Guideline on Streamlined approach for SPI

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – Mar 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES 1. The SFC issues additional guidance for high-multiplier IPO subscription 2. SFC proposes enhancements to targeted tools to address corporate misconduct MARKET NEWS 3. Hong Kong capital markets ended with high achievements in 2024 4. HKEX and Exchange Fund collaborate on development of fixed-income and currency (FIC) ecosystem 5. Hong Kong’s securities industry posted broad-based growth in 2024 6. Hashkey Capital was granted type 1 license by the SFC ENFORCEMENT NEWS 7. SFC obtains disqualification order against former financial controller of Anxin-China Holdings Limited 8. SFC seeks disqualification and compensation orders against entire former board of 3DG Holdings (International) Limited 9. SFC obtains disqualification orders against former executive directors of Tech Pro Technology Development Limited 10. SFC suspends a Finfluencer for 16 months for unlicensed investment advice on Telegrams 11. SFC fines Enlighten Securities Limited $5 million for securities margin financing failures 12. SFC bans former RO of Kylin International for private fund management failures Regulatory Updates 1. The SFC issues additional guidance for high-multiplier IPO subscription The SFC recently completed a review (“ Review ”) of the risk management practices and control measures of selected licensed corporations (“ LC ”s) in relation to their initial public offering (“ IPO ”) subscription and financing services. A circular dated 20 March 2025 set out the findings of the Review and provides guidance to LCs on the expected standards of conduct. An Executive Summary of the Review 1. Key Findings from the Review The Review identified the deficiencie s including lenient credit control in assessing clients’ financial capabilities, imprudent IPO financing, thus rendering the LCs to risk exposure levels beyond their anticipation. (1) Credit controls are too lenient the LCs over-emphasized on the subscription levels rather the assessment of the clients’ financial capacities, resulting in over-leverage for clients, subject the LCs to increased client default risk; practices observed like applying high multiplier to clients’ account balances based on some pre-set leverage ratios without written justification ; (2) IPO funding arrangement some LCs collected minimal upfront subscription deposits on non-fully funded IPO subscription orders, while relying on house money to meet pre-funding requirement, putting significant pressure on the liquidity level of the LCs; (3) Handling subscription deposits the LCs failed in proper and timely segregation of the subscription deposits received from the clients that were not placed with the designated banks for pre-funding confirmation; causing under-segregation of client monies in segregated bank accounts; the LCs failed in timely segregation of the client money released from designated banks after the balloting process and before returning to clients within one day after receiving the receipts by the LCs; 2. The Regulatory Guidance With the aim to mitigate excessive exposure for the investors, some expected standards of conduct are set out in particular with respect to FRR capital requirements and relevant internal control measure. (1) For IPO financing activities, the LCs should: assess the financial capabilities of the clients, and collect minimum upfront subscription deposits of not less the 10% of the subscription amounts; conduct financial and liquidity assessment prior to offering any IPO financing activities to the clients, including estimation of the maximum amount of IPO financing as well as the utilization of any external sources of financing clients’ subscriptions; (2) For Segregation of subscription deposits LCs are reminded to properly segregate upfront subscription deposits that are not placed with designated banks for pre-funding confirmation; 3. Other important points with compliance Issues (1) Investor identification requirement under FINI to ensure the Client Identification Data (“CID”) submitted to FINI for IPO subscriptions is accurate; to prevent clients from submit multiple subscription orders; (2) Computation of liquid capital the LCs which provide IPO financing facilities to clients for pre-funding confirmation should follow the guidance set out in the circular with respect to FRR rules and requirements; FINAL REMINDER LCs should critically review their existing policies and procedures to ensure proper implementation of and full compliance with this circular for IPOs with offering periods commencing after the date of this circular. SIGNIFICANCE: LCs are advised to pay attention to this circular which outlines the perspective of the SFC in relation to imprudent IPO financing and its adverse impact on FRR compliance of the LCs; it is of top priority to strike a balance between risk, viability and compliance as the pendulum needs to swing to sustain the momentum rather than staying at either side. 2. SFC proposes enhancements to targeted tools to address corporate misconduct On 28 March 2025, the SFC began a consultation on proposed enhancements (“ PPEH ”) for the relating to Securities and Futures (Stock Market Listing) Rules (“SMLR”) for IPO cases and post-IPO matters, aiming to improve regulatory efficiency and providing protection for investors at large. In the wake of the SMLR review, the PPEH was put forward to ensure the SFC with sufficient targeted tools to encourage that the listed issuers and listing applicants to make more transparent & accurate disclosures, as well as addressing misconduct. The key PPEHs to the SMLR comprise of FOUR areas : (1) for IPO cases: listing applicants are required to meet continuing disclosure obligations post-listing without the SFC’s objections to the listing, given that the listing conditions remain effective after listing. It is expected that some applications can be expedited with increased transparency with this bespoke disclosure requirement; (2) for post-IPO matters: apart from the existing power to execute suspension of dealing in the securities, the SFC would be able to impose post-listing conditions on a listed issuer, requiring for more transparent and complete disclosures in order that investors can make more informed decisions; (3) for trading suspension: to shorten the suspension time through proposed simplified procedures to handle application for trading resumption more efficiently; (4) for issuers unsatisfied with SFC’s decisions: the aggrieved party would have the right to seek for a review by the Securities and Futures Appeals Tribunal, providing an independent safeguard to the aggrieved that the decisions made by the SFC are reasonable and fair. SIGNIFICANCE: The merits of these PPEHs can be summarised by what Mr. Michael Duigan, the SFC’s Executive Director of Corporate Finance, has said, “ Investors and listed issuers alike stand to benefit from these comprehensive enhancements to drive regulatory and operational efficiencies in Hong Kong’ s listing market as a favourite listing destination for companies at home and abroad .” The above PPEHs, despite its name as targeted tools for the SFC to address misconduct, are actually beneficial arrangements to both the issuers and the investing public by strengthening public accountability and streamlining the regulatory process on one hand; whereas further consolidating the execution authority of the SFC in implementing the policies and procedures with more flexibility. Market News 3. Hong Kong capital markets showed high achievements in 2024 A Quarterly Report (Q4) of the SFC in March showed that strong asset management sector and enhanced market connectivity amidst improving investor sentiments boosted the Hong Kong capital markets to end with high scores. Some key takeaways of the achievements: (1) The average daily turnover of ETFs surged 35% year-over-year to HKD18.9 billion with net inflows of HKD22.8 billion for the year; (2) Net inflows of HK-domiciled funds were up 88% to HKD 162.9 million with asset managed up 22% HKD1.64 trillion; (3) Cross-listing of two Hong Kong ETFs in Saudi Arabia with combined market capitalization of USD1.6 billion as of December; (4) Enhancement of the ETF Connect and the Mainland-Hong Kong Mutual Recognition of Funds scheme bolstered the fund sales in HK since January 2025; (5) Stock Connect saw 55% jump in average daily southbound trading to HKD48.2 billion, more than 18% of turnover in HK, with net inflows hit a 10-year high of HKD807.9 billion; (6) Total number of licensed corporations was up 1.5% with number of license applications up 15% as end of 2024; (7) The number of SFC licensed VA trading platforms was up three more to a total of 10; and the launch of “ ASPIRe ” roadmap further navigated the development of the VA regime in HK; (8) Step up of investor education and combat investment fraud, in December, the SFC launched a fresh anti-scam publicity campaign titled “ Don’t be Sucker ” through the mass media to arouse public alertness. SIGNIFICANCE: Undoubtedly, the support from Mainland is second to none as a driver for the success in Hong Kong. And to conclude the achievements, Ms Julia Leung, the SFC’s CEO, said, “ Building upon the progress, the SFC will remain committed to facilitating developments and fostering innovation for our markets while upholding their integrity and quality. ” 4. HKEX and Exchange Fund collaborate on development of fixed-income and currency (FIC) ecosystem The Hong Kong Exchanges and Clearing Limited (“ HKEx ”) has been providing an unrivalled connectivity between China and the rest of the world, and diversifying the business of the exchange to make it more resilient to volatility and prepared for opportunities. The HKEx has established the most comprehensive product ecosystems in Asia, and it continues to work. For the cash equity market, complemented by the equity derivatives franchise, the HKEX has provided the clients with one-stop-shop to trade and manage risk. Going further, the HKEX will be focusing on driving fixed-income and currency (“FIC”) market development to cultivate a similar ecosystem or this asset class. Mainland China’s fixed-income market, at USD24.6 trillion, ranks the second largest in the world. With strong policy support, it is expected that the growth trajectory of Mainland’s FIC market to continue and connectivity with offshore market. Two cornerstone s of market liquidity and resilience: (a) Diverse investor base: Bond Connect is a key channel for international investors to gain access to China’s domestic fixed income market, given the average daily turnover of its northbound broke records since its launch in 2017. (b) Well-functioning derivative market : allowing investors to effectively and efficiently manage their risks. On 4 March 2025, the HKEx marked a new milestone in building HK’s FIC ecosystem with the announcement to collaborate with CMU OminClear Limited (“ CMU OmniClear ”). CMU OmniClear , a wholly-owned subsidiary of the Exchange Fund with USD610 billion assets under custody, and HKEX signed a MOU on that date to deepen their collaboration in enhancing the post-trade securities infrastructure of the Hong Kong’s capital markets, and supporting a long-term development of the fixed-income and currencies (FIC) ecosystem. Key points of the MOU are that the two parties will explore and pursue cooperation in the following areas: (i) realising cross-asset class efficiencies across equities and fixed income; (ii) expanding the use of Mainland bonds as collaterals; (iii) enhancing HK as a bond issuance centre; (iv) developing an international centre securities depository (“ ICSD ”) in Asia; SIGNIFICANCE: This MOU sets an important milestone and a commitment from both parties to the development of the capital markets, and also for building a vibrant FIC ecosystem in HK. Moreover, through the MOU, the HKEX, HKMA and the CMU OmniClear are collaborating to enhancing the development of HK’s fixed-income market, materializing the RMB internationalization and consolidating HK as an international financial centre as well as an offshore RMB business hub. 5. Hong Kong’s securities industry posted broad-based growth in 2024 On 26 March 2025, the SFC published that from a report on the financial review of the securities industry , it showed that the securities industry demonstrated a remarkable resilience in financial performance in 2024 with total net profits up 56% year-on-year to HKD44.4 billion. The encouraging findings are as below: (i) earning growth of 11% increase in total income to HKD222.6 billion; (ii) the total value of transactions of all securities dealers and securities margin financiers jumped 34% to HKD144.1 trillion; (iii) broad-based growth across different categories: securities commission up 18% to HKD20.2 billion; asset management income up 14%to HKD37.5 billion, and underwriting and placing of securities (up 18% to HKD11.1 billion). For details of the financial review, it is available on the website. 