方法、數據來源、數據紀錄、假設和假據紀錄、假設和假 ☐ 個壓力測試的結果，包括但不限於每個客戶帳戶的預計虧損金額及預計超蝕款項，及其每個自營帳戶的計交易易 ☐ 壓力測試結果壓力測試結果壓力測 ☐ 評估結果採取的任何跟進行動。 12. 風險披露及聲明 期貨經紀行應在客戶協議內披露以下重要事項： (1) 期貨經紀行 就其代理人之綜合帳戶內持有的客戶資產 而向有關客戶負上法律責任的範圍，及客戶在綜合帳戶內的資產的權利； (2) 客戶享有其對持有在期貨經紀行於 某結算所開立的綜合帳戶 內的資產的權利； (3) 為客戶提供在香港以外地方的期貨市場買賣或結算服務時， 其海外對手方及該期貨市場不受證監會所規管及可能受到有別於《證券及期貨條例》及據此訂立的規則和規例的法律及規例所規管，而因此 客戶在海外進行交易所存放款項可能無法享有在香港期貨市場進行交易所獲賦予的相同保障。 期貨經紀行應在客戶協議內披露以下重要披露以下重要 ☐ 貨經紀行 就其代理人之綜合帳戶內持有的客戶資產 而向有關客戶負上法律責任的範圍，及客戶在戶負上法律責任的範圍 ☐ 戶享有其對持有在期貨經紀行於 某結算所開立的綜合帳戶 內的資產的權 ☐ 客戶提供在香港以外地方的期貨市場買賣或結算服務時， 其海外對手方及該期貨市場不受證監會所規管及可能受到有別於《證券及期貨條例》及據此訂立的規則和規例的法律及規例所規管，而因此 客戶在海外進行交易所存放款項可能無法享有在香港期貨市場進行交易所獲賦予的相同保障。 13. 通知規定 (1) 當察覺到任何以下事宜起的 一個營業日內給予證監會書面通知 ： i. 每個交易日結束時所有獲得 優惠保證金待遇 的客戶的分類帳內的 客戶保證金短欠 數額的總額， 超逾量化基準 （設定為該行的速動資金盈餘與可用資金中較高者的50%）; ii. 在期貨經紀行及時和勤勉盡責地評估壓力測試結果時，所識別“超逾該行的速動資金盈餘或可用資金的30%”的任何客戶或關連客戶組別可能無法清繳其預計超蝕款項； iii. 該行的速動資金盈餘或可用資金將不足以承受最大金額的預計超蝕款項的兩個客戶或關連客戶組別的預計超蝕款項，及該行自營帳戶的預計交易虧損； iv. 該行無法或將無法履行任何對手方發出的任何追繳保證金通知。 (1) 當察覺到任何以下事宜起的 一個營業日內給予證監會書日內給予證監 ☐ 個交易日結束時所有獲得 優惠保證金待遇 的客戶的分類帳內的 客戶保證金短欠 數額的總額， 超逾量化基準 （設定為該行的速動資金盈餘與可用資金中較高可用資金中較高 ☐ 期貨經紀行及時和勤勉盡責地評估壓力測試結果時，所識別“超逾該行的速動資金盈餘或可用資金的30%”的任何客戶或關連客戶組別可可用資金中較高可用資金中較高 ☐ 行的速動資金盈餘或可用資金將不足以承受最大金額的預計超蝕款項的兩個客戶或關連客戶組別的預計超蝕款項，及該行自營帳戶的預計可用資金中較高 ☐ 行無法或將無法履行任何對手方發出的任何追繳保證金通知。 (2) 當出現以上(1)的情況向證監會提交通知時， 須要列明有關事宜的全部詳情， 包括: i. 超逾基準的原因及就享有優惠保證金待遇的客戶持倉而承擔的風險； ii. 根據以上(1)情況的相關壓力測試結果，及該等客戶或關連客戶組別在出現該等預計超蝕款項時是否有能力清繳該等虧損進行的相關評估結果；及 iii. 已採取、正採取或將採取的任何風險紓減措施，以減低就享有優惠保證金待遇的客戶持倉而承擔的任何過高風險； iv. 已採取、正採取或將採取的任何跟進行動，以防止出現交收失敗或違反《財政資源規則》下最低速動資金規定的情況； v. 無法或將無法履行任何對手方發出的任何追繳保證金通知的理由， 以及其為糾正或防止有關無法履行有關追繳保證金通知的情況而已採取、正採取或將採取的任何措施。 (2) 當出現以上(1)的情況向證監會提交通知時， 須要列明有關事宜的全部詳 可用資金中較高 ☐ 逾基準的原因及就享有優惠保證金可用資金中較高可用資金中較高 ☐ 據以上(1)情況的相關壓力測試結果，及該等客戶或關連客戶組別在出現該等預計超蝕款項時是否有能力清繳該等虧損進行的相關評估結損進行的相關 ☐ 採取、正採取或將採取的任何風險紓減措施，以減低就享有優惠保證金待遇的客戶持倉而承擔的可用資金中較高 ☐ 中較高可用資金中較高可用資金中較高可用資金中較高可用資金中較高可用資金中較高可用資金中較高用資金中較 ☐ 法或將無法履行任何對手方發出的任何追繳保證金通知的理由， 以及其為糾正或防止有關無法履行有關追繳保證金通知的情況而已採取、正採取或將採取的任何措施。

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – May 2023 The topics discussed in this monthly newsletter are as follows: Virtual Asset Trading Platforms licensing regime has come into effect on 1st June, 2023 HashKey and Hundsun Ayers signed MOU for Strategic Cooperation in Virtual Asset Market  Reminder to Licensed Corporations regarding the (1) Revised Financial Return form, (2) Analysis of client assets and (3) Audit questionnaire  SFC commenced MMT proceedings against former bank employee over alleged insider dealing  SFC reprimanded and fined China on Securities Limited $6 million for failures as share placement agent MARKET NEWS 1. Virtual Asset Trading Platforms licensing regime has come into effect on 1st June, 2023 The SFC released the Consultation Conclusions on the Consultation Conclusions on the Proposed Regulatory Requirements for Virtual Asset Trading Platform Operators Licensed by the SFC . A significant majority of respondents agreed to the proposal to allow licensed trading platform operators to serve retail investors, given the conditions that a number of robust measures should be implemented by the SFC for protection of these retail investors, including the prerequisite of suitability in onboarding new clients, governance, enhanced token due diligence, admission criteria and disclosure obligation. As Ms Julia Leung, CEO of the SFC, said: “ providing clear regulatory expectations is the key to fostering responsible development ”, and she further reiterated the principle of “ same business, same risks, same rule s”, demonstrating the standpoint of the SFC to uphold investor protection and risks management as the key issues. Since the Guidelines for Virtual Asset Trading Platform Operators (the “VATP Guidelines”) has come into effective on 1 June 2023. The VATP Guidelines set out, among others, safe custody of assets, segregation of client assets, avoidance of conflicts of interest and cybersecurity standards and requirements expected of licensed trading platforms. And more additional guidance on the new regulatory requirements, licence application procedures, as well as information about the transitional arrangements had been posted on 31 May 2023 just before the new Guidelines are in effect. SIGNIFICANCE: Apart from the above VATP Guidelines, there is also another corresponding Guidelines on AML/CFT (For Licensed Corporations and SFC-licensed Virtual Asset Service Providers) (the “VASP Guidelines”) under the AMLO VASP regime for non-security virtual assets. With the deliberation to ensure business continuity of the licensed VATP under SFO regime amid any characteristic changes in defining a specific virtual asset, it is of the SFC’s view that VA trading platform providers should abide a “dual license arrangement” to be licensed in both the SFO VATP regime and AMLO VASP regime. Interested applicants can seek reference to the FAQ of VA licencing conditions regarding “ Competence requirements for individuals ” for details of the pragmatic approach SFC has adopted in RO eligibilities. There are also some key takeaways in the Consultation Conclusions: The SFC has removed the requirement to submit legal advice from VATP on admission of a new token (which would not amount to a security token) to be made available for trading to the retails; The coverage of the compensation arrangement has been lowered to a threshold of 50% for client virtual assets held in cold storage (subject to the condition that 98% of the client virtual assets are already held in cold storage), while tightening the condition to less than 2% should only be held in hot storage of which is more vulnerable to hacking risk; Despite the availability of accesses to retail investors, it should be noted that the onboarding requirements applicable to individual professional investors will be the same as those applicable to retail investors under the new regulatory regime; The licensed VATP should establish a token admission committee to enhance governance. It is the intention of the SFC that the committee should consist of members from senior management who are “ principally responsible for ” managing the key business line, compliance, risk management and information technology of whom are also the corresponding managers-in-charge (MICs) of the platform operator for reason of augmenting the accountability of senior management of the VATP; The disclosure obligations in the VATP Guidelines to require platform operators to take all reasonable steps to ensure the product specific information they disclose is not false, biased, misleading or deceptive. 