6. Hashkey Capital was granted type 1 license by the SFC On 18 March 2025, HashKey Capital was granted a Type 1 license from the SFC on top of its Type 9 (providing discretionary account management) and Type 4 (providing advisory service on securities and virtual asset investments) licenses. Under the new Type 1 license, HashKey Capital can now offer brokerage services to both retail and professional investors, as well as marketing and distributing funds including those related to virtual assets. With the addition of Type 1 license, HaskKey Capital can now offer a broader range of services which can be classified into three major categories: (1) Market access: providing brokerage services to two markets between crypto exchanges and brokers; (2) Investment funds: its clients now have the access to funds with diverse strategies; (3) Structured products: its clients are now provided with access to diverse suite of structures products HashKey Capital is now able to serve investors with more diversified goals and trading strategies. Enforcement News 7. SFC obtains disqualification order against former financial controller of Anxin-China Holdings Limited SFC has successfully obtained a court order disqualifying Ms. Yang Shuyan, the former financial controller of Anxin-China Holdings Limited (“ Anxin ”, 01149.HK ), from serving as a director, liquidator, receiver, or manager of any listed or unlisted corporation in Hong Kong, or being involved in their management, for three years. This ruling, effective without court permission, stems from her admitted failure to uphold the required standards of skill, care, and diligence in her role. Case Details: The Court of First Instance issued the order following Ms. Yang’s admission that she did not adequately oversee Anxin’s financial reporting. Between 2011 and 2015, the company significantly overstated its cash position, with discrepancies amounting to $1.26 billion in 2012 and $1.73 billion in 2013, as reflected in its audited financial statements. To mask these inaccuracies, false bank records were supplied to auditors during a 2014 audit. As financial controller, Ms. Yang was tasked with ensuring the accuracy of Anxin’s financial statements and overseeing the audit process. However, she failed to take reasonable steps to verify the company’s cash reserves or investigate discrepancies identified by auditors. Additionally, as a member of a special team formed to probe these inconsistencies, she accepted the team’s findings without scrutiny, neglecting to raise concerns about cash flow irregularities or the integrity of senior management. The court described her negligence as "nothing short of breath-taking," emphasizing that such large-scale financial misstatements could not have occurred without gross oversight on her part. SIGNIFICANCE: Mr. Christopher Wilson, SFC’s Executive Director of Enforcement, commented: “ The role of financial controllers in listed companies is pivotal to ensuring the integrity of financial reporting. Professional scepticism is not just a best practice; it is an essential duty. Financial controllers must approach their responsibilities with a critical mindset, actively questioning and verifying financial information to protect stakeholders.” This is not the first instance of regulatory action against Anxin’s leadership. In June 2021, SFC secured an eight-year disqualification order against a former executive director of the company, as part of broader proceedings against its senior management. These repeated interventions signal the severity of governance issues at Anxin and SFC’s resolve to address them. The disqualification of Ms. Yang serves as a powerful reminder of the responsibilities financial professionals bear in safeguarding stakeholder trust. Her failure to exercise professional scepticism and diligence led to significant misrepresentations that undermined the company’s credibility and misled investors. For further details of the case, please refer to - Case No.: HCMP314/2020 8. SFC seeks disqualification and compensation orders against entire former board of 3DG Holdings (International) Limited SFC has initiated legal proceedings in the Court of First Instance against eight former directors of 3DG Holdings (International) Limited, previously known as Hong Kong Resources Holdings Company Limited (“ HK Resources ”, 02882.HK ), which listed on the Main Board of Stock Exchange of Hong Kong since 30 June 2003. SFC is seeking disqualification and compensation orders for their alleged failure to prevent the misappropriation of $74.4 million in corporate funds. There are in total of eight directors (5 Executive Directors & 3 Non-Executive Directors), all serving on the board at the time of the alleged misconduct. Allegations of Misconduct SFC’s investigation revealed that on 8 June 2017, HK Resources acquired a company with a money lender’s license. Between June 2018 and March 2019, the company issued 12 loans totalling $74.4 million through this new money lending business, all of which defaulted. SFC alleges that the acquisition and subsequent loans were part of a scheme to misappropriate HK Resources’ cash. Legal Action and Potential Consequences - SFC is seeking: Compensation Orders: To recover the $74.4 million paid out for the loans, with the directors potentially liable individually or jointly. Disqualification Orders: To bar the directors from serving in corporate management roles for up to 15 years, under Section 214(2)(d) of SFO. SFC claims the directors breached their duties by failing to exercise proper skill, care, and diligence in their roles. SIGNIFICANCE: This case highlights SFC’s commitment to upholding corporate governance and protecting shareholders. The outcome could influence future standards for director accountability in Hong Kong’s financial markets. 9. SFC obtains disqualification orders against former executive directors of Tech Pro Technology Development Limited On 20 January 2025, SFC has won disqualification orders in the Court of First Instance against three former executive directors of Tech Pro Technology Development Limited (“ Tech Pro ”, 03823.HK ) for failing to oversee a joint venture, resulting in significant financial losses. Directors Penalized Mr. Li Wing Sang (former Chairman and Executive Director): Disqualified for 7 years. Mr. Liu Xinsheng (former Executive Director): Disqualified for 7 years. Mr. Chiu Chi Hong (former Executive Director): Disqualified for 4 years. Case Details SFC’s investigation revealed that Li, Liu, and Chiu failed to properly supervise a joint venture, leaving its management to the mainland partner. Li and Liu served as director and supervisor of the venture, respectively, while Chiu had no direct role in it. Their lack of oversight allowed the partner to misappropriate over RMB 300 million. Worse still, the partner didn’t pay rent for a Shanghai building (the venture’s main asset), leading to a mainland court order terminating its sub-leasing rights. This wiped out Tech Pro’s investment, and the directors were oblivious to the legal proceedings. The disqualification orders bar Li, Liu, and Chiu from acting as directors, liquidators, receivers, or managers, or being involved in managing any listed or unlisted corporation in Hong Kong. For Li and Liu, this lasts until 2032; for Chiu, until 2029. SIGNIFICANCE: SFC’s Executive Director of Enforcement, Mr Christopher Wilson, said: “As executive directors of the company, they should be responsible and accountable for managing the financial and operational status of the joint venture. Any delegation of the management of the joint venture to the mainland partner would not exonerate their fiduciary duties and obligation to act in the best interests of the company and safeguard its assets.” “These judgments reinforce the SFC’s commitment to upholding the highest standards of corporate governance and individual accountability in protecting the interests of investors and ensuring market integrity.” Mr Wilson added. The disqualifications which barring the trio from corporate roles in Hong Kong highlight the importance of diligent oversight in joint ventures and SFC’s resolve to maintain market integrity. For further details of the case, please refer to - Case No.: HCMP 2068/2020 10. SFC suspends a Finfluencer for 16 months for unlicensed investment advice on Telegram SFC has suspended Mr. Wong Ming Chung, a financial influencer known as Franky Wong, for 16 months, from 19 March 2025 to 18 July 2026. Wong, a licensed representative of Tse’s Securities Limited (“ TSL ”), was penalized following his criminal conviction for providing investment advice through a subscription-based Telegram chat group without the proper license. Case Details Between 2 January 2018 and 21 May 2019, Wong operated the Telegram chat group in his personal capacity, offering investment advice without the requisite licensing. This led to his conviction on 20 June 2024, where he pleaded guilty, receiving a $10,000 fine and an order to pay SFC’s investigation costs. Although Wong held SFC licenses for Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities and has been accredited to TSL since 20 August 2010, he was only authorized to act on behalf of TSL. Under the SFO, "advising on securities" is a regulated activity requiring an SFC license. Sections 114(1)(a) and 114(8) of the SFO make it an offense to carry on such a business without proper licensing, barring a reasonable excuse. Wong’s operation of the Telegram group violated these provisions, leading to his conviction. SFC determined that Wong’s actions rendered him unfit to remain licensed to conduct regulated activities. However, in deciding the 16-month suspension, SFC took into account Wong’s cooperation in addressing their concerns. SIGNIFICANCE: Mr. Christopher Wilson, SFC’s Executive Director of Enforcement, issued a stern warning to investors: “Investors should remain vigilant and exercise caution when availing themselves of information shared by finfluencers. Some finfluencers who provide investment-related content on social media and other online platforms may in fact be conducting regulated activities for which they need to be licensed by SFC. Finfluencers who are not licensed may not adhere to SFC’s requisite standards of conduct and accountability, and investors may suffer by relying on their advice.” He further advised: “Before acting upon an investment advice, investors should ensure that firms and individuals who provide the advice are properly licensed.” Wong represents a growing trend of finfluencers who use social platforms like Telegram to share investment-related content. This case highlights the risks of relying on unlicensed advice and reinforces SFC’s commitment to protecting investors by enforcing strict regulatory standards. 11. SFC fines Enlighten Securities Limited $5 million for securities margin financing failures SFC has taken disciplinary action against Enlighten Securities Limited (“ ESL ”), imposing a $5 million fine and a reprimand for serious internal control lapses in its securities margin financing operations. Additionally, Mr. Denny Kua Kong Chak, a responsible officer (“ RO ”) and senior manager at ESL, faces a seven-month suspension of his licence, effective from 21 March 2025 to 20 October 2025. Case Details SFC’s investigation uncovered multiple deficiencies in ESL’s risk management practices over margin financing during the period of 1 May 2020 to 30 November 2022. The key issues included: No safeguards to halt further securities purchases by clients with insufficient equity in their accounts. Weak margin call enforcement, including a failure to liquidate positions when necessary and inadequate documentation for policy deviations. Inadequate oversight of clients’ credit limits. Delayed action on collecting overdue margin payments. These failures breached the Internal Control Guidelines, the Code of Conduct, and the Guidelines for Securities Margin Financing Activities, standards that ESL, as a licensed entity under the SFO, was obligated to meet. Consideration behind the Penalties SFC’s decision was influenced by several factors: Recurring issues: Similar problems were flagged by SFC in 2015, yet persisted into 2022. Prior warnings: ESL received reminders from SFC in 2015 and 2022 to tighten its risk management practices. Kua’s responsibility: His oversight failures as a senior manager were a significant factor. Financial context: ESL’s decision to cease operations and its financial state led to a reduced fine (from a potential $6.5 million). Deterrence: SFC aimed to send a clear message to the industry about the importance of robust controls. Clean records: Both ESL and Kua had no prior disciplinary history, a mitigating factor. SIGNIFICANCE: This case highlights SFC’s commitment to enforcing prudent risk management and holding both firms and their leaders accountable, particularly in high-stakes areas like margin financing. The penalties serve as a warning to other licensed corporations to prioritize compliance or face serious consequences. For further details of the case, please refer to - STATEMENT OF DISCIPLINARY ACTION 12. SFC bans former RO of Kylin International for private fund management failure SFC has barred Mr. Steven Wong Yung, former Responsible Officer (“ RO ”) and CEO of Kylin International (HK) Co., Limited (“ Kylin ”), from the industry for 14 months, from 18 March 2025 to 17 May 2026. The sanction stems from his failure to properly manage private funds under Kylin’s oversight. Case Detail: Between August 2018 and July 2021, Kylin acted as the investment manager and/or consultant for sub-funds of a Cayman-incorporated fund. Wong, who served as RO for Type 9 (asset management) regulated activity from 2016 to 2023, was tasked with overseeing Kylin’s operations and internal controls. SFC found that he : Failed to ensure Kylin maintained appropriate standards of conduct a nd adhered to proper procedures in managing the funds. Did not adequately manage risks tied to Kylin’s business. These lapses fell short of the standards expected of an RO and senior manager, roles in which Wong also served as manager-in-charge for critical functions like compliance, risk management, and overall oversight. The Penalty Wong’s industry ban reflects SFC’s stance on accountability. In determining the 14-month duration, SFC considered: His cooperation in addressing their concerns. His clean disciplinary record prior to this incident. Wong, no longer licensed by the SFC as of 30 November 2023, cannot re-enter the industry until mid-2026. SIGNIFICANCE: Kylin ceased regulated activities on 31 December 2023, and its licence was revoked by the SFC on 22 January 2025 at the firm’s request. SFC’s action against Wong ties into broader disciplinary proceedings against related entities involved with the same funds. Details of these failures remain under wraps until those cases conclude. This ban underscores SFC’s commitment to holding senior management accountable for fund oversight failures. It’s a reminder that ROs must proactively manage risks and uphold rigorous standards to protect investors and maintain market integrity. [End of ComplianceOne Newsletter – March 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - 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 analysis update are as follows: The 10 Most Significant Regulatory News for Insurance Sector in 2025 The topics discussed in this analysis update are as follows: Regulatory Updates Tackling Unlicensed Referral Activities Overhauling Commission and Referral Fee Structure Indexed Universal Life Product RO-CPTD requirement and Reference Checking Scheme Market News Macau's Modernized Intermediary Regulations JD.com Enters Hong Kong Insurance Brokerage! Enforcement News IA's Imposes Against the Insurance Company affiliated with the Infamous Prince Group! Tahoe Life Fined $10 Million for Unauthorized Transactions Landmark First Conviction! Broker Fined for Failing to Submit Audited Statements ICAC Crackdowns on Dummy Agent Fraud Schemes Regulatory Updates 1. Tackling Unlicensed Referral Activities In May 2024, The Insurance Authority (IA) issued Circular outlines key principles to regulate referral business models prohibiting unlicensed referral activities conducted by “Mainland China Visitors” (MCV). In Jun 2025, IA’s undercover inspections in Tsim Sha Tsui uncovered unlicensed street sales issues, targeting MCVs, leading to shared findings with the industries. (For more information: IA - Speeches/Articles 2025-06-15 ) 2. Overhauling Commission and Referral Fee Structure To boost transparency and consumer protection, the IA introduced major reforms for participating policies. From 1 Jan 2026, mandates spreading commissions with at least 70% in the first year and 30% over the next five; to prevent front-loading issues. (Source: IA - Circular 2025-07-30 ; Practice Note ) From 1 Oct 2025 , licensed insurance broker(s) should not pay referral fess above 50% of the total commission received from insurer(s), exceed the benchmark required enhanced disclosure and explanation subject to closer monitoring by the IA. (Source: IA - Circular 2025-09-01 ) 3. Indexed Universal Life Product IA and HKMA clarified regulations for Indexed Universal Life (IUL) products in Apr 2025, classifying as Class C (i.e. linked long-term) tailored for professional investors only. (Source: IA&HKMA – Joint Circular 2025-03-13 ) 4. RO-CPTD requirement and Reference Checking Scheme From 1 Aug 2025 , RO must complete at least 2 RO-CPD hours focused specifically on management and control functions during each CPD assessment period. (Source: IA - Circular 2025-07-11 ) From 1 Jan 2026 , the Reference Checking Scheme recommend all licensed insurance companies mandating checks on prospective intermediaries' past seven years , covering agents and technical representatives in long-term business to prevent misconduct migration. Not mandate but breaching the scheme may lead to closer monitoring by the IA. (Source: IA - Circular 2025-11-20 ) Market News 5. Macau's Modernized Intermediary Regulations The Monetary Authority of Macau (AMCM) introduced the Insurance Intermediary Business Law ( Law No. 15/2024 ) effective 1 Aug 2025, replacing a 36-year-old framework ( Decree-Law No. 38/89/M ). 