2. HashKey and Hundsun Ayers signed MOU for Strategic Cooperation in Virtual Asset Market On 4 May 2023, Hash Blockchain Limited (“HashKey”) and Hundsun Ayers Technologies Limited (“Ayers”) jointly made an announcement of their decision of signing a Memorandum of Understanding (“MOU”) to explore strategic cooperation in the field of virtual assets and financial services. HashKey is the operator of HashKey PRO, as one of the two licensed VATPs under the SFO regime to operate a virtual asset trading platform under the Type 1 (Dealing in securities) and Type 7 (Providing automated trading service) license. Under the MOU, Ayers and HashKey will collaborate on various initiatives aimed at enhancing the respective product offerings and exploring new business opportunities. This strategic partnership aims to leverage the strengths of both parties to provide customers with innovative and cutting-edge solutions in the financial and virtual asset markets. SIGNIFICANCE: The fabulous encounter of HashKey and Ayers is definitely to make a catalyst in the economies of scale and transferability of technologies in the industry, given the pioneer status of being one of the first two licensed VATP of HashKey, with the partnership of Ayers, which is also one of the most popular broker supplied systems vendors in Hong Kong, would undoubtedly pose an absolute advantage on exploring, marketing new products, providing customised solutions to catch up with the ever-changing prevailing regulatory regime, and maximizing the market shares of the two stakeholders. 3. Reminder to Licensed Corporations regarding the (1) Revised Financial Return form, (2) Analysis of client assets and (3) Audit questionnaire On 25 May 2023, the SFC published revised versions of: (i) the financial return form which is required to be submitted by licensed corporations under section 56 of the Securities and Futures (Financial Resources) Rules; (ii) the analysis of client assets for associated entity which is required to be submitted by associated entities of an intermediary under section 3(3) of the Securities and Futures (Accounts and Audit) Rules; and (iii) the audit questionnaire completed by auditors of licensed corporations for submission to the SFC; all pertaining to the period ending on or after 1 December 2023 , (i) Financial return form - the electronic version of the revised financial return form should be used for submitting a return, superceding the existing version of the form; - mainly with the inclusion of virtual assets items in the excel forms. (ii) Analysis of client assets for associated entity - the revised version of analysis of client assets for associated entity should be used for submitting an analysis of client assets as at the end of the financial year for an associated entity of an intermediary; - the reason for this is that associated entity of the VATP is subject to the host of private key management and custody requirements under the VATP Guidelines with respect to client virtual assets . (iii) Audit questionnaire - mainly with the inclusion of virtual assets items in the questionnaire ENFORCEMENT NEWS 4. SFC commenced MMT proceedings against former bank employee over alleged insider dealing The SFC had commenced proceedings in the Market Misconduct Tribunal (MMT) against Mr Wu Kam Shing, a former executive deputy general manager of China CITIC Bank International Limited (CITIC Bank), for alleged insider dealing in the shares of Bloomage BioTechnology Corporation Limited (Bloomage). In possession of inside information about the privatisation, Wu purchased a total of 10,000 and 1,265,000 Bloomage shares via the securities accounts of himself and his spouse respectively between 22 May and 15 June 2017, and later sold 10,000 and 1,007,500 shares of Bloomage for a profit of about $3 million; while the remaining shares of Bloomage in Wu’s spouse securities account were cancelled pursuant to the privatisation. 5. SFC reprimanded and fined China On Securities Limited $6 million for failures as share placement agent The SFC had reprimanded and fined China On Securities Limited (China On) $6 million over its failures as the placing agent in a share placement between 25 November and 6 December 2019. On 25 November 2019, China On was appointed as the placing agent by the then majority shareholder (Vendor) of Hon Corporation Limited (Hon Corp) to procure placees to subscribe up to 45% for the shares of Hon Corp. The SFC’s investigation found that upon identifying six placees for the placement, China On failed to ensure that it acted within the scope of the Vendor’s authority and adequately safeguard the Vendor’s assets by: - entering into bought and sold notes relating to the shares on the Vendor’s behalf with the placees, but the transaction prices therein were inconsistent with the placing price agreed with the Vendor; - transferring the shares to the placees without first requiring payment of the purchase price or the certainty that they would be able to make payment of the placing price to the Vendor; and - executing a purported instruction by a third party for part of the shares to be transferred to one of the placees for free without verifying the instruction with the Vendor. SIGNIFICANCE: In the Statement of Disciplinary Action, it was stated as the view of the SFC that China On was grossly negligent, if not reckless, in its disregard of its fundamental duties to safeguard its client’s assets and ensure that it was acting under its client’s instructions and authorities. In particular, China On’s conduct constituted breaches of the following provisions: i) not properly safeguarding client assets; ii) failing to satisfy itself on reasonable grounds that the steps it took in effecting a transaction (of the bought and sold notes) for the Vendor were authorised; iii) to act with due skill, care and diligence in the best interest of the Vendor. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or call us at (852) 39550277 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk To unsubscribe, please simply reply with “ I don’t like to know more about Compliance ”.

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - September 2023 The topics discussed in this monthly newsletter are as follows: 1. The JPEX Fraudulence 2. SFC amended the Codes on Takeovers and Mergers and Share Buybacks with effective from 29 September 2023 3. HKEX FINI to launch on 22 November 2023 with pricing of IPO shortened to T+2 4. SFC commenced a cybersecurity review of selected licensed corporations focusing on cybersecurity management 5. SFC fined Chee Tak Securities Limited $2 million and sanctioned its responsible officer for internal control deficiencies and a host of regulatory breaches 6. SFC revoked Axial Capital Management Limited’s licence for repeated failures to comply with the Securities and Futures (Financial Resources) Rules 7. LO Wai Ming, a former RO of Taiping Securities (HK) Co Limited, was banned by SFC for unauthorized trading of client accounts 8. SFC obtained interim injunction against former director of SMI Culture & Travel Group Holdings Limited (formerly 2366.HK ) MARKET NEWS 1. The JPEX fraudulence On 13 September 2023, the SFC released an astonishing warning statement of its awareness of a virtual asset trading platform (VATP) known as “JPEX” which has been actively promoting its products and services to the Hong Kong public through social media influencers and key opinion leaders (KOLs) as well as over-the-counter virtual asset money changers. The SFC made it clear in the statement that no entity in the JPEX group was licensed by the SFC or had applied to the SFC for a licence to operate a VATP in Hong Kong; and a number of suspicious features about the practices of JPEX had been observed: a) The declaration made by JPEX that it was “a licensed and recognised platform to facilitate the trading of digital asset and virtual currency” was not true. b) JPEX offered very high returns for some of its products. c) The SFC had received complaints from retail investors who were unable to withdraw virtual assets from their accounts maintained with JPEX. d) Some of the products offered by JPEX appeared to be involving virtual asset “deposits”, “savings” or “earnings” which are not allowed under the SFC’s regulatory regime for VATPs. e) JPEX publicised on its website and local advertorials that it had entered into a business cooperation with and received investment from a Hong Kong listed company which in fact had been terminated already. f) KOLs and OTC Shops had made false or misleading statements on social media to suggest that JPEX had applied for a VATP licence in Hong Kong. SIGNIFICANCE: The warning statement aroused the scepticism of many investors, and rendered a large tide of withdrawal requests; strange enough was the subsequent arrangement and feedback of JPEX to restrict the withdrawal amount to a maximum of USDT1000 per request with withdrawal fee of up to USDT999. Such unscrupulous responses to investors triggered a large number of reported cases of fraudulence to the HK Police and it unveiled the undertow that it was merely the “the tip of the iceberg”. More than 1,000 cases were reported at the first around, and with the amount of stake up to HKD1.5 billion! The SFC was rather proactive to respond this time when confronted with criticism from the public that NOT sufficient information was published to enhance the public awareness of the incidence of JPEX despite its high-profile, large-scale social media advertisement which swept over the entire city and conveyed a misleading image that it was a legitimate virtual assets trading platform. It should be noted that the legislations for governing the virtual asset regime and the AML Guidelines were only effected in June 2023 with the “Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations and SFC-licensed Virtual Asset Service Providers)” and “Guidelines for Virtual Asset Trading Platform Operators”, and only after which that the SFC is vested with the authority to regulate the virtual asset regime and to enforce the guidelines for protection of the general public. In light of recent public concerns about unregulated virtual asset trading platforms (VATPs), the SFC put forward a series of measures to reinforce information dissemination and investor education. Some remedial measure had been launched to provide the public with more information from its announcement on 25 September 2023 as a response to the vehement vogue for more transparent status of the licensing status of some ongoing VATPs which included: a) a “List of licensed VATPs”; b) a “List of closing-down VATPs” setting out the names of VATPs required by law to close down within a specified period; c) a “List of deemed licensed VATPs” consisting of the names of VATPs which are deemed to be licensed as of 1 June 2024; d) in light of public demand, a list of VATP applicants. The SFC also took an active role to collaborate with the Police and set up a dedicated channel to share information on suspicious activities of and breaches by VATPs as well as investigate the JPEX incident to bring the wrong-doers to justice. And there were also a couple of press conferences from the SFC and the Police to demonstrate to the public that the JPEX fraudulence ranked top priority on the list with their dedicated mission of the ultimate goal to protect the investors, especially in Hong Kong as an international financial centre, and the recent high-profile roadshow of the HIKSAR government to establish Hong Kong as a pioneer in licensing the virtual asset landscape over the rest of the world. A few days later on 29 September 2023, the SFC made another announcement with a series of “ Lists of virtual asset trading platforms ” to accommodate the vehement vogue for more information of VATP from the public. Besides, a dedicated list of suspicious VATPs was also published to help investors more easily identify suspicious VATPs doing business in Hong Kong and enhance awareness. At this stage, there are more than 2,000 reported cases from investors, and the amount of stake surged up to nearly HKD1.5 billion. It is just the beginning of the story with more than 20 suspects arrested for further investigation by the Police. Ironically, it may be a good opportunity for the HKSAR Government to demonstrate to the world its competence and tactics in settling and sorting out this JPEX scam which is analogous to the incidence of the FTX in the US. 2. SFC amended the Codes on Takeovers and Mergers and Share Buybacks with effect from 29 September 2023 On 21 September 2023, the SFC released the consultation conclusions on its proposed amendments to the Codes on Takeovers and Mergers and Share Buy-backs (the “Codes”) which would then be gazetted on 29 September 2023 and took effect immediately. All the proposals were adopted with minor modifications only. SIGNIFICANCE: It should be noted that the amendments mainly codify existing practices of the Takeovers Executive and clarify the Codes where necessary, including revising the definitions of important terms, streaming the process to enhance efficiency etc. Further be noted that consequential amendments will be made to a number of Practice Notes to the Codes and will be available on the SFC website when the revised Codes take effect. Market practitioners are encouraged to read and get themselves acquainted with the amendments. 3. HKEX FINI to launch on 22 November 2023 with pricing of IPO shortened to T+2 On 27 September 2023, the HKEX was pleased to confirm the launch date for FINI, Hong Kong’s new digitalised IPO settlement platform, on 22 November 2023. FINI is a major new initiative that will significantly shorten the time between the pricing of an IPO and the trading of shares from five business days (T+5) to two business days (T+2). FINI is a cloud-based platform , which will enable different stakeholders such as IPO sponsors, underwriters, legal advisers, banks, clearing participants, share registrars and regulators to collaborate and perform their respective roles in an IPO, digitally. A new public offer pre-funding model is also being introduced in FINI , helping to reduce the scale of locked-up funds in over-subscribed IPOs. SIGNIFICANCE: The launch of FINI is a milestone development in the evolution of the city’s capital markets; it will modernise and digitalise Hong Kong’s IPO settlement process, driving efficiency and supporting the long-term development of Hong Kong as a capital raising centre. 4. SFC commenced a cybersecurity review of selected licensed corporations focusing on cybersecurity management A circular was released on 15 September 2023 saying that the SFC would commence a cybersecurity review of selected licensed corporations (LCs) with a focus on assessing their cybersecurity management and compliance as well as the resilience of their information systems against cybersecurity threats. Cybersecurity has long been a major focus of the SFC’s supervision of LCs which offer internet trading to their clients, and are required to comply with the requirements set out in the Guidelines for Reducing and Mitigating Hacking Risks Associated with Internet Trading (Cybersecurity Guidelines), the cybersecurity frequently asked questions (FAQs) and the expected standards set out in the “Report on the 2019-20 thematic cybersecurity review of internet brokers”. The cybersecurity incidents reported to the SFC by some LCs in recent years and the SFC’s inspection findings show a number of security loopholes and deficiencies, including the use of end-of-life software as well as inadequate controls over remote access and phishing attacks which hackers may easily exploit to infiltrate LCs’ information systems. SIGNIFICANCE: It is a common scenario and arrangement for many LCs to employ third-party technology vendors to supply and support business application systems, posing additional risks in hosting their systems and data in the cloud environment where the responsible officer (“RO”) or the senior management team may not be so conversant in cybersecurity risks. In the light of this and to better assess the industry’s preparedness for and resilience to cyber risks, the SFC would commence a cybersecurity review in September 2023. A snapshot of the key takeaways are as follows: a) the SFC would conduct a survey of selected LCs of different sizes and business types, including securities and futures brokers, leveraged foreign exchange traders, global financial institutions and firms which provide online product distribution platforms; b) the SFC would meet with selected LCs to better understand their cybersecurity governance and controls; and c) the SFC would perform on-site inspections