6. JD.com Enters Hong Kong Insurance Brokerage! JD.com (京東集團)'s Hong Kong subsidiary, Jingdong Insurance Consultants (Licensed No.: GB1101), secured the insurance brokerage license in Oct 2025. Enforcement News 7. IA's Imposes Against the Insurance Company affiliated with the Infamous Prince Group! On 28 Oct 2025, IA imposed strict license restrictions on Mighty Divine Insurance Brokers Limited (Licensed No.: FB1329). Due to the company's association with the notorious Prince Group (太子集團); founded by Chen Zhi (陳志) . IA prohibited it from engaging in any regulated activities. 8. Tahoe Life Fined $10 Million for Unauthorized Transactions On 2 Sep 2025, IA reprimanded Tahoe Life and imposed a $10M fine from shareholders' funds. Penalties for unauthorized related-party deals that bypassed board approval, violating policies and regs. (Source: IA - Enforcement 2025-09-02 ) 9. Landmark First Conviction! Broker Fined for Failing to Submit Audited Statements On 19 Mar 2025, IA won its first conviction under Insurance Ordinance s73(1). Aurex Insurance Brokers Ltd fined $26,060 by court for failing to submit audited statements, auditor's report, and compliance report within 6 months (twice). (Source: IA - Enforcement 2025-03-19 ) 10. ICAC Crackdowns on Dummy Agent Fraud Schemes In 2025, ICAC targeted "puppet" and "dummy" agent frauds, securing convictions in related cases. A former branch manager was sentenced to 46 months in Feb, with 10 agents receiving 11-22 months, for a 2016-2020 scheme that defrauded two insurers of over HK$52 million through 478 lapsed policies. (Source: ICAC - Press 2025-02-11 ) In October, police sergeant and five others were charged for HK$3 million in bogus commissions from Sun Life and China Taiping using fake credentials and dummy recruits. (Source: ICAC - Press 2025-10-08 ) The final six defendants in the $52M case were jailed 12-21 months in Nov 2025. (Source: ICAC - Press 2025-11-21 ) [End of ComplianceOne's Summary – The 10 Most Significant Regulatory News fo r Insurance Sector in 2025 ] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – June 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES A tour of recent developments of the VA Regulatory Regime in Hong Kong SFC joins global regulatory effort to curb activities of unauthorised finfluencers Rumour of mainland’s crackdown on illegal cross-border accounts opening: more Hong Kong brokers tighten onboarding rules The Government welcomed the passage of the Banking (Amendment) Bill 2025 to share information of suspicious accounts SFC proposes to further restrict use of misleading names to enhance investor protection MARKET NEWS SFC released the 2024-25 Annual Report ENFORCEMENT NEWS SFC issues restriction notice to GA (Int'l) Capital Management Limited and conducts search operation SFC suspends Pun Hong Hai for supervisory failures SFC bans WONG Lai Suen for failure in managing credit risks and detecting suspicious trading activities SFC suspends Hadiee CHUI Lai Chun for undisclosed personal trading account SFC reaches first settlement of its kind to compensate public shareholders of Combest Holdings Limited SFC bans LAW Man Wai for market manipulation Regulatory Updates 1. A tour of recent developments of the VA Regulatory Regime in Hong Kong Recent Developments (1) Hong Kong Expands Crypto Market with Derivative Trading for Professional Investors The SFC is ready to introduce virtual asset derivatives trading for professional investors as part of its efforts to increase product diversity and reinforce robust risk controls. The move is part of Hong Kong's drive to enhance its competitiveness in the global digital asset market. With this in mind, the SFC will focus on robust risk management measures to ensure orderly, transparent, and secure trading. The proposed product is designed to facilitate efficient risk transfers, increase liquidity in spot markets where cryptocurrencies area traded instantly, and assist experienced investors in implementing their hedging and leveraging strategies. The Financial Services and the Treasury Bureau is preparing a second policy statement on virtual assets, exploring how to harness traditional financial services and emerging technologies to drive growth in the VA market. More encouraging, virtual assets will be classified as qualifying transactions under Hong Kong's preferential tax regimes to attract international fintech players. (2) Second policy statement on development of digital assets issued to scale Hong Kong to new heights of global digital asset leadership On 26 June 2025, the HKSAR Government issued its long-awaited Policy Statement 2.0 on the Development of Digital Assets in Hong Kong, reinforcing its commitment to establishing Hong Kong as a global hub for innovation in the digital asset (DA) field; built upon the foundational measures outlined in its initial policy statement in October 2022. The Policy Statement 2.0 sets out a vision for a trusted and innovative DA ecosystem that prioritizes risk management and investor protection; the latest statement introduces the main theme of “ LEAP ” framework with focuses on: Legal and regulatory streamlining : The government is establishing a comprehensive regulatory framework for DA service providers, including DA exchanges, stablecoins issuers, DA dealing service providers, and DA custodian service providers. Expanding the suite of tokenised products : The government will regularize the issuance of tokenised Government bonds and incentivize the tokenisation of RWAs to enhance liquidity and accessibility. Advancing use cases and cross-sectoral collaboration : The government is fostering collaboration among regulators, law enforcement agencies, and technology providers for the development of DA infrastructures. People and partnership development : The government is strengthening talent development through partnerships with industry and academia, positioning Hong Kong as a centre of excellence for DA knowledge-sharing and international cooperation. (3) Next move is to seek opinion from market practitioners. Starting with the first “ Public Consultation on Legislative Proposal to Regulate Dealing in Virtual Assets ” (a non-exhaustive extract) (1) Scope and coverage : any person who conducted a business in providing services of spot trade of any VAs in Hong Kong will need to be licensed (2) Business types and Business models: a) simple dealing; b) more complex dealing services; c) all other VA dealing services. (3) Exemptions: a) stablecoin issuers who (i) are licensed by the HKMA and (ii) conduct offering or redemption of the stablecoins they issue in the primary market; b) peer-to-peer trading of VAs between individuals where no intermediary is involved. (4) Regulatory Requirements: a) VA dealing service providers that fall within the scope will need to be licensed or registered; b) The SFC will set out standards of the requirements. (5) Regulatory Principle: a) taking the “same activity, same risks, same regulation” principle, taking reference from the VATP licensing regime. (6) Eligibility: a) A HK company with two ROs with sufficient financial resources such as HKD5M as minimum paid-up capital or HKD3M as minimum required liquid capital; b) A licensee or registrant will have to set up a token admission and review committee establishing, implementing and enforcing the criteria for any VA to be made available for/withdrawn from trading; c) deposits/withdrawals of clients’ VAs to/from the licensees’ wallet addresses; d) Investor Protection: assessing clients’ VA knowledge, risk profiling, position limits etc. (7) Licensing Matters: no deeming arrangement to the pre-existing VA dealing service providers. (8) Powers of the Regulatory Authorities: the SFC still being the licensing and registration authority, and be empowered to impose licensing and registration conditions. (9) Sanctions: to achieve the necessary deterrent effect and to ensure regulatory parity among different regimes relating to VA activities (10) Public Consultation. (4) Then come with the next round for “ Public Consultation on Legislative Proposal to Regulate Virtual Asset Custodian Services ” (a non-exhaustive extract) (1) Definition: the provision of VA custodian service as a business is proposed to be defined as: by way of business, the safekeeping of (i) VAs on behalf of clients; or (ii) instruments enabling transfer of VAs of clients (including but not limited to private keys) on behalf of clients. (2) Incidental Exemption for SFC or HKMA regulated entities where the safekeeping of client VAs is wholly incidental to the principal business of providing the VA service. (3) Examples of VA Custodian like associated entities of SFC-licensed VATPs or banks, licensed or registered fund managers etc. (4) Eligibility: a regime similar to Type 13 regulated activity. (5) Licensing Issues: no deeming arrangement to the pre-existing VA Custodian. (6) Powers of the Regulatory Authorities: the SFC still being the licensing and registration authority, and be empowered to impose licensing and registration conditions. (7) Sanctions: to achieve the necessary deterrent effect and to ensure regulatory parity among different regimes relating to VA activities. (8) Public Consultation. Active participations from market participants (5) GF Securities (Hong Kong) issued its first tokenised securities - HashKey Chain announced that GF Securities (Hong Kong) Brokerage Limited (“ GFS ”) as the first brokerage firm to issue tokenized securities in Hong Kong, has now fully integrated with HashKey Chain as the core on-chain issuance network, and has launched the first daily redeemable tokenized security ,"GF Token". High-net-worth individual professional investors and institutional professional investors can participate in subscription and trading. "GF Token" is a tokenized security issued by GFS based on its credit rating support where the issuance to investors includes three currencies: USD, HKD, and CNH. Among them, the yield of the US dollar tokenized securities is anchored to the Secured Overnight Financing Rate (“SOFR”), providing users with a fair, transparent, and low-volatility cash management tool denominated in USD. HashKey Group Chairman Xiao Feng stated that the on-chain integration of Real-World Assets (RWA) requires genuine two-way integration between financial institutions and blockchain technology platforms, and the release of the "GF Token" materialized this concept. 2. SFC joins global regulatory effort to curb activities of unauthorised finfluencers The SFC is joining regulators across the globe to curb activities of unlawful financial influencers (“ finfluencers ”) who are putting millions of social media users at risk by touting financial products or services illegally. To achieve this aim, the SFC and the other members of the International Organization of Securities Commissions (“ IOSCO ”) are participating in the “Global Week of Action Against Unlawful Finfluencers” during the week of 2 June 2025. This initiative involves regulators using a combination of supervisory and enforcement powers to disrupt illegal activities of finfluencers, coupled with educational schemes and consumer awareness programmes. Some key takeaways are: A) SFC’s supervisory actions assess securities brokers’ compliance with applicable regulatory requirements when engaging finfluencers and digital platforms; review selected securities brokers’ due diligence of the finfluencers and digital platforms to ensure that these media are not involved in any unlicensed activities or improper practices; issue guidance to licensed corporations outlining expected standards when engaging finfluencers and digital platforms. B) SFC’s enforcement actions suspend the licence of a finfluencer who was criminally convicted for providing investment advice via a chat group beyond the scope of his licence; commence criminal prosecution against a finfluencer for unlicensed regulated activities; take a pro-active role to press the overseas VATP to terminate affiliate arrangements with finfluencers thus preventing them from marketing to local public; engage with social media platforms to remove social media posts and profiles impersonating public figures and promoting unauthorised investment products. C) Investor education warn the public about scammers impersonating or posing as finfluencers on social media through its Alert List system; encourage the public to utilise IOSCO’s newly revamped global warning system, the International Securities & Commodities Alerts Network (“ I-SCAN ’); make use of its ongoing “Don't be Sucker” anti-scam publicity campaign to arouse awareness of the public against finfluencers-related pitfalls and other common investment scam tactics. SIGNIFICANCE: As Julia Leung, the SFC’s Chief Executive Officer, said: “ As part of our education efforts, we must emphasise the importance of personal responsibility . Investors should serve as their own first line of defence by verifying the regulatory status and trustworthiness of the finfluencers, critically evaluating any investment ideas from them, and conducting thorough due diligence on any prospective investments before committing ”. 