of some of the selected LCs for a deep dive review of their information technology and related management controls and an assessment of their compliance with the Cybersecurity Guidelines and other expected standards. Cybersecurity risk management has become a serious issue deserving imminent attention from senior management of many LCs especially with the upcoming reported cases of phishing attacks which pose unprecedented and irrevocable risk of data leakage. ENFORCEMENT NEWS 5. SFC fined Chee Tak Securities Limited $2 million and sanctioned its responsible officer for internal control deficiencies and a host of regulatory breaches On 18 September 2023, the SFC had fined Chee Tak Securities Limited (CTSL) $2 million for internal control deficiencies and a host of regulatory breaches; and also suspended the license of its responsible officer Kevin Chiu Koon Yu (CHIU) for 10 months. The disciplinary actions followed the SFC’s investigation which found that, between 1 July 2018 and 5 March 2020, CTSL failed to: (i) have in place an order recording policy and observe the order recording requirements; (ii) implement effective internal controls to monitor cross trades between staff members and clients and to ensure fair treatment of clients; (iii) establish and maintain an adequate and effective monitoring system to detect and assess suspicious transactions in client accounts; (iv) set up systems and controls to identify and assess third-party deposits into client accounts; (v) require or obtain written third-party authorisation for the operation of client accounts; and (vi) institute internal controls to monitor employee dealings. SIGNIFICANCE: The failures of CTSL constituted breaches of the Code of Conduct, the Internal Control Guidelines and the Circular to licensed corporations and associated entities – Third-party deposits and payments; and the SFC had considered that CTSL’s failures were attributable to the failures of CHIU in discharging his duties as its responsible officer and a member of its senior management which called into question his fitness and properness. CHIU had been accredited to CTSL since Nov 2004 for nineteen years, and was still not competent to discharge his duties as a RO properly, it unveils the hidden picture that some ROs may not have properly updated themselves with the prevailing guidelines, or are not aware of them during their tenures in the capacity for years. 6. SFC revoked Axial Capital Management Limited’s licence for repeated failures to comply with the Securities and Futures (Financial Resources) Rules On 11 September 2023, the SFC had revoked the licence of Axial Capital Management Limited (Axial) for repeated failures to comply with the Securities and Futures (Financial Resources) Rules (FRR), the SFO and the Code of Conduct. Meanwhile, the responsible officer, Mr Eugene CHUNG, whose license would also be suspended for five years to September 2028. The investigation of the SFC found that Axial failed to maintain its required liquid capital of $100,000 for a consecutive period of 19 months starting from 28 March 2019, and Axial only notified the SFC 18 months later! In addition, Axial also failed to submit the semi-annual FRR returns and the audited financial statements from 2019 to 2022, despite repeated reminders from the SFC to do so. SIGNIFICANCE: The SFC's view that Axial’s failures were attributable to the failure of CHUNG in discharging his duty as the firm’s senior management and RO is something " a fact beyond controversy "; the crucial point in this case here is its prolonged period of time and repeated patterns of omissions which a competent licensed person is NOT supposed to overlook! 7. LO Wai Ming, a former RO of Taiping Securities (HK) Co Limited, was banned by SFC for unauthorized trading of client accounts. On 18 September 2023, the SFC had prohibited Mr LO Wai Ming (LO), a former responsible officer of Taiping Securities (HK) Co Limited (TSCL), from re-entering the industry for seven months from 16 September 2023 to 15 April 2024. The disciplinary action followed an SFC investigation which found that between 2 January 2018 and 28 September 2018, LO had, unbeknownst to TSCL, logged into two clients’ internet trading accounts and placed orders for them. As a result, trades in the clients’ accounts were effectively disguised as if they have been placed by the clients themselves . SIGNIFICANCE: It was obvious that LO intended to circumvent TSCL’s internal policies by concealing the fact that he was trading on behalf of the two clients, and avoided the conflict of interest to be monitored under the regular routines. Such dishonest deeds and intention to play around with the loopholes should definitely be reprimanded in the eyes of the SFC. 8. SFC obtained interim injunction against former director of SMI Culture & Travel Group Holdings Limited (formerly 2366.HK) On 25 September 2023, the SFC had obtained an interim injunction order at the Court of First Instance (CFI) against Ms Leung Anita Fung Yee Maria (LEUNG), former chief executive officer and executive director of SMI Culture & Travel Group Holdings Limited (SMI Culture & Travel Group), to preserve assets for satisfying a compensation order that the court might impose at the conclusion of legal proceedings brought by the SFC. The application for an interim injunction order to prohibit LEUNG from disposing assets in Hong Kong and elsewhere mainly for reason of indication that there was a real risk of dissipation of assets by LEUNG. The SFC alleged that at the material times between 2010 and 2012, LEUNG, Wong Yu Hong (WONG) and/or Tsiang Hoi Fong implemented a fraudulent scheme under the guise of numerous non-genuine sale and purchase agreements in relation to TV licence rights with a total consideration of HKD327.75 million, while the unjust profits gained by LEUNG or Wong was in the range of HKD35.2 million to HKD74.27 million, being the sums transferred to LEUNG and/or companies owned by LEUNG or WONG. A further step of legal action, the SFC was also seeking disqualification orders, and a compensation order for losses suffered by SMI Culture & Travel Group or alternatively an order to account for any profits gained by the respondents as a result of the alleged fraudulent scheme. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk To unsubscribe, please click “ unsubscribe ”.

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - December 2023 The topics discussed in this monthly newsletter are as follows: 1. SFC issued key regulatory work and market data in quarterly report 2. SFC would consider authorising spot virtual asset ETF funds for public offering 3. HKMA proposes to implement regulatory regime for stablecoin issuers to secure protection to the public 4. SFC fined Ruifeng Securities Limited $5.2 million and suspended its responsible officer for fund management and account opening failures 5. SFC banned Amy Chow Bik Sum for life for conviction of bribery offence 6. SFC fined Central Wealth Securities Investment Limited $1 million for breach of Financial Resources Rules 7. SFC suspended Hau Bing Leung for 15 months for unauthorized third-party operated securities account MARKET NEWS 1.SFC issued key regulatory work and market data in quarterly report On 7 Dec 2023, the SFC published its latest Quarterly Report to provide operational and financial highlights for the quarter from July to September 2023. Encouraging achievements are as follows. (1) On asset management, exchange-traded funds (“ETFs”) were a bright spot with robust net inflow of HKD16.2 billion, while their average daily turnover (“ADT”) recorded with a healthy growth of 12% to HKD14.8 billion. (2) Besides ETF figures, the number of open-ended fund companies (“OFCs”) was also recorded with an encouraging growth of 87% year-over-year to 187. Hong Kong-domiciled funds recorded net inflows ($11.7 billion) for another quarter. (3) For the listing market, the SFC processed 39 new listing applications in the quarter, including four from pre-profit biotech companies. (4) For licensed activities, the SFC witnessed growth in the number of licence applications received, up 13% from the quarter before and 6% from a year ago. It also granted 33 corporate licences during the quarter, mainly for asset management (Type 9) and advising on securities (Type 4). (5) On the VA front, the SFC stepped up information dissemination on virtual asset trading platforms (“VATPs”) by publishing several VATP lists online, including a list of applicants. SIGNIFICANCE: Though fraught with negative comments that the status of Hong Kong as an international financial centre was fading away, the figures and achievements stated above demonstrate to the world how resilient Hong Kong can be from the previous economic drawback due to COVID-19 epidemic! 2. SFC would consider authorising spot virtual asset ETF funds for public offering A circular dated 22 Dec 2023 set out the requirements under which the SFC would consider authorising investment funds with exposure to virtual assets (“VA”) of more than 10% of their net asset value (“NAV”) for public offerings in Hong Kong ( SFC-authorised VA Funds ) under sections 104 and 105 of the Securities and Futures Ordinance (“SFO”). In the light of rapid evolvement of the VA landscape and the increasing demand for investment products providing exposure to VA, and VA-related ETFs offered in major overseas markets, where accesses to both retail and professional investors are available; the SFC has introduced regimes that allow the offering of certain VA products to the Hong Kong public with appropriate investor protection safeguards. The SFC put forward requirements for SFC-authorized funds with regard to two categories: (i) funds investing directly in the same spot VA tokens tradable on the SFC-licensed VATPs (i.e., direct exposure ); and (ii) funds acquiring indirect investment exposure to such VA (i.e., indirect exposure ) through futures traded on conventional regulated futures exchanges. A snapshot of the requirements on SFC-authorized VA Funds Pre-requisites to start with are that the Funds should meet the applicable requirements in the Overarching Principles Section and the Code on Unit Trusts and Mutual Funds (“UT Code”) in the SFC Handbook for Unit Trusts and Mutual Funds, Investment-Linked Assurance Schemes and Unlisted Structured Investment Products. Additional requirements are applicable to the followings (please refer to original for details): (a) Management companies : good compliance record with competent staff knowledgeable in VA product. (b) Eligible underlying VA : accessible on SFC-licensed VATPs. (c) Investment Strategy : (i) funds with direct or indirect exposure in eligible VA tokens; (iii) only for those traded on conventional regulated futures exchanges; (iii) no leverage in exposure to VA at the fund level (d) Transactions and direct acquisitions of spot VA : (i) transactions and acquisitions of spot VA by SFC-authorised VA Funds should be conducted through SFC-licensed VATPs, or authorized financial institutions where subscriptions can be in form of “in-cash” or “in-kind” types; (ii) both in-kind and in-cash subscription and redemption are allowed for SFC-authorised spot VA ETFs. (e) Custody : (i) the custodian function of the VA Fund should only be delegated to SFC-licensed VATPs or any authorised financial institutions ("AIs”); (ii) VA holdings owned by clients should be segregated, and stored most in cold wallet for safety purpose; (iii) the private keys should be securely stored. (f) Valuation : an indexing approach based on VA trade volume across major VA trading platforms should be adopted. (g) Service Providers : it is necessary to ensure all service providers are competent. (h) Disclosure and Investor education : the offering documents, including the product key facts statements (“KFS”), of SFC-authorised VA Funds should disclose the investment limits and key risks related to the funds’ VA exposures. (i) Distribution : refer to the relevant requirements for intermediaries and distribution of SFC-authorised VA Funds as set out in the Joint Circular (dated 22 Dec 2023 SIGNIFICANCE: Hong Kong maybe the first pioneer in allowing the public offering of spot VA ETF , and it further consolidates the status of Hong Kong being the international financial centre for licensing regime of digital assets. The HKEX should also ensure the infrastructures should be adaptable and aligned to keep pace with the rapid and ever-evolving VA landscape in order to maintain the competitiveness and attractiveness of Hong Kong as an international financial centre as well. 3. HKMA proposes to implement regulatory regime for stablecoin issuers to secure protection to the public In an announcement on 27 Dec 2023, the Financial Services and the Treasury Bureau (“FSTB”) and the HKMA jointly issued a public Consultation Paper on the legislative proposal for implementing the regulatory regime for stablecoin issuers in Hong Kong. An executive summary for your glance as below. Virtual assets and stablecoins Virtual assets (“VA”), often referred to as crypto-assets, are digital representations of value that are cryptographically secured, typically through the use of distributed ledger technology (“DLT”), like blockchain. Given the intrinsic high price volatility which suffocate the growth of VA, the emergence of stablecoins seems to offer a solution to tackle the problem. Stablecoins can be visualized as a VAs which aim to maintain a stable value with reference to certain asset such as fiat currencies. It can be envisaged as exchanging fiat currency with a stablecoin issuer in return or stablecoins of equivalent value, or vice versa. These tokens with stable value on blockchain could help mitigate the abovementioned issues of high volatilities, which could in turn improve the overall efficiency of “on-chain” transactions. Potential use cases and risks of stablecoins With the use of DLT, payment and settlement via stablecoins could become more efficient and transparent, and when used in conjunction with smart contracts, stablecoins could also function as “programmable money” and be used to execute complex transactions. The VA market is still far from maturity and will likely continue to evolve, and stablecoins could become the interface between traditional finance and the VA markets. Yet, from the users’ perspective, they could suffer financial losses and disruption in their supposedly smooth daily payment routines if stablecoin issuers fail to maintain adequate reserve assets to uphold the stable value of the stablecoin, especially in redeeming back to fiat currencies. Formulation of a regulatory regime In the light of the potential risk of stablecoins, under our proposed regime, an issuer of stablecoins would be required to obtain a licence from the HKMA if it issues a stablecoin that references the value of one or more fiat currencies (“ fiat-referenced stablecoin ”) in Hong Kong. The licensee would be required to put in place an effective stabilisation mechanism, such as maintaining a pool of high-quality and highly-liquid reserve assets; and would also need to comply with relevant governance, risk management and AML/CFT measure. In particular, only stablecoins issued by licensed issuers could be offered to retail investors. In an ever-changing and evolving market, there is always a dilemma of safeguarding financial stability and embracing innovation. With this in mind, the HKMA plans to roll out a “sandbox” to facilitate the communication of our supervisory expectations with entities that are interested in issuing stablecoins in Hong Kong. SIGNIFICANCE: According to the Consultation Paper, we have the key takeaways: (1) The consultation period will expire on 29 February 2024. (2) There is a transitional period arrangement. It is proposed that the commencement date will be effective one-month upon gazettal of the proposed new ordinance. The pre-existing fiat-referenced stablecoin (“ FRS ”) issuers currently conducting FRS issuance activities may continue to operate under a non-contravention period of 6 months, on condition that they have submitted an application to the HKMA within 3 months of the commencement of the regime; or otherwise, the FRS issuers will have to close down its business by the end of the 4th month. (3) Making a reference from international practices, it is proposed that the minimum paid-up share capital will be either HKD25,000,000 or a fixed percentage at 2% of the par value of FRS in circulation, whichever is higher will be applied. ENFORCEMENT NEWS 4. SFC fined Ruifeng Securities Limited $5.2 million and suspended its responsible officer for fund management and account opening failures On 4 December 2023, the SFC reprimanded and fined Ruifeng Securities Limited (“RSL”) HK$5.2 million over failures relating to its fund management activities and account opening procedures. It was found that RSL invested about 90 per cent of the fund’s US$94.5 million net asset value into financial instruments which was identified as having various downside factors in their own analysis and such material information was not disclosed in the fund. It was also found that RSL had failed to adopt acceptable account opening procedures for verifying the identities of clients who opened their accounts on a non-face-to-face basis through RSL’s mobile application between 26 November 2018 and 31 July 2020. As a result of this investigation, the SFC also suspended the licence of Mr Fang Zhi for 10 months from 1 December 2023 to 30 September 2024 for failing to discharge his duties as a responsible officer of RSL in charge of its fund management activities. 5. SFC banned Amy Chow Bik Sum for life for conviction of bribery offence It was announced on 13 December 2023 that the SFC had banned Ms Amy Chow Bik Sum, a former assistant customer service manager of OCBC Wing Hang Bank Limited (“OCBC”), from re-entering the industry for life following her conviction of bribery offence. The Kwun Tong Magistrates’ Court found that on 15 July 2021, Chow, who handled residential mortgage applications at OCBC, offered an employee of OCBC Wing Hang Credit Limited (“OCBC Credit”) a rebate of referral fees from an external party as a reward for referring OCBC Credit’s clients to that party, who would in turn arrange mortgage refinancing from other banks or financial institutions. The SFC considers that Chow is not a fit and proper person to be licensed or registered to carry on regulated activities as a result of her criminal conviction . 6. SFC fined Central Wealth Securities Investment Limited $1 million for breach of Financial Resources Rules On 18 December 2023, the SFC reprimanded and fined Central Wealth Securities Investment Limited (“CWSIL”) $1 million for failures in complying with the Securities and Futures (Financial Resources) Rules (“FRR”). It was found that CWSIL made various accounting and calculation errors in the financial returns submitted to the SFC under the FRR which resulted in overstating its liquid capital between April 2019 and December 2020 (Relevant Period) which was otherwise records of deficits after eliminating the errors. CWSIL’s failure to ensure accuracy in the FRR was mainly attributable to its failure to appoint qualified and competent persons to prepare and review the FRRs, coupled with the fact that its responsible officers were not familiar with the FRR requirements as well. SIGNIFICANCE: The assurance of a qualified and competent staff to conduct the financial returns was a prerequisite to ensure compliance with the FRR under the SFC. With the rapid development and fast-changing regulatory regime in the financial industry, particularly in the recent and buoyant environment with the virtual assets and non-conventional businesses under the regime of regular regulated activities, a precise and accurate financial return prepared by competent staff is of high priority for senior staff with respect to risks management which is the pillar for sustainability of a licensed corporation. 7. SFC suspended Hau Bing Leung for 15 months for unauthorized third-party operated securities account On 27 December 2023, the SFC had suspended the license of Mr Hau Bing Leung (“HAU”), former account executive of Chee Tak Securities Limited (“CTSL”), for 15 months from 22 December 2023 to 21 March 2025. It was found in the investigation that between 1 July 2018 and 5 March 2020, Hau had allowed a third party to operate the securities account of a client at CTSL without obtaining the client’s written authorisation. Having been verbally authorized by the client, the third party and HAU also even carried out personal trades in the client’s securities account; even worse was that HAU prevented CTSL from monitoring the operation of that client’s account and his personal dealings. SIGNIFICANCE: The incidence revealed the deficiency in risk control and trades monitoring, and subsequently exposed the client to potential loss from unauthorized trading and CTSL to potential liability in case of disputes arising from trades in the account concerned. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk To unsubscribe, please click “ unsubscribe ”.