3. Rumour of mainland’s crackdown on illegal cross-border accounts opening: more Hong Kong brokers tighten onboarding rules Media reports in China indicate that regulatory efforts to curb mainland residents’ unauthorized use of Hong Kong accounts for cross-border investments are intensifying. Following the responses by Futu Securities International (Hong Kong) Limited and Tiger Brokers (HK) Global Limited , many Hong Kong-based securities firms—including Long Bridge HK Limited and Valuable Capital Limited —are tightening the account-opening requirements for clients originated from mainland since June. Media indicated that some brokers have already done away with the previously accepted method of using " proofs of existing accounts " (存量證明, “ PEA ”) for onboarding. Instead, mainland clients must now provide proof of cross-border residence or employment, such as utility bills or rental agreements. This explicitly strangles the flexibility that allowed mainland investors to indirectly open securities accounts in Hong Kong through loopholes. The PEA methodology had permitted mainland investors to open Hong Kong or U.S. securities accounts by verifying ownership of another already existing overseas securities account. With its removal replaced with the new “proof of life & work”, the requirement substantially raises barriers for mainland residents seeking to open new trading accounts in Hong Kong, explicitly cutting off any channels for those investors permanently residing in mainland China. The report quoted a number of Hong Kong brokerages as saying that the closure of mainland residents' account opening was carried out under the guidance of mainland regulators, and the relevant requirements were effected about three days ago, when several brokerages received a unified regulatory order restricting mainland residents from opening accounts in Hong Kong. 4. The Government welcomed the passage of the Banking (Amendment) Bill 2025 to share information of suspicious accounts Passage of the Banking (“ Amendment ”) Bill 2025 by the Legislative Council on 4 June helps facilitate the sharing of account information among banks under specified conditions to enhance the efficiency in detecting and preventing crime in Hong Kong. With the Amendment Ordinance:- a voluntary mechanism is in place for banks and relevant law enforcement agencies to share with each other, via electronic means, information of corporate and individual accounts through secure platforms designated by the Hong Kong Monetary Authority (“ HKMA ”), when banks become aware of suspected prohibited conduct (i.e. money laundering, terrorist financing or financing of proliferation of weapons of mass destruction); legal protection provided for banks that disclose the relevant information; banks and relevant law enforcement agencies are enabled to act swiftly to intercept illicit funds and expedite intelligence gathering, thus providing better protection to the public. SIGNIFICANCE: As the Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, " The new mechanism not only enhances Hong Kong's ability to combat fraud and associated money laundering activities , providing better protection for citizens, but also helps maintain the stability of Hong Kong's banking system and showcases the efforts made by Hong Kong, as an international financial centre, in international collaborations to combat relevant illegal activities. " And the Chief Executive of the HKMA, Mr Eddie Yue, said, " The new information sharing mechanism will further enhance the ability of the banks to detect and prevent fraud and other financial crime . The HKMA will continue to work closely with the Hong Kong Police Force and the banking sector to take forward the preparation work, including the upgrade of systems and formulation of practical guidelines, with a view to implementing the new mechanism as soon as practicable. " 5. SFC proposes to further restrict use of misleading names to enhance investor protection On 12 June 2025, the SFC launched a consultation aimed at restricting unregulated entities from improperly adopting names that may give the public a false impression that they are regulated entities. Some key points of the proposal: to cater for recent developments, including the emergence of virtual asset trading platforms (VATPs), the SFC proposes expanding the current list of restricted titles under the Securities and Futures Ordinance (SFO) which currently sets out a list of names that cannot be adopted except with the SFC's approval (e.g. "stock exchange" and "commodity exchange"); the aim of it is to ensure that businesses and operations do not adopt names that may mislead the public into believing they are regulated by the SFC when in fact they are not; to include similar restrictions under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). The rationale is that VATPs that carry on business in Hong Kong , or actively market their services to Hong Kong investors, are required to be licensed and regulated by the SFC . The SFO regulates VATPs providing services for virtual assets that also constitute securities or futures contract s, while the AMLO regulates VATPs offering services for virtual assets that do NOT constitute securities or futures contracts; extend the restrictions to commonly used terms that are similar in meaning to “exchange” (e.g. “trading platform”) and those that refer to some of the financial products and platforms regulated under the SFO; some titles that may imply an association with established exchanges, VATPs and other similar entities are also covered under the restriction. SIGNIFICANCE: The proposed restriction is conducive in stifling the use of misleading name in the disguise of any publicly known entity for deceiving the public and conveying any fraudulent message of its legitimacy. Market News 6. SFC released the 2024-25 Annual Report Hong Kong's capital markets are experiencing a renaissance, driven by cutting-edge innovation and strengthened global ties. The SFC Annual Report 2024-25, released on 25 June 2025, paints a picture of a vibrant financial hub that's embracing the future while solidifying its position as a global leader. Innovation at the Forefront Hong Kong is rapidly evolving into a future-ready financial hub, leading the charge in virtual assets and securities tokenization. Virtual assets, such as cryptocurrencies, and tokenized securities are making markets more efficient and accessible. Last quarter (Q1 2025), it authorized the Asia-Pacific’s first batch of three tokenized money market funds for retail access[1], with total assets under management reaching HKD$736 million by March 2025. Under the SFC’s "ASPIRe" roadmap : Two virtual asset ETFs were permitted to engage in staking (earning rewards by holding certain cryptocurrencies), making them the first-of- their-kind in the Asia-Pacific region. The six Hong Kong-listed virtual asset spot ETFs have also seen their total market capitalization surge 95% since April 2024, with daily turnover rising 16%. Additionally, the SFC has licensed 11 virtual asset trading platforms, cementing Hong Kong’s role as a digital finance hub. Strengthening Global Connectivity Hong Kong’s global ties have deepened, particularly with Mainland China and the Middle East. The Stock Connect scheme has been a standout success, with cumulative southbound inflows exceeding $4.35 trillion by May 2025, and southbound trading now accounting for 22.5% of Hong Kong’s market turnover. New partnerships with the Middle East are thriving. Two Hong Kong ETFs cross-listed on the Saudi Exchange have become the largest there, boasting a market capitalization of $14.5 billion (US$1.86 billion) as of May 2025. Asia’s first Saudi ETF, listed in Hong Kong since late 2023, has seen its feeder ETFs on Mainland exchanges contribute 17% to its market cap since mid-2024. These milestones highlight Hong Kong’s growing role as Asia’s premier capital intermediary. Other Noteworthy Highlights Enforcement & Protection: The SFC secured landmark rulings, including the longest prison sentences for market manipulation and a historic settlement for Combest Holdings Limited shareholders, reinforcing market integrity. Anti-Scam Efforts : The “Don’t Be Sucker” campaign expanded via MTR commercials and TV, garnering over 1.6 million views to protect investors. Sustainability: The SFC halved its carbon emissions from the baseline, hitting its interim target five years early, showcasing its green commitment.[2] SIGNIFICANCE: The SFC’s leadership has been instrumental. Chairman Dr. Kelvin Wong emphasized, “ Our role as an effective regulator is to ensure Hong Kong remains a cornerstone of global finance, where capital flows efficiently, innovation thrives, and fairness builds trust .” CEO Ms. Julia Leung added, “ Hong Kong’s long-term success hinges on strengthening our core competence as a premier fund-raising and asset management hub and capitalizing on transformative global forces .” The numbers speak for themselves. Since April 2024, 64 Mainland enterprises have listed in Hong Kong, raising over $100 billion through IPOs. The total market capitalization of ETFs and leveraged and inverse products hit a record $520 billion, up 35% year-on-year, comprising 15% of market turnover. The SFC, collaborating with HKEX, has also slashed the average response time for new listing applications to 20 business days, boosting efficiency. [1] These include the introduction of tokenised classes to existing SFC-authorised money market funds. The AUM represents that of their tokenised classes. [2] SFC announces carbon neutrality commitment : SFC has set the interim goal of halving its carbon emissions by 2030 and ultimate goal of achieving carbon neutrality by 2050. Enforcement News 7. SFC issues restriction notice to GA (Int'l) Capital Management Limited and conducts search operation On 6 June 2025, the SFC took decisive action against GA (Int'l) Capital Management Limited (“ GCML ”) due to concerns about its reliability, integrity, and ability to carry out its regulated activities (i.e. RA 4 & 9[1]) competently, honestly, and fairly. This has led the SFC to question GCML's fitness and properness to remain a licensed entity. The SFC issued a restriction notice to GCML, imposing the following prohibitions: GCML cannot carry on any of its licensed regulated activities without prior written consent from the SFC. GCML is barred from disposing of or dealing with any relevant property, except for paying operational expenses in the ordinary course of business. Such actions require prior written notification to the SFC and their consent. SIGNIFICANCE: In addition to the restriction notice, the SFC conducted a search operation on June 6, 2025, which included searching the premises occupied by GCML’s responsible officer. This step underscores the seriousness of the ongoing investigation. These measures are designed to protect the investing public and maintain market integrity, reflecting the SFC's assessment of the situation's severity. The SFC has emphasized that the investigation remains active, and no further comments will be provided at this stage. [1] RA4 : Type 4 Advising on securities; RA9 : Type 9 Asset management 8. SFC suspends Pun Hong Hai for supervisory failures The SFC has suspended Mr. PUN Hong Hai (“ PUN ”), a former responsible officer and chief executive officer of Freeman Commodities Limited, for 10 months, from 11 June 2025, to 10 April 2026. This disciplinary action stems from supervisory failures identified during an investigation into his oversight of the company’s operations between June 2017 and December 2018. Key Findings PUN failed to ensure Freeman Commodities Limited upheld appropriate standards of conduct and adhered to proper procedures during his tenure: PUN inadequately managed risks tied to the company’s use of customer supplied systems (CSSs) for client order placements. PUN did not sufficiently oversee suspicious money movements and trading patterns in client accounts over the specified period. SIGNIFICANCE: The SFC’s suspension of PUN reinforces its firm stance on accountability among senior management in licensed corporations. By imposing this 10-month penalty, the regulator sends a clear message about the necessity of diligent supervision and robust risk management practices. 