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – November 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES IA Issues Circular on Reference Checking Schemes for Licensed Insurance Intermediaries ENFORCEMENT NEWS IA Imposes Restrictive License Conditions on Mighty Divine Insurance Brokers Limited Associated with Prince Group (太子集團) ICAC Secures Jail Sentences for Last Batch of Defendants in $52 Million Dummy Agents Commissions Fraud ICAC Issues Arrest Warrants for Two Individuals Implicated in $3 Million Insurance Commissions Fraud Regulatory News 1. IA Issues Circular on Reference Checking Schemes for Licensed Insurance Intermediaries On 20 November 2025, IA Issues further Circular on the Reference Checking Scheme (the “ Scheme ”) for Licensed Insurance Intermediaries. Addressing the “rolling bad apples” phenomenon “One bad apple spoils the whole barrel” so the old adage goes. In the context of the Scheme, the phenomenon of “rolling bad apples” refer to licensed individuals attempt to evade the consequences of past misconduct by moving principals without proper disclosure. To address the issue of “rolling bad apples”, the Scheme was launched by the Hong Kong Federation of Insurers (“ HKFI ”) by its circular dated 5 July 2025 to be used by its members which are authorized insurers carrying on long-term business from 1 September 2024 onwards. The IA then issued the Circular on 5 July 2024 to endorse and support the Scheme. The Scheme then expanded in Phase 2, jointly launched by the HKFI, the Hong Kong Confederation of Insurance Brokers (“ CIB ”) and Professional Insurance Brokers Association (“ PIBA ”), covers all licensed long-term individual intermediaries to protect policyholders, maintain market confidence, and prevent misconduct from spreading. Effective Date With effect from 1 January 2026 , the Scheme will be expanded to cover all appointment of all individuals licensed intermediaries carrying on long term insurance business. Non-compliance may lead to supervisory scrutiny or disciplinary action by the IA. Scope and Application Applies to appointments of prospective intermediaries (the “ Candidates ”), including: licensed individual insurance agents; technical representatives (agent); or technical representatives (broker) (collective as “ TRs ”); for regulated activities in long-term business . As a Recruiting Principal, conduct reference checks on candidates with past 7 years of relevant experience. Check only the THREE most recent appointments if multiple. Excludes agencies that are authorized institutions under Banking Ordinance (potential integration with banking scheme ongoing). Summary of the Scheme Making a Reference Checking Request (as Recruiting Principal) Before appointing for long term activities, conduct reference checks on THREE most recent appointments within Past 7 years. · Use Annex 1A template to request info from responding principals. · Obtain written consent from candidates via Annex 2A form , authorizing checks, disclosure, and exempting contractual limits. If candidates refuse to provide consent or withdrawn the provided consent, should NOT appoint. For group companies, one entity can conduct checks for reliance, but each remains accountable with access to results. Responding to a Reference Checking Request (as Responding Principal) Upon received the Reference Checking Request from Recruiting Principal: · Complete and return info within 15 days; · If delayed, send interim reply with reason and expected final (max 2 months , exceptional only, approved by * KPIM/RO or delegate). *KPIM - key person in control function for intermediary management; RO - Responsible Officer. After submitting the first round of reference checking requests, respond to any further clarification requests within 15 days, if applicable. Recruiting Principal may assume that no further clarification to be provided by Responding Principal. Assessment by the Recruiting Principal (as Recruiting Principal) Discretion in Decisions : Recruiting principal has full discretion to appoint based on all info, including references. Evaluate adverse info considering nature, timing, explanations, and recurrence risk. Responding principals may voluntarily add material facts. Opportunity to Be Heard : For fairness, provide candidates chance for representations if adverse info may block appointment; share reference copy. No need to reopen investigations or seek more from responders. Proceeding with Adverse Records : Document assessment and justification for appointing despite issues; endorsed by KPIM/RO. Ongoing Assessment : If Responding Principal declare further information to provide, the reference process may consider complete once the Recruiting Principal assesses available information and decides on appointment ( must document the justification with KPIM/RO endorsement ). Pre-Appointment & Post-Appointment (as Recruiting Principal) Pre-Appointment If the Recruiting Principal decides to appoint despite adverse records from reference checks, they must document the assessment and justification, which requires endorsement by KPIM/RO. Post-Appointment If additional information arrives after appointment, the Recruiting Principal has full discretion to use it for ongoing evaluation, including potential actions like terminate the appointed candidate. Records and Communications (All Principals engaging Long-term business) Record Keeping For Insurance Broker Company engaging Long-Term Business: · Maintain records of resigned TRs for at least 7 years (or per internal policy, not longer than necessary under PDPO). · For unsuccessful application, retain max 2 years unless reason or consent. IIC Centralized Contact Database IA will maintain centralized contact database contain all participating principals via IA’s e-portal - Insurance Intermediaries Connect (“ IIC ”). As a safeguard, responding principals are not required to reply to reference check requests unless sent from the valid designated email address recorded in the contact database. Reference Checking Schemes Materials The Circular attached with relevant materials including: I. Main Paper – Details of the Schemes and Procedures II. Annex 1A – Template III. Annex 2A – Consent Form IV. FAQ for Licensed Entities V. FAQ for Licensed Individuals Attachment: Reference Checking Schemes Materials 附件: 保險中介人背景查核計劃資料 SIGNIFICANCE: This Scheme reinforces the IA's commitment to maintaining high standards of conduct and integrity in Hong Kong's insurance sector by preventing the recirculation of unfit intermediaries. By mandating structured reference checks, it enhances policyholder protection, reduces risks of misconduct, and promotes a more transparent and accountable industry. Insurers and intermediaries should review their hiring processes promptly to ensure compliance, as this could mitigate potential regulatory risks and foster greater trust in the market. Enforcement News 2. IA Imposes Restrictive License Conditions on Mighty Divine Insurance Brokers Limited Associated with Prince Group (太子集團) The Prince Group (太子集團) founded by Chen Zhi (陳志), has been implicated in operating telecom fraud parks in Cambodia, with Chen Zhi facing US prosecution and sanctions, including the freezing of approximately HK$120 billion in Bitcoin assets. On 28 October 2025, IA Imposes Restrictive License Conditions on Mighty Divine Insurance Brokers Limited (“ Mighty Divine ”) - Associate Company with Prince Group. The conditions prohibit the company from conducting, or representing itself as conducting, any regulated activities as defined under the Insurance Ordinance (Cap. 41) . Details of the Licensed Corporate: Name (EN) Mighty Divine Insurance Brokers Limited Name (CN) 美迪保險經紀有限公司 Licence No. FB1329 License Type Insurance Broker Company Line(s) of Business General & Long Term Business (excluding Linked Long Term Business) Business Address FLAT/RM 803, 8/F, 68 KIMBERLEY ROAD, TSIM SHA TSUI, KL Responsible Officer(s) Nill (as of 28 Oct 2025) For more details, please refer to Register of Licensed Insurance Intermediaries Conditions of the License 1) The licensee is restricted from carrying on, or holding out to carry on, any regulated activities under the Insurance Ordinance (Cap. 41) (“IO”); 2) Without prejudice to the generality of condition (1) above, and subject to condition (3) below, the licensee shall not receive, hold, or deal with any monies as specified in section 71(2) of the IO (i.e. (a) monies received by the company from or on behalf of a policy holder or potential policy holder for or on account of an insurer in connection with a contract of insurance; and (b) monies received by the company from or on behalf of an insurer for or on account of a policy holder or potential policy holder.) (“Client Monies”); and 3) The licensee may be involved in arranging the transfer, remittance or payment of, or otherwise deal with, Client Monies in accordance with the requirements under the IO and the Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules (Cap. 41L), provided that (i) it acts in compliance with all applicable laws and regulatory requirements; and (ii) it has obtained the prior written consent of the Insurance Authority. 3. ICAC Secures Jail Sentences for Last Batch of Defendants in $52 Million Dummy Agents Commissions Fraud On 21 November 2025, the Hong Kong District Court sentenced the final six defendants in a major corruption case investigated by the Independent Commission Against Corruption (“ ICAC ”), involving a $52 million fraud scheme (the ” Scheme ”) orchestrated through dummy insurance agents at: FWD Life Insurance Company (Bermuda) Limited (富衛人壽保險(百慕達)有限公司) (“ FWD ”); and Sun Life Hong Kong Limited (香港永明金融有限公司) (“ Sun Life ”). Case Summary The scheme, masterminded by LO Yin-wa (“ LO ”), a former FWD branch manager who was earlier sentenced to 46 months' imprisonment, involved recruiting dummy agents who falsely represented themselves as handlers of 478 high-commission insurance policies between February 2016 and November 2020. This deception led to the release of over $52 million in commissions, incentives, bonuses, and allowances, most of which were funneled back to LO through laundered bank accounts. The majority of the policies lapsed due to non-payment of subsequent premiums. FWD and Sun Life provided full cooperation during the ICAC investigation, which stemmed from a corruption complaint. Enforcement Act and Court Order The last six defendants, aged 25 to 39 and acting as purported insurance agents were convicted or pleaded guilty to charges of conspiracy to defraud and conspiracy to deal with property known or believed to represent proceeds of an indictable offense, with sentences ranged from 12 to 21 months' imprisonment. i. LEUNG Tsz-wing (梁紫穎) ii. MO Wing-han (毛詠嫻) iii. WOO Kin-leung (胡健良) Entered Guilty Pleas iv. LO Nga-wing (羅雅穎) v. NGAN Tsz-ting (顏梓定) vi. KONG Tsz-ying (江梓瑩) Convicted After Trial A total of 17 defendants faced 20 charges in the case, with 10 other dummy agents previously sentenced to terms ranging from 11 to 22 months. SIGNIFICANCE: The ICAC continues to prioritize integrity in the insurance sector, offering training and resources like the Corruption Prevention Guide for Insurance Companies to mitigate such risks. The judge also reprimanded the defendants for breaching professional conduct standards, noting they were lured into the offenses by the main culprit. This case highlights the severe consequences of integrity breaches in the insurance industry, emphasizing the need for robust internal controls, agent verification processes, and anti-fraud measures to prevent dummy agent schemes that erode public trust and cause financial harm. 4. ICAC Issues Arrest Warrants for Two Individuals Implicated in $3 Million Insurance Commissions Fraud The ICAC has issued arrest warrants for NG Ho-lun (吳浩麟) (“ NG ”) and Kuzca CHIK Sin-deon, formerly known as Pan CHIK Ka-tung (戚善惇, 前稱戚加彤) (“ CHIK ”), two key figures in an alleged insurance fraud scheme that defrauded: Sun Life Hong Kong Limited (香港永明金融有限公司) (“ Sun Life ”); and China Taiping Life Insurance (Hong Kong) Company Limited (中國太平人壽保險(香港)有限公司) (“ Taiping Life ”); of approximately $3 million in commissions, bonuses, and allowances through bogus policies and false representations. Case Summary The case, which involves recruiting family members, friends, and police officers as dummy agents and policyholders, stems from corruption allegations and has led to charges against eight individuals total, with six already charged and appearing in court. On 6 November 2025, the case against the six charged defendants were transferred from the Eastern Magistrates’ Courts to the District Court for plea on 27 November 2025. The defendants face 21 charges. See below table for the Six Charged Defendants Details: Role/Relationship Name Police Sergeant LAM Hin-ho (林顯豪) LAM Hin-ho’s brother LAM Chun-pong (林振邦) LAM Hin-ho’s sister-in-law YU Xiaodan (余曉丹) LAM Hin-ho’s friend LAU Chun-yee, formerly known as LAU Man-yee (劉臻頤, 前稱劉敏儀) Solicitor Osbert HUI Yee (許懿) Police Constable SZE Hong-chak (施匡澤) For more details of the case, please refer to Topic 4 of ComplianceOne Insurance Newsletter – October 2025 Details of Two Wanted Individuals Name Former Positions Role in Fraud Fraud Conducted NG Ho-lun Regional Director of Sun Life; Senior Branch Manager of Taiping Life Central role in orchestrating the fraud Recruited individuals (including LAM Hin-ho’s family, friends, and police colleagues) as dummy downline agents and policyholders; Took out 20 insurance policies, paying premiums while falsely claiming they were settled by genuine policyholders; Ensured false claims of agent interviews; Conspired with LAM Hin-ho and LAU Chun-yee to create false academic qualifications for LAU's recruitment. Kuzca CHIK Sin-deon (formerly Pan CHIK Ka-tung) Insurance Agent of Sun Life Participated in recruitment and posed as a dummy agent Contributed to false representations to insurers; Deceived insurers into believing applications were legitimate and interviews occurred, leading to fraudulent commissions. SIGNIFICANCE: This case underscores the vulnerabilities in the insurance sector to internal fraud schemes involving unlicensed or dummy intermediaries, particularly when intertwined with public servants like police officers, potentially eroding public trust in both law enforcement and financial institutions. The ICAC's proactive investigation and pursuit of fugitives highlight the importance of robust verification processes for policy applications, agent qualifications, and commission payouts to prevent such exploitation. Insurers are urged to enhance anti-fraud measures, including cross-verification of applicant interviews and premium sources, while collaborating with regulators to maintain industry integrity and protect policyholders from systemic risks. [End of ComplianceOne Insurance Newsletter – November2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1605, 16/F, West Tower, Shun Tak Centre,168-200 Connaught Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - June 2024 The topics discussed in this monthly newsletter are as follows: 1. HKEX to implement severe weather trading in securities and derivatives markets 2. SFC marks its 35-year history as the guardian of Hong Kong financial markets 3. SFC’s deficit nearly tripled to 298 million ending in March 2024 4. SFC enforcement report shows 175 completed cases in 2023-2024 5. SFC suspends PICC’s former licensed representative for seven months for failures in managing a private fund 6. WONG Ming Chung was convicted for providing investment advice on Telegram without a licence 7. SFC disciplined WU Chao for circumventing personal dealings MARKET NEWS 1. HKEX to implement severe weather trading in securities and derivatives markets Hong Kong Exchanges and Clearing Limited (HKEX) announced on 18 June 2024 that the Severe Weather Trading (SWT) will commence on 23 September 2024 in both securities and derivatives markets, the consultation conclusions received from market participants showed strong support for the implementation. The SWT covers Stock Connect, derivatives holiday trading, and after-hours trading, during severe weather events; and to ensure safety, remote working and the use of online services are strongly encouraged. Some adjustments are also required to ensure the market’s operational resilience as certain services may not be available during SWT day. As HKEX Chief Executive Officer, Bonnie Y Chan, had said: “ This is an important step that will make Hong Kong's markets always available to regional and international investors during trading hours, whatever the weather, and underscores HKEX’s commitment to supporting the resilience and competitiveness of Hong Kong as a world-class financial centre. ” Besides, the Hong Kong Association of Banks and the Hong Kong Interbank Clearing Limited have confirmed that, during SWT days, banking services, such as electronic money transfer channels, will be available from designated banks and settlement banks of relevant clearing houses of HKEX to facilitate the operations and settlement process. To allow small-and-medium-sized brokers adequate preparation time, HKEX plans to offer special arrangements to eligible participants requiring assistance, for example by temporarily fulfilling margin payment or settlement obligations for these participants on a SWT day. The above special arrangements will be in place from the SWT effective date until the end of 2024. SIGNIFICANCE: During the SWT day, HKEX's trading, clearing, settlement and market data systems will be fully accessible via remote networks; and HKEX has made enhancements to its infrastructure and operational arrangements to reduce the need for physical access among participants, and will arrange testing sessions before the launch of SWT to ensure readiness of market participants. Severe Weather Trading is no doubt a bold step of the HKEX to achieve a seamless trading environment uninterrupted by any unfavourable weather conditions, thus providing more opportunities and protections to investors to manage their risks and exposures along with the global market conditions. 