9. SFC bans WONG Lai Suen for failure in managing credit risks and detecting suspicious trading activities The SFC has imposed a six-month industry ban on Ms. WONG Lai Suen (“ WONG ”), former responsible officer (“ RO ”) and executive director of MTF Securities Limited (“ MTF ”), effective from 4 June to 3 December 2025. This disciplinary action stems from significant lapses in managing credit risks and detecting suspicious trading activities at MTF. Case Overview & Key Findings MTF’s clients executed transactions vastly disproportionate to their financial profiles, displaying red flags suggestive of market misconduct and money laundering, with one client’s limit even reaching ten times his declared annual income. MTF failed to flag these activities as suspicious, investigate further, or report them promptly to the Joint Financial Intelligence Unit and the SFC. The SFC concluded that MTF lacked robust policies for credit risk management and monitoring suspicious trading, breaching the Code of Conduct and other regulatory standards. These shortcomings were pinned on WONG, who, as a RO and senior manager, failed to uphold her duties. SIGNIFICANCE: Christopher Wilson, SFC’s Executive Director of Enforcement, underscored the importance of accountability: " Senior management of a licensed corporation must not blindly follow marching orders from the firm’s shareholders or controllers. When faced with an unusual or suspicious request, the ROs should exercise independent judgment and, where appropriate, conduct proper due diligence before acting on the request. " He also added: " It is the duty of ROs and senior management to ensure that effective policies and controls are in place to prevent the firm from being used to facilitate wrongdoing, including market misconduct and money laundering. " 10. SFC suspends Hadiee CHUI Lai Chun for undisclosed personal trading account The SFC has suspended Ms. Hadiee CHUI Lai Chun (“ CHUI ”), a licensed representative of Rifa Securities Limited (“ Rifa ”), for seven months from 13 June 2025, to 12 January 2026. This disciplinary action follows an SFC investigation into her conduct between September 2018 and September 2021. Case Overview & Key Findings During this period, CHUI maintained a personal securities trading account at another brokerage firm without disclosing it to Rifa, her employer. CHUI conducted 20 personal trades through this undisclosed account without obtaining prior approval from any responsible officer of Rifa. Furthermore, CHUI failed to report these trades or provide the relevant trade confirmations and statements of account to Rifa. The SFC considers CHUI’s actions wilful and dishonest, raising serious concerns about her fitness and properness to remain a licensed person. By failing to disclose her trading account and conducting unauthorized trades, she undermined Rifa’s ability to oversee her activities, potentially jeopardizing the firm and its clients. SIGNIFICANCE: In imposing the seven-month suspension, the SFC took into account: The duration of her breaches, spanning approximately three years. Her cooperation in resolving the SFC’s concerns. Her otherwise clean disciplinary record. This sanction balances the severity of her misconduct with these mitigating factors. This case highlights the critical need for transparency and compliance with regulatory and company policies among licensed persons. Failing to disclose personal trading activities can lead to significant consequences, including suspension or loss of licensure. Licensed individuals must uphold their obligations to safeguard the integrity of the financial markets and maintain public trust. 11. SFC reaches first settlement of its kind to compensate public shareholders of Combest Holdings Limited On 2 June 2025, the SFC has obtained a groundbreaking court decision in the Court of First Instance, ordering former senior executives of Combest Holdings Limited (“ Combest ”) (HKEX: 08190) to pay $192 million in compensation to shareholders. This ruling also includes disqualification orders against a shadow director[1] and two former executive directors for their misconduct, please refer to: SFC’s press release dated 21 May 2020 . SFC’s press release dated 16 September 2024 . Case Overview The SFC’s investigation revealed that between 2016 and 2019, the shadow director - Mr. NG Kwok Fai (“ NG ”) and two former executive directors - Mr. LIU Tin Lap and Mr. LEE Man To in serious financial misconduct, including: Overvaluing two subsidiary group acquisitions by $229 million. Paying $64 million in fictitious loan interests and fees to entities linked to NG. Artificially inflating Combest’s revenue through transactions with NG-related entities. These actions misled shareholders and misrepresented the company’s financial position, ultimately harming independent public shareholders of the now-delisted company. [1] Shadow Director: someone who isn't officially appointed as a director of a company but exerts significant influence over its decisions, effectively acting as a director without the formal title. Court Orders The Court of First Instance delivered the following rulings: Name Roles Disqualifications Court Orders Mr. NG Kwok Fai Shadow Director Disqualified for 12 years, reflecting the severity of his misconduct. Compensation The trio must pay $192 million, to be redistributed as special dividends to independent public shareholders. Legal Cost The former executives were ordered to cover the SFC’s legal costs. Mr. LIU Tin Lap Executive Director Each disqualified for 8 years for knowingly assisting Ng. Compensation The trio must pay $192 million, to be redistributed as special dividends to independent public shareholders. Legal Cost The former executives were ordered to cover the SFC’s legal costs. Mr. LEE Man To Executive Director Each disqualified for 8 years for knowingly assisting Ng. Compensation The trio must pay $192 million, to be redistributed as special dividends to independent public shareholders. Legal Cost The former executives were ordered to cover the SFC’s legal costs. The disqualification periods bar them from serving as directors, liquidators, receivers, or managers, or being involved in the management of any corporation. Compensation Scheme Details (First-of-its-kind settlement in Hong Kong) In an innovative settlement, the $192 million compensation will be administered by Bruno Arboit of Kroll (HK) Limited, jointly appointed by the SFC and Combest. Enhanced Payouts: Two major shareholders (holding 24.4% of Combest) forfeited their entitlements, boosting independent shareholders’ dividends by 32.3%. Per-Share Amount: Eligible shareholders will receive $0.066 per share—2.75 times higher than Combest’s last closing price before its suspension on 29 May 2019. Distribution Process: Payments will be based on shareholdings as of the date the funds are deposited into the administrator’s account. The administrator will contact eligible shareholders directly. For inquiries, reach out to: Email: DL.combestholdingslimited@kroll.com Hotline: (852) 2281 0108 SIGNIFICANCE: SFC Chief Executive Officer Ms. Julia Leung highlighted the ruling’s significance: “ This court decision underscores the SFC’s power to hold de facto controllers of listed companies accountable for their misconducts, ensuring they face repercussions for their wrongdoings. The provision of direct compensation to affected shareholders marks a pioneering step, demonstrating the SFC’s unwavering devotion to exploring all avenues to achieve the most fair and efficient resolutions to protect the investing public .” This case sets a powerful precedent, reinforcing accountability for corporate misconduct and introducing a direct compensation model that prioritizes affected investors. Case Reference: HCCW 118/2020 12. SFC bans LAW Man Wai for market manipulation The SFC has banned Mr. LAW Man Wai (“ LAW ”), a former licensed representative of Cinda International Securities Limited (“ CISL ”), from re-entering the industry for three years, from 19 June 2025, to 18 June 2028. This action stems from an SFC investigation into his activities between March and September 2023. Background LAW, who was licensed to conduct RA 1 (dealing in securities) from 26 March 2020, to 8 June 2024, used accounts belonging to his sister and a friend for personal trading. These accounts were held at CISL and another brokerage. During the specified period, he executed 109 matched trades[1] or wash trades[2] across nine stocks, involving his own CISL account and those of his sister and friend. His goal was to avoid forced liquidation due to potential margin calls, disregarding the trades' impact on stock prices or trading volumes. Key Findings LAW deliberately hid his beneficial interests and personal trades in these accounts, breaching CISL’s staff dealing policy. LAW used CISL’s recorded telephone line to confirm trades with his sister and friend, submitting signed order records that falsely suggested the orders came from them. Additionally, LAW impersonated his friend to place orders for the friend’s account at another brokerage, keeping his involvement hidden from that firm. The SFC determined that LAW’s actions were dishonest, casting significant doubt on his fitness and properness to remain a licensed individual. However, the SFC noted a lack of evidence showing manipulative intent behind the trades and considered his previously clean disciplinary record when determining the three-year ban. SIGNIFICANCE: This case highlights the critical need for licensed representatives to follow regulatory and internal policies on personal trading and account usage. Unauthorized trading and concealment of interests can result in severe penalties, such as extended industry bans. Transparency and integrity are essential for maintaining trust in the financial markets. [1] Matched Trade: A trade where a person sells securities at a price nearly identical to their (or an associate’s) buy offer, creating an artificial market appearance. [2] Wash Trade: A trade with no change in beneficial ownership, effectively a self-transaction. [End of ComplianceOne Newsletter – June 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . 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The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Newsletter – February 2026 The topics discussed in this monthly newsletter are as follows: Regulatory Updates SFC Launches Three Major Trading Initiatives to Boost Digital Asset Market Vibrancy in Hong Kong SFC Announces Key Liquidity-Focused Enhancements Under ASPIRe Roadmap to Deepen Hong Kong’s Virtual Asset Market Depth and Global Competitiveness Market News HKMA Targets Issuance of First Batch of Stablecoin Issuer Licences in March with Very Limited Number to Prioritise Prudent and Risk-Based Development Hong Kong’s Single-Family Offices total surpasses 3,380, Contributing Approximately $12.6 Billion Annually to Hong Kong’s Economy SFC Hosts Third Broker Forum to Strengthen Industry Collaboration, Address Emerging Risks, and Promote Compliant Innovation in Hong Kong’s Capital Markets Enforcement News - Intermediaries SFC reprimands and fines Kylin International (HK) Co., Limited $9 million for fund management failures Masterminds jailed up to 24 months in securities fraud case involving social media “stock tips” of alleged ramp-and-dump schemes Retail trader sentenced in SFC’s false trading case SFC obtains worldwide court orders in Hong Kong and England and Wales to freeze suspects’ assets up to HK$4.3 million in alleged insider dealing SFC bans Andy LAU Ka Ho for life for Serious Misconduct Enforcement News - Listed Companies SFC obtains compensation and disqualification orders against former SFC Reaches Settlement Agreement with Sino Wealth International Limited and Clear Prosper Global Limited for Breaches of Takeovers Code Rules Regulatory Updates 1. SFC Launches Three Major Trading Initiatives to Boost Digital Asset Market Vibrancy in Hong Kong On 11 February 2026, the Securities and Futures Commission (“ SFC ”) of Hong Kong issued a package of 3 new initiatives as part of its ongoing ASPIRe Roadmap (initially published in February 2025 ). These measures aim to enhance liquidity, expand product diversity, and strengthen Hong Kong's position as a sustainable and competitive virtual asset (“ VA ”) hub. The 3 Initiatives Announced: VA Financing to securities margin clients Licensed corporations providing VA dealing services (“ VA brokers ”) are now permitted to offer financing for VA trading to their securities margin clients. This is subject to sufficient collateral (initially including Bitcoin and Ether), prudent haircuts, concentration limits, robust governance, and investor safeguards aligned with existing securities margin financing principles. *Please refer to SFC Circular on VA dealing services issued on 11 Feb 2026 , for further information. High-Level Framework for VA Perpetual Contracts The SFC introduced a principles-based framework guiding licensed virtual asset trading platforms (“ VATPs ”) in developing and proposing perpetual contracts (“ Perp ”, leveraged instruments without expiry dates) exclusively for professional investors. Requirements emphasize transparent product design, risk disclosures, margin/liquidation mechanisms, operational controls, and market surveillance. *Please refer to the SFC Framework paper on Perp issued on 11 Feb 2026 , for further information. Aacceptance of Affiliated Market Makers on VATPs Affiliates of licensed VATPs may now act as market makers on their platforms, providing additional liquidity channels. Strict safeguards must be implemented to mitigate conflicts of interest, including information barriers, functional independence, data security, and priority for client orders. *Please refer to SFC Circular on permitting VATPs to accept affiliated market makers issued on 11 Feb 2026 , for further information. SIGNIFICANCE: In Feb 2026, Dr Eric Yip, the SFC’s Executive Director of Intermediaries delivered his speech at Consensus Hong Kong “Our structured development approach based on the ASPIRe Roadmap is essential to scaling our digital asset market. These targeted initiatives to enhance liquidity showcase the SFC’s unswerving commitment to developing Hong Kong’s digital asset market in a sustainable and collaborative manner.” *Please refer to topic 2 of this Newsletter; and Keynote speech at Consensus Hong Kong 2026 issued on 11 Feb 2026 , for further information. These targeted enhancements build on Hong Kong's pro-innovation yet risk-controlled VA regulatory ecosystem. By enabling responsible leverage, deeper liquidity provision, and broader participation (particularly for sophisticated investors), the SFC aims to improve market depth, price discovery, and investor confidence while maintaining strong protections. 