2. SFC marks its 35-year history as the guardian of Hong Kong financial markets SFC issued an Annual Report on 19 June 2024 which highlighted various initiatives to promote the resilience and sustainable growth of Hong Kong’ s capital markets as well as laying out the roadmap to prepare the capital markets for future opportunities and challenges. As SFC’s CEO Ms Julia Leung has said: “ To remain a world-class regulator and lead Hong Kong’ s capital markets to new heights in decades to come, the SFC must strengthen its dual role as protector and enabler , by staying agile and vigilant as well as harnessing new opportunities from sustainability and new technologies, without compromising investor protection. ” Also, cherishing to enhance the super-connector role of Hong Kong has been one of the top initiatives, the SFC has been endeavouring to collaborate with the China Securities Regulatory Commission (CSRC) to deepen the mutual market access. The flagship Stock Connect scheme has recorded a 20-fold advance in average daily trading since 2014; together with the ETF Connect, the Swap Connect, which strengthen the role of HK as an offshore risk management hub. To lead financial market transformation via technology, the SFC has pioneered in launching the VA licensing regime to facilitate the trading of VAs and its VA-related spot ETFs accessible to retail investors. More details in other areas are delineated in the Annual Report 2023-24 for public interests. 3. SFC’s deficit nearly tripled to 298 million ending in March 2024 With reference to the Annual Report posted on 19 June 2024, the SFC recorded a deficit of HK$298 million for the year ending in March 2024 as over the past three years, staff costs were up 8% and total expenses up 5% (page 142); the recorded loss in the previous fiscal year was HK$101 million. The total income for the year was HK$1835 million, down 6% from HK$1942 million last year, owing to decrease in securities market turnover with resulting levy income went down 19% from last year to $1,390 million. Apart from the above, the SFC still has to complete the transaction for acquiring nine office floors as its permanent office, and HK$2.3 billion form the property acquisition reserve has been utilized. As of 31 March 2024, the reserves still stood at $7.6 billion, of which $1.2 billion has been set aside to support the acquisition of three additional floors and future principal bank loan repayments. SIGNIFICANCE: Despite of the above financial figures, the SFC remains as the robust regulatory body in Hong Kong with irreplaceable role as regulator and facilitator in maintaining the integrity and governing regime of this international financial centre. 4. SFC enforcement report shows 175 completed cases in 2023-2024 In the Annual Report 2023-2024 of the SFC, 183 investigation cases had been launched with 175 cases completed, and 24 cases were brought to criminal proceedings. A landmark of investigation cases in 2023 was the highly organized, large scale and sophisticated market manipulation case with several individuals involved and charged with various criminal offences at the High Court in May last year. Moreover, following the investigation by the SFC, cases of two suspects of the key members of a "ramp-and-dump" syndicate were transferred to the District Court. As Mr Tim Lui, Chairman of the SFC, had stated the SFC had gained valuable experiences and achieved remarkable results in the past years, and would continue to ensure the integrity, stability and resilience of the financial markets in Hong Kong amid the emerging challenges over the world. ENFORCEMENT NEWS 5. SFC suspends PICC’s former licensed representative for seven months for failures in managing a private fund On 20 June 2024, the SFC has suspended Mr Shum Wai Nap, former licensed representative of PICC Asset Management (Hong Kong) Company Limited (PICC), for seven months from 20 June 2024 to 19 January 2025 for fund management failures. The investigation found that Shum was the investment manager of a Cayman-incorporated fund (the “Fund”) under PICC between May 2018 to April 2020, and he failed to: (i) properly manage the Fund in line with its investment objectives and restrictions; and (ii) properly manage the risks of the Fund with PICC’s policies. Taking a thorough scrutiny of the Statement of Disciplinary Action of what Shum had done, it serves as a negative example to illustrate how funds should be properly managed ! (1) Failure to adhere to the Fund’s investment strategy, objectives and investment restrictions: the memorandum of the Fund was capital preservation with steady capital appreciation in a diversified portfolio; SHUM only held 1 to 3 stocks with highly concentrated positions, including a Stock X which was NOT in the approved stock pool under the internal policies of PICC’s Investment Committee with respect to the investment mandate. (2) Failure to mitigate the risks associated with the Fund’s holding of an unsuitable stock: Shum continued with several requests to add the Stock X to the stock pool despite repeated rejections from the Investment Committee with “SELL” only restriction to him, and Shum declined to follow. (3) Failure to manage liquidity risks: under the guideline of illiquid assets (ie, assets that required more than 30 days to sell), holding of illiquid assets should not exceed 20% of a Fund’s portfolio; under Shum’s management, the ratios were as high as 80.7 % and 91.69%! (4) Failure to manage concentration risks: according to PICC’s policies, holding of a single stock should not exceed 20% of the Fund’s total NAV; and the holding of Stock X and others under Shum far exceeded 20%. (5) Failure to comply with PICC’s stop loss procedure: there is a guideline for stop-loss of more than 50% of a particular single stock; and Shum did not follow the instructions to execute forced sales of the Stock X within three trading days as required. SIGNIFICANCE: Shum’s repeated failure to properly manage the Fund and his deliberate intention NOT to comply with PICC’s risk management policies was in breach of General Principle 2 (diligence) of the Code of Conduct which requires a licensed person to act with due skill, care and diligence, in the best interests of his clients and the integrity of the market in conducting business activities. The mal-practices of Shum are typical incidences a licensed corporation in asset management should endeavour to avoid as remedial measures to mitigate potential regulatory breaches! 6. WONG Ming Chung was convicted for providing investment advice on Telegram without a licence On 20 June 2024, the Eastern Magistrates’ Court today convicted Mr WONG Ming Chung (WONG) for providing investment advice on a subscription-based chat group on Telegram he hosted without a licence in a prosecution brought by the SFC. WONG pleaded guilty to the charge and was fined HKD10,000 together with the SFC’s investigation costs. The investigation found that between 2 January 2018 and 21 May 2019, WONG hosted a chat group on Telegram named “ FRANKY - 即市直播谷 ” which was opened to members of the public on a subscription by payment basis. SIGNIFICANCE: Despite that WONG was licensed under the SFC to conduct with Type 1 (dealing in securities) and Type 4 (advising in securities) regulated activities, the CRUX of the conviction was that the Telegram group was not operated on behalf of the licensed corporation WONG was accredited to, but for his own remunerations. 7. SFC disciplined WU Chao for circumventing personal dealings On 26 June 2024, the SFC prohibited Mr WU Chao (“WU”), a former responsible officer, manager-in-charge (MIC) and chief operations officer of DA International Financial Service Limited (DA), from re-entering the industry for three years and seven months from 26 June 2024 to 25 January 2028. The investigation found that between February and April in 2022, WU concealed from DA his beneficial interest in and direct control over a securities margin account held by a third party at DA without obtaining DA’s prior approval. WU’s conduct circumvented DA’s employee dealing policy from being monitored under personal trading activities. In all, the unauthorised transactions conducted in the account at the material time totalled $7.3 million. WU also abused his right as a member of DA’s senior management to make 33 unauthorised adjustments to the margin loan limits of the account and the margin financing ratios to facilitate his trading activities. The SFC considers that WU’s conduct was dishonest and it called into question his fitness and properness to be a licensed person. SIGNIFICANCE: No matter how comprehensive and stringent are the prevailing rules and guidelines, there are always loopholes to be abused, in particular by anyone who is in authority to circumvent and override the existing regulatory framework for his own advantages.” 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