2. SFC Announces Key Liquidity-Focused Enhancements Under ASPIRe Roadmap to Deepen Hong Kong’s Virtual Asset Market Depth and Global Competitiveness On 11 February 2026, Dr Eric YIP , Executive Director of Intermediaries of the SFC, delivered a keynote speech titled “All about Liquidity” at Consensus Hong Kong 2026. The address outlined the SFC’s strategic emphasis on cultivating high-quality liquidity in Hong Kong’s VA ecosystem as the next phase of development under the ASPIRe Roadmap. The roadmap structures its initiatives across several pillars, with this year’s priority placed on Pillar A (Access) and Pillar P (Products) to enhance market depth, improve price discovery, and build investor confidence through calibrated reforms and responsible innovation. Key announcements and ongoing initiatives on Pillar A and Pillar P: ASPIRe - Pillar(s) Sub-Sections Details Enhancing Accessibility - Pillar A (Access) Completion of VA licensing regimes The SFC has concluded consultation on proposals to regulate: (i) VA dealing; (ii) VA Custody; (iii) VA Advisory; and (iv) VA Management; services and is advancing the legislative process at full speed. Fast-track licensing assessments will facilitate a seamless transition to the new statutory framework upon enactment, ensuring continuity for market participants. Permitting affiliated market makers (“ AFMMs ”) Licensed VATPs may allow their affiliates to act as market makers, subject to robust safeguards including conflict-of-interest controls, information barriers, data security, functional independence, client order priority, and clear identification of market-making activities. This is expected to narrow spreads and provide more consistent liquidity. Shared order book Licensed VATPs will be enabled to integrate intra-group and global liquidity pools, giving Hong Kong investors access to deeper order books. Expanding Hong Kong’s product suite – Pillar P (Products) VA margin financing VA brokers may offer financing for VA trading to securities margin clients, anchored to the existing securities margin financing framework. Additional guardrails cover collateral quality (including use of VA as collateral), concentration limits, prudent haircuts, and governance requirements to support responsible leverage without compromising stability. VA perpetual contracts A principles-based framework has been introduced for licensed VATPs to develop leveraged perpetual contracts offered exclusively to professional investors. Key requirements include transparent product design, risk disclosures, valuation, margining and liquidation protocols, loss allocation management, and insurance-fund governance. Upcoming Initiatives under Pillar Re (Relationships) A structured communication channel between the SFC and industry innovators (operated through an appointed agent) will provide regulatory clarity, support efficient resource allocation, and facilitate exploration of new market-making models, financing mechanisms, and leveraged products. SIGNIFICANCE: The SFC’s latest initiatives reflect a mature, balanced approach to scaling Hong Kong’s VA market in a sustainable manner. By expanding access channels, broadening product offerings with appropriate safeguards, and fostering structured innovation dialogue, the regulator aims to enhance liquidity, attract global flows, and strengthen price discovery while upholding investor protection and financial stability. Market News 3. HKMA Targets Issuance of First Batch of Stablecoin Issuer Licences in March with Very Limited Number to Prioritise Prudent and Risk-Based Development During the Legislative Council Panel on Financial Affairs briefing on 2 February 2026, the HKMA Chief Executive Eddie YUE Wai-man (“ YUE ") provided an update on the implementation of the Stablecoins Ordinance (effective 1 August 2025). Upcoming license initiation plan The HKMA aims to issue the first batch of licences in March 2026 and confirmed it has received 36 licence applications for fiat-referenced stablecoin issuers and is in the final stages of assessment. HKMA state that the initial number of licences will be very less, with stability and prudence as the overriding objectives. Briefed Slides submitted to LegCo The briefing slides submitted to LegCo on 26 January 2026 (and presented on 2 February 2026) outlined the HKMA’s core functions, including maintaining currency stability under the Linked Exchange Rate System, promoting financial system stability (including the banking system), supporting Hong Kong’s role as an international financial centre, and managing the Exchange Fund. For more details of the slides, please refer to: HKMA’s PPT Presentation on 2 February 2026 ; and HKMA’s PPT Presentation submitted to LegCo on 26 January 2026 . Background Timeline of HKMA plans of Stablecoins: Date Event May 2025 Stablecoins Bill passed by the Legislative Council 1 August 2025 Stablecoins Ordinance takes effect August–September 2025 Application window open; 77 expressions of interest received (36 formal applications) 2 February 2026 HKMA Chief Executive Eddie YUE briefs LegCo Panel; confirms 36 applications under review, targets March issuance of very limited first batch March 2026 (target) First batch of licences expected to be issued SIGNIFICANCE: The HKMA’s cautious approach limiting the initial batch to a very small number of licences while placing heavy emphasis on robust risk management, particularly anti-money laundering controls and reserve asset quality, reflects a deliberate strategy to foster stable, responsible growth in the stablecoin sector. This high-bar entry threshold aims to mitigate potential financial stability risks in an emerging asset class and reinforces Hong Kong’s reputation as a trusted, innovation-friendly yet prudently regulated international financial centre. Successful issuance of the first licences in March 2026 would mark a concrete step forward in Hong Kong’s virtual asset ecosystem development, complementing parallel SFC initiatives on virtual asset trading platforms and liquidity enhancements. 4. Hong Kong’s Single-Family Offices total surpasses 3,380, Contributing Approximately $12.6 Billion Annually to Hong Kong’s Economy On 10 February 2026, the Financial Services and the Treasury Bureau (“ FSTB ”) and Invest Hong Kong (“ InvestHK ”) jointly released findings from the Market Study on the Family Office Landscape in Hong Kong , commissioned by InvestHK and conducted by Deloitte. The study estimates that 3,384 single-family offices were operating in Hong Kong as of the end of 2025, marking an increase of 681 offices (over 25%) since the end of 2023. Two major affects to the Hong Kong Market: Economic Impact: Single-family offices contribute approximately HK$12.6 billion annually to the local economy through operating expenditures alone and directly employ over 10,000 full-time professionals. When including multifamily offices and supporting service providers, the overall economic benefits are expected to be substantially greater. Hong Kong’s Wealth Management Position: As of end-2024, assets under management in Hong Kong reached approximately HK$35 trillion (about US$4.5 trillion). The city ranked second globally in the number of ultra-high-net-worth individuals as of June 2025, reinforcing its status as a leading destination for family offices. Key highlights from the announcement and study: Upcoming measures in 2026 Upcoming measures include legislative proposals in the first half of 2026 to expand preferential tax regimes for funds and single-family offices to cover additional asset classes such as precious metals, loans, private credit investments, and digital assets. Achieving the new target set out in the Chief Executive's 2025 Policy Address The Government aims to assist more than 220 family offices to establish or expand in Hong Kong from 2026 to 2028. *The target was set out in the Chief Executive's 2025 Policy . Comments from Representatives of FSTB and InvestHK Mr Christopher HUI, Secretary for Financial Services and the Treasury, attributed the sustained growth to Hong Kong’s advantages under the “one country, two systems” framework, including its role as a leading global asset and wealth management hub with predictable environment, connectivity to the mainland and the world, and supportive policies. Ms Alpha LAU, Director-General of Investment Promotion at InvestHK, highlighted strong overseas interest (particularly from Europe and Southeast Asia) in Hong Kong’s flexible investment environment, no geographical restrictions on investments under the preferential tax regime, high privacy (no general licensing requirement for single-family offices), and tax incentives. SIGNIFICANCE: The surge in single-family offices underscores Hong Kong’s strengthened position as Asia’s premier wealth and asset management hub, attracting diverse global capital through targeted policy enhancements, tax competitiveness, privacy protections, and strategic connectivity. The substantial annual economic injection of HK$12.6 billion (via operating expenditures) and direct employment of over 10,000 professionals highlight the sector’s growing role in driving local financial services growth, job creation, and broader ecosystem development. With forthcoming tax expansions (including digital assets) and ambitious growth targets, these developments reinforce Hong Kong’s appeal to ultra-high-net-worth families amid global shifts toward sustainable wealth management and intergenerational planning, further solidifying its status as a trusted international financial centre. 5. SFC Hosts Third Broker Forum to Strengthen Industry Collaboration, Address Emerging Risks, and Promote Compliant Innovation in Hong Kong’s Capital Markets On 2 February 2026, the SFC successfully hosted its third broker forum at the SFC office and online, attracting over 600 participants from the financial sector. The event served as a key platform for open dialogue between the regulator and industry participants, fostering a culture of compliance while supporting market development and financial innovation. Key highlights from the forum: For the first time, the forum included a dedicated panel discussion examining the regulatory and commercial implications of the growing prevalence of finfluencers (financial influencers) in the market. Other sessions covered important industry developments and regulatory updates, including: Latest progress on the Integrated Fund Platform; Conduct issues related to IPO sponsors (referencing the SFC’s circular issued on 30 January 2026 ); Enhanced controls for client onboarding processes and measures to prevent potential layering activities. SIGNIFICANCE: The third broker forum underscores the SFC’s proactive and collaborative approach to regulation, engaging directly with market participants to better understand industry’s challenges, support industry development and tackle emerging risks, particularly the influence of finfluencers and conduct issues in IPO sponsorship and client onboarding while promoting innovation in areas such as fund platforms and broader asset management. Enforcement News - Intermediaries 6. SFC reprimands and fines Kylin International (HK) Co., Limited $9 million for fund management failures On 9 February 2026, the SFC has reprimanded and fined Kylin International (HK) Co., Limited (CE: BCH442 ) (“ Kylin ”) HKD 9 million for multiple failures in managing private funds over a period of three years. **Kylin ceased carrying on regulated activities on 31 December 2023. Following its application, the SFC revoked its license on 22 January 2025 The misconduct occurred between August 2018 and July 2021, during which Kylin acted as the investment manager or consultant for six sub-funds of a Cayman-incorporated fund. The SFC identified failures across Five Key Areas : 1) Failed to manage and disclose conflicts of interest arising from six loans extended by it or its director to four of the sub-funds. 2) Failed to appoint an independent auditor to audit the sub-fund’s financial statements and failed to perform monthly reconciliations or regular valuations of the sub-funds’ assets. 3) Failed to implement adequate systems and controls for KYC and suitability assessment. 4) Neglected to maintain records demonstrating compliance with AML/CFT regulations. 5) Misrepresented its regulatory obligations by incorrectly informing investors that it was exempt from the suitability assessment requirement as they were classified as professional investors. *For more details of the background, please refer to the Statement of Disciplinary Action The SFC attributed the misconduct to failures by senior management, including Mr. Steven WONG Yung (former Responsible Officer and CEO) and Ms. ZHU Hong (former director and manager-in-charge). The SFC had previously taken separate disciplinary actions against WONG (March 2025) and ZHU (August 2025) . SFC Reminders for All Licensed Asset Managers Asset managers are strongly reminded to carefully review and implement the guidance set out in the circular to licensed corporations engaged in asset management business, issued by the SFC on 9 October 2024. SIGNIFICANCE: Licensed Corporations, particularly private fund managers, must ensure robust systems and controls are in place and functioning, to accurately understand and discharge their regulatory obligations, and to remind that senior management will also be held responsible for any systemic deficiencies. This high-profile SFC enforcement action reinforces the regulator's zero-tolerance stance on governance lapses, conflicts of interest, and AML/CTF weaknesses in asset management, particularly for private funds. 7. Masterminds jailed up to 24 months in securities fraud case involving social media “stock tips” of alleged ramp-and-dump schemes On 9 February 2026, the District Court sentenced two masterminds to substantial prison sentences (22 and 24 months) their wives to community service (180 and 120 hours), after convictions for securities fraud involving the shares of four Hong Kong-listed companies. Involved Individuals (here referred to as “ Defendants ”) Defendants Background Mr. LI King Hong (“ LI ”) Mastermind(s) of the Schemes Former SFC-licensed representative for Type 2 regulated activity, accredited to Core Pacific-Yamaichi Futures (H.K.) Limited until 15 January 2021 Mr. LAM Hin Fai (“ LAM ”) Mastermind(s) of the Schemes Ms. CHAN Ngai See (“ CHAN ”) Mastermind(s)’s Wives, directed by the mastermind(s) Ms. Betty HUI Pui Yan (“ HUI ”) Mastermind(s)’s Wives, directed by the mastermind(s) Case Details Between June and September 2020, LI and LAM act as the masterminds, directed CHAN and HUI to deceive an account executive at CVP Securities Limited (" CVP ") on nine occasions. They falsely represented ownership of shares in the following companies to induce CVP to place selling orders: NOIZ Group Limited (formerly Merdeka Financial Group Limited, stock code: 08163) National Investment Fund Limited (stock code: 01227) Contel Technology Company Limited (stock code: 01912) Sino Prosper (Group) Holdings Limited (stock code: 00766) Acting on information from “WeChat teachers” promoting the schemes on social media, the defendants engaged in naked short selling. They sold shares at inflated prices despite not owning them, then repurchased the shares at lower prices after subsequent declines to close their short positions. This resulted in illicit profits of HK$3.3 million while exposing CVP to significant risk of losses and undermining the integrity of the securities market. Court Order Defendants Sentenced to Mr. Li King Hong 24 months in prison Mr. Lam Hin Fai 22 months in prison Ms. Chan Ngai See 180 hours of community service Ms. Betty Hui Pui Yan 120 hours of community service *For further details, refer to SFC press releases dated 23 June 2023 , 18 August 2023 , and 12 September 2024 . SIGNIFICANCE: Account executives and compliance staffs of brokerage firms plays a critical role as the first line of defence. They must carefully verify share ownership and be vigilant against client attempts to engage in naked short selling or other deceiving practices. Apart from that, the successful outcome of this case demonstrates the effectiveness of SFC’s close collaboration with the Police in tackling financial crime to protect the integrity of our securities market. 8. Retail trader sentenced in SFC’s false trading case Following a criminal prosecution brought by the SFC, the Eastern Magistrates' Courts has sentenced Mr. NG Ka Hei to 220 hours of community service for false trading in the shares of six Hong Kong-listed companies. The court also ordered Mr. NG to pay a fine of HKD 117,715, which represents the profit gained from his illicit trading activities, as well as HKD 199,669 to cover the SFC's full investigation costs. Mr. NG made illicit profits by selling shares at artificially high prices he created through “scaffolding” and wash trading between 20 September 2022 and 24 October 2024. He placed and cancelled trading orders at increasing prices and traded between his various securities accounts as both buyer and seller. SIGNIFICANCE: The SFC will pursue criminal sanctions for market manipulation, seeking not only to punish and deter but also to fully recover illicit gains and the costs of enforcement. Robust compliance and surveillance are essential to avoid similar severe penalties. As Mr. Michael Duignan, SFC’s Executive Director of Enforcement, said: “False trading undermines investor confidence in the market. The SFC is committed to taking resolute action against such misconduct to protect market participants and uphold the integrity of Hong Kong’s securities markets . ” 9. SFC obtains worldwide court orders in Hong Kong and England and Wales to freeze suspects’ assets up to HK$4.3 million in alleged insider dealing On 24 February 2026, the SFC announced that it has secured a worldwide interim injunction order from the Court of First Instance of Hong Kong (“ HK Order ”) against: Involved Individuals Background Mr. CHAN Ching Wa (“ CHAN ”) Former Assistant Vice President in the Listing Division of the Hong Kong Exchange and Clearing Limited (“ HKEX ”) Extended relatives with LAM and CHAU Mr. LAM Cho Man (“ LAM ”) Extended relatives Mr. CHAU Chi Kwong (“ CHAU ”) Extended relatives The SFC alleges that CHAN accessed confidential and price-sensitive information about various Hong Kong-listed companies prior to their public announcements and used it for insider dealing. In parallel, the SFC initiated proceedings in England and Wales, obtaining an interim injunction order from the High Court of Justice Business and Property Courts of England and Wales (“ UK Order ”) to freeze the assets of CHAN and CHAU in that jurisdiction. This marks a first-of-its-kind action by the SFC in England and Wales, aimed at preserving assets where suspects have left Hong Kong and transferred holdings overseas. Case Details The SFC’s ongoing investigation involves 24 listed companies in total. The allegations center on insider dealing in shares of at least seven Hong Kong-listed companies: Jinmao Hotel and Jinmao (China) Hotel Investments and Management Limited (Stock code: 6139); SOHO China Limited (Stock code: 0410); Beijing Capital Land Limited (Stock code: 2868); Lifestyle International Holdings Limited (Stock code: 1212); Get Nice Financial Group Limited (Stock code: 1469); Ping An Healthcare and Technology Company Limited (Stock code: 1833); and ENN Energy Holdings Limited (Stock code: 2688). CHAN allegedly procured LAM to trade shares on his behalf or counseled him to do so using the inside information. LAM is further accused of disclosing the information to CHAU, who then traded the relevant shares. Court Order The HK Order and UK Order prohibit the three individuals from disposing of or diminishing the value of their assets in Hong Kong and overseas (including England and Wales), up to specified values: CHAN Ching Wa LAM Cho Man Assets up to HKD 3,709,566 are frozen CHAU Chi Kwong Assets up to HKD 604,545 are frozen SIGNIFICANCE: This case marks a significant escalation in the SFC’s enforcement strategy. It establishes that the geographic movement of persons or assets will not be a barrier to accountability . The ultimate message is that the cost and risk of engaging in market misconduct like insider dealing have been substantially raised, reinforcing the principle that Hong Kong's markets are fair, orderly, and protected by a regulator with a long and forceful reach. 10. SFC bans Andy LAU Ka Ho for life for Serious Misconduct On 26 February 2026, the SFC imposed a permanent prohibition on Mr. Andy LAU Ka Ho (“ LAU ”), a former licensed representative of Sun Hung Kai Group Licensed Entities, from re-entering the industry for life over serious misconduct, based on an investigation initiated by the following entities. The action stemmed from an SFC investigation initiated by a joint self-report from: Sun Hung Kai Investment Services Limited (“ SHKIS ”); Sun Hung Kai Commodities Limited (“ SHKCOM ”); and SHK Fund Management Limited (“ SHKFM ”) (collectively, “ SHK Entities ”; now known as Everbright Securities Investment Services (HK) Limited, CES Commodities (HK) Limited and Bright Fund Management Limited respectively). In imposing the lifetime ban, the SFC considered the persistent nature of the misconduct and its severe deceptive elements, which included: Conducting unauthorized trades in a client’s account. Executing online trades without the client’s knowledge or authorisation. Fabricating trading instructions from the client’s email. Providing forged account statements showing inflated cash balances and portfolio values. Blocking a cash withdrawal by falsely claiming a fictitious high-interest deposit arrangement and providing a forged confirmation to support it. *For more details of the background, please refer to the Statement of Disciplinary Action . SIGNIFICANCE: LCs must build a multi-layered defence system combining effective supervision, strong internal controls, direct client verification, technological safeguards, and a strong compliance culture to prevent, detect, and stop such misconduct. Reliance on an employees’ integrity alone is a severe and unacceptable control failure. Enforcement News - Listed Companies 11. SFC obtains compensation and disqualification orders against former directors of Arta TechFin Corporation Limited for Breaches of Directors' Duties Causing Substantial Company Losses On 10 February 2026, the SFC has secured a Court of First Instance order mandating that Mr. Andrew LIU (“ LIU ”), a former non-executive director of Arta TechFin Corporation Limited (formerly Freeman Financial Corporation Limited), and Mr. Quincy HUI Kwong Hei (“ HUI ”), its former managing director, jointly compensate the company for the financial loss incurred. The compensation of $57.5 million relates to losses sustained by Arta TechFin from its acquisition and subsequent disposal of a stake in LIU’s Holdings Limited. LIU, HUI and other seven other former executive directors were disqualified from acting as a director or in any way being concerned with or taking part in the management of Arta TechFin and any other corporation without leave of the Court. LIU Andrew 8 years disqualification HUI Quincy Kwong Hei 6 years disqualification Seven other former executive directors and independent non-executive directors of Arta TechFin Ranging from 1 to 2 years depending on their involvement and the severity of their misconduct. SIGNIFICANCE: This case is a reminder for all directors and senior managers in Hong Kong-listed companies to exercise heightened diligence, particularly in conflict-of-interest situations. It affirms the SFC’s commitment to holding individuals accountable to maintain market integrity and protect investors as Mr. Michael Duignan, SFC’s Executive Director of Enforcement, said: “ We welcome the judgement. This judgment sends a clear and unequivocal message that directors, whether executive or non-executive or independent non-executive, who neglect their fiduciary duties or fail to protect the company’s interests will be held fully accountable. The SFC stands resolute in its commitment to enforcing the highest standard of corporate governance and individual accountability. We will not hesitate to take decisive action to protect investors, safeguard company assets, and uphold the integrity of our markets .” 12. SFC Reaches Settlement Agreement with Sino Wealth International Limited and Clear Prosper Global Limited for Breaches of Takeovers Code Rules On 16 February 2026, the SFC has finalized a settlement with Sino Wealth International Limited and Clear Prosper Global Limited regarding breaches of the Takeovers and Mergers Code related to dealings in Giordano International Limited shares. The case centres on their parent company, CHOW Tai Fook Nominee Limited (“ CTFN ”), and a group of parties acting in concert with it (the “ Relevant Concert Group ”). Key Findings of the Breach Settlement Terms The SFC’s Takeovers Executive concluded that the Relevant Concert Group’s total shareholding in Giordano crossed the 30% threshold on 18 May 2016. This crossing should have triggered a mandatory general offer to all other shareholders at HKD 3.60 per share, but no such offer was made. A voluntary general offer (“ VGO ”) made by Clear Prosper in June 2022 at HKD 1.88 per share. The Executive found that this VGO was wrongly declared lapsed on 13 September 2022, even though its sole condition had been met based on the concert group’s holdings and valid acceptances received. Sino Wealth and Clear Prosper have agreed to provide compensation payments to independent shareholders who held Giordano shares on the dates of the two breaches. The total maximum compensation could reach approximately HKD 1.5 billion depending on the number of valid victims. SIGNIFICANCE: This case serves as a critical reminder that extreme diligence is required when assessing the fulfilment of conditions for voluntary general offers; allowing such an offer to lapse improperly constitutes a separate breach. This outcome emphasizes that strict, ongoing scrutiny of concert party relationships and associated obligations is essential to avoid significant financial liability and regulatory sanction. Moreover, the SFC remains committed to taking appropriate action to safeguard public interest and maintain the integrity of Hong Kong’s securities market. [End of ComplianceOne Newsletter – February 2026] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1605, 16/F, West Tower, Shun Tak Centre,168-200 Connaught Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

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

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - August 2024 The topics discussed in this monthly newsletter are as follows: SFC’s Second Quarterly Report reveals market growth and regulatory progress in Hong Kong HKEX’s annual rehearsal for trading system recovery Joint announcement on modifications to requirements for specialist technology companies and de-SPAC transactions HKMA’s response on Nova Credit Limited’s cessation of operation and exit of Credit Data Smart SFC consults on proposals to abolish mixed media offers Chairman and CEO of China Forestry found culpable of false information and insider trading by Market Misconduct Tribunal MARKET NEWS 1. SFC Second Quarterly Report reveals market growth and regulatory progress in Hong Kong On 22 August, 2024, the SFC posted its second quarterly report (“ Report ”) showing encouraging performance on asset management, listing and virtual assets landscapes in Hong Kong. Key takeaways of the achievements mentioned in the Report are as follows: Hong Kong-domiciled funds continued the momentum with AUM up 7% Quarter-over-Quarter(“ QoQ ”) as end-June, and recorded with net fund inflows up 80% QoQ for the quarter; license applications received by the SFC rose 3% QoQ and 8% Year-over Year (“ YoY ”); new listing applications up 6% QoQ; on virtual assets, the six VA spot ETFs were traded with a total market capitalisation of HKD2.4 billion as of mid-August; 17 applications for virtual asset trading platform (VATP) were received in the quarter; further deepening of connectivity with Mainland and regional capital markets for Hong Kong through the five measures announced by the Mainland to expand market cooperation with Hong Kong; Besides, the collaboration between the SFC and the HKEX for launch of the severe weather trading arrangement in late September this year further pushes Hong Kong a bit forward towards uninterrupted trading environment to algin with the global markets. SIGNIFICANCE: As Ms Julia Leung, the SFC’ s Chief Executive Officer, has said: “ the latest quarterly data and continuing trends reaffirm the SFC’ s strategic approach , and we will build upon our accomplishments with steadfast commitment to market connectivity, innovation, sustainability and, above all, integrity ”. 2. HKEX’s annual rehearsal for trading system recovery On 13 August 2024, the SFC announced that the HKEX will conduct an annual rehearsal for emergency trading system recovery in securities market on 7 September 2024. The following process of the Hong Kong investor identification regime (“ HKIDR ”) will be covered in the rehearsal: Submission of the BCAN-CID Mapping File and Reporting Forms to the data repository of the Stock Exchange of Hong Kong (SEHK) (applicable to all Relevant Regulated Intermediaries1(RRIs)); and BCAN tagging for order submission to SEHK’s trading system (applicable to RRIs who are Exchange Participants (EPs) only). RRIs refers to “Relevant Regulated Intermediaries”, namely, the SFC-licensed corporations which are subject to the HKIDR requirements; and the RRIs are encouraged to participate in the rehearsal to get familiar with the contingency procedures and related operational matters upon the simulated service outage on the SEHK’ trading system. SIGNIFICANCE: The HKIDR was launched on 20 March 2023 last year, the submission of the BCAN-Mapping File and tagging of BCAN are indispensable without which the orders will be invalid. Given such paramount importance, RRIs are advised to participate in the rehearsal as failure to act promptly according to the contingency plan might lead to disastrous consequences a RRI can hardly withstand. RRIs can make reference to Attachment 2 (Guidelines for Exchange Participants during the Rehearsal) of the HKEX Circular for details. 3. Joint announcement on modifications to requirements for specialist technology companies and de-SPAC transactions On 23 August 2024, the SFC and The Stock Exchange of Hong Kong Limited (SEHK) made a joint announcement regarding the temporary modifications to Listing Rules (“ Modifications” ) and amendments to the SEHK’s guidance materials with effect from 1 September 2024. The modifications are designed to address the changes in market conditions since introduction of the listing regimes, key takeaways of the Modifications are : A) For Specialist technology companies Reduction in initial market capitalisation threshold for listing reduced from (in HKD): (i) 6 billion to 4 billion for commercial companies; (ii) 10 billion to 8 billion for pre-commercial companies. B) For de-SPAC transactions 1. The minimum independent third-party investment required for a de-SPAC transaction will be modified to the lower of: (i) the currently prescribed percentage of the negotiated value of the de-SPAC target as set out in Main Board Listing Rule 18B.41 , or (ii) $500 million in value. 2. Independence requirements for third party investors: The independence test for third party investors in a de-SPAC transaction pursuant to Main Board Listing Rule 18B.40 will be aligned with that for sophisticated independent investors (“ SIIs” ) in specialist technology companies in Chapter 18C Independence Test (please refer to the hyperlinks for details), a brief of the details are as follows: (i) the independence of a third-party investor will be determined as at the date of the signing of the definitive agreement for investment in the de-SPAC; (ii) the following persons will not be considered as independent third-party investors, namely, (a) core connected persons of the SPAC or the de-SPAC target, (b) controlling shareholder of the SPAC or the de-SPAC target; (c) the founder of the de-SPAC target and their close associates; (iii) the SEHK retains the discretion to deem any other person to be not independent based on the facts and circumstances of an individual case. Other key notes are: C) Time limit for the Modifications The above Modifications will apply temporarily for a fixed period of three years from 1 September 2024 to 31 August 2027 (“ Implementation Period ”), and the SEHK may review the requirements and conduct public consultation if required during the Implementation Period. D) Clarification on the definition of a “sophisticated investor” for independent third party investment The SEHK has amended its guidance materials that align the definition of a “sophisticated investor” for independent third-party investment more closely with the SEHK’ s requirement for identifying qualified SIIs in specialist technology companies. SIGNIFICANCE: According to Ms Katherine Ng, Head of Listing of HKEX, who said: “These modifications will provide greater flexibility and clarity for both issuers and investors, whilst upholding our robust regulatory standards .” Reduction of the thresholds in minimum initial market capitalization, together with the subsequent alignments of: (a) independence test between the third-party investors in a de-SPAC transaction and the SII in specialist technology companies; (b) definition of a “sophisticated investor”; all amounted to providing facilitation and flexibilities as the HKEX official has stated. 4. HKMA’s response on Nova Credit Limited’s cessation of operation and exit of Credit Data Smart On 31 July 2024, the Hong Kong Monetary Authority (“ HKMA ”) had been informed by notifications from the Hong Kong Association of Banks, the Hong Kong Association of Restricted License Banks and Deposit-taking Companies, and the Hong Kong S.A.R. Licensed Money Lenders Association Limited (collectively as the “ Industry Associations ”) that Nova Credit Limited (“ Nova ”), one of the consumer credit reference agencies under the Credit Data Smart, had decided to cease its operations and exit Credit Data Smart for its own reasons. For sake of protecting the security of consumers’ personal credit data, the Industry Association had required Nova to destroy all personal credit data downloaded from the Credit Data Smart as soon as possible as a matter of compliance to the service agreement; and an independent third party has also been appointed to monitor the implementation progress by Nova. SIGNIFICANCE: The HKMA is concerned about the incident of Nova and will maintain close communication with the Industry Association to ensure the exit work of Nova is properly conducted with priority in protection of personal credit data. 5. SFC consults on proposals to abolish mixed media offers On 16 August 2024, the SFC launched a two-month consultation on proposals to abolish mixed media offers (“ MMOs ”) to facilitate a fully electronic process for public offerings and enhance the efficiency of the regulatory process in Hong Kong. With the proposed changes, an issuer of equity or debt securities listed or to be listed on the SEHK will be removed of the option to issue printed application forms accompanied by electronic prospectuses under the Companies (Winding Up and Miscellaneous Provisions) Ordinance, thus expanding the implementation of paperless listing regime . The SFC takes one step forward to cease granting waivers for the use of MMOs in public offerings of SFC-authorised collective investment schemes listed or to be listed on the SEHK. SIGNIFICANCE: Under the existing arrangement, MMO allows listing applicants to issue paper application forms in public offers; abolition of this practice helps facilitate and materialise a paperless listing regime and further digitalise the listing process for the benefits of the issuers and the investors. ENFORCEMENT NEWS 6. Chairman and CEO of China Forestry found culpable of false information and insider trading by Market Misconduct Tribunal On 7 August 2024, the Market Misconduct Tribunal (“ MMT ”) has found Mr Li Kwok Cheong (former chairman, “ LKC ”) and Mr Li Han Chun (former CEO, “ LHC ”) of China Forestry Holdings Company Limited (“ China Forestry ”), culpable for disclosing false or misleading information in China Forestry’s IPO prospectus and its annual results announcement and annual report for the year ended 31 December 2009, inducing transactions in the company’s shares. It was found that as a result of the false information, the reported turnover of China Forestry was overstated by 91.56 % and 99.99% for the years ended 31 December 2008 and 2009. Also, the customers claimed by the company were either non-existent or not genuine, and documentations were falsified as well. The MMT concluded that LHC and LKC knew of the falsifications amid the IPO and annual results announcement; and LHC with his company were further found of insider dealing by selling 119,000,000 shares of China Forestry in January 2011, thus avoiding a loss of HKD353 million. SIGNIFICANCE: The SFC started the proceedings in the MMT against LHC and LKC for market misconduct in 2018, details of which is available in the SFC’s press release dated 28 June 2018. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – August 2022 ComplianceOne Newsletter – August 2022 The topics discussed in this monthly newsletter are as follows: 1. Regulators to enhance Stock Connect trading calendar 2. Hong Kong Securities and Futures Commission (SFC) sets out the way forward for green and sustainable finance 3. Creating and accumulating wealth with diversified fund structures—by Financial Services and the Treasury Bureau 4. SFC reprimands and fines TC Capital International Limited $3 million and suspends its responsible officer for sponsor failures 5. SFC commences MMT proceedings against hedge fund manager over alleged false trading 6. SFC issues restriction notice to a broker to freeze client account linked to suspected insider dealing 7. Retail investors convicted and fined for illegal short selling MARKET NEWS 1. Regulators to enhance Stock Connect trading calendar The SFC and the China Securities Regulatory Commission (CSRC) today jointly announced their in-principle approval for changes to the trading calendar for Stock Connect. The changes would apply to both northbound and southbound trading. Because different public holidays are observed in the Mainland and Hong Kong, investors currently cannot trade through Stock Connect on certain days. The proposed changes enable Stock Connect trading on any day when both the Mainland and Hong Kong markets are open, even when the corresponding settlement day falls on a public holiday Significance: As Mr. Ashley Alder, the SFC’s Chief Executive Officer had said: “ Stock Connect provides a unique opportunity for Mainland and Hong Kong investors to participate in each other’s market. The enhancements will allow investors to better manage their portfolios through Stock Connect and support the further expansion of the programme. ” 2. SFC sets out the way forward for green and sustainable finance The SFC published its “ Agenda for Green and Sustainable Finance ” to set out further steps to support Hong Kong’s role as a regional green finance center with key focus on: a) Enhancing corporate disclosures; b) Monitoring the implementation of and enhancing existing measures relating to environmental, social and governance (ESG) funds and expectations for fund managers; and c) Identifying an appropriate regulatory framework for any proposed carbon markets. As a speech of Mr. Ashley Alder, the SFC’s Chief Executive Officer, has made it explicit that: “ Climate change and sustainability are cross-border issues which require a coordinated response, and Hong Kong has a critical role to play as a regional and international green finance center. The SFC will continue to lead global regulatory development in this space to ensure that domestic policies and international standards are aligned. ” Significance The SFC as a robust regulatory body in HK plays a pro-active role in navigating and allocating more resources to attaining an intricated balance between global economic growth and the preservation of environment from climate risk given the existing scenario where the private sectors, if left to its own device, would not be so dedicated to implementing the measures in a sound and efficient manner than otherwise spearheaded by a regulatory body a like SFC. 3. Creating and accumulating wealth with diversified fund structures Last year, the assets managed by Hong Kong stood at HK$35.5 trillion (US$4.6 trillion), which was 12 times the size of our GDP. The HKSAR has been striving to develop Hong Kong as a premier international asset and wealth management center in the Asia-Pacific region; and among the measures taken is the introduction of new fund structures, which includes the set-up of open-ended fund company (OFC), is of prior significance. Ever since commencement of the OFC regime, 88 OFCs have been set up or re-domiciled to Hong Kong, and the number of registered OFCs recorded a more than four-fold year-on-year increase as at end July this year. To further enhance the attractiveness of the OFC regime, a three-year grant scheme was launched in May 2021, and subsidies have been provided to 52 OFCs set up in/re-domiciled to Hong Kong. Significance: The HKSAR plays a proactive role in developing the asset and wealth management regime, given the advantages enjoyed by OFC as follows: (1) Tax concession (2) Cost-savings (3) Easy management (4) Facilitate international distribution (5) Cater for public/private funds (6) Eligible Products under the Cross-boundary Wealth Management Connect Scheme in the Greater Bay Area and ETF Cross-listing Scheme Coupled with the introduction of the grant scheme, and the fact that OFCs are qualified products under the Cross-boundary Wealth Management Connect Scheme, it is expected that market practitioners would be delighted to show great interest among the industry in this new fund structure and anticipate further growth of the OFCs ENFORCEMENT NEWS 4. SFC reprimands and fines TC Capital International Limited $3 million The SFC has reprimanded and fined TC Capital International Limited (TC Capital) $3 million for failing to discharge its duties as the sponsor in the listing application of China Candy Holdings Limited (China Candy). It is found that TC Capital failed to: a) conduct reasonable due diligence on the third party payments made on behalf of two top customers of China Candy; and b) maintain proper records of the due diligence work allegedly done in relation to the listing application Although TC Capital was aware of the third party payments, their RO and transaction team members did not make any further queries and assess if such payment method was legitimate or not; and no follow-up due diligence was conducted. Apart from the lack of proper records in due diligence, there was also no audit trail showing that TC Capital had turned its mind to the issues at all. Significance: It demonstrates to the market practitioners again the crucial importance of due diligence on any third party payments which are signal of red flags that necessitate serious attention and follow-up remedial action from licensed corporation in the eyes of SFC. 5. SFC commences MMT proceedings against hedge fund manager over alleged false trading The SFC has commenced proceedings in the Market Misconduct Tribunal (MMT) against Mr. Jonathan Dominic Iu Wai Ching, a responsible officer of Tarascon Capital Management (Hong Kong) Limited (Tarascon), for allegedly engaging in false trading in the shares of two Hong Kong-listed companies. The SFC alleges that Iu executed matched trades between the brokerage accounts of the hedge fund and of his mother between August and September 2014, which had the effect of creating a false or misleading appearance of active trading or of the price for dealings in the listed shares concerned. 6. SFC issues restriction notice to a broker to freeze client account linked to suspected insider dealing The SFC has issued a restriction notice to Bright Smart Securities International (H.K.) Limited (Bright Smart), prohibiting it from disposing of or dealing with certain assets held in a client account that holds proceeds of suspected insider dealing. Significance: The SFC considers that the issue of the restriction notice, which prevents dissipation of proceeds of suspected insider dealing held in the account, is desirable in the interest of the investing public or in the public interest. 7. Retail investors convicted and fined for illegal short selling The Eastern Magistrates’ Court today convicted Ms. Chan Siu Tai and her sister Ms. Janice Chan after they pleaded guilty to illegal short selling in prosecutions brought by the SFC. The sisters were fined a sum of $114,000 and ordered to pay the SFC’s investigation costs. 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 – March 2023 ComplianceOne Newsletter – March 2023 The topics discussed in this monthly newsletter are as follows: 1. Hong Kong Regulators Welcomed UBS AG's Acquisition of Credit Suisse AG 2. LME Warehouse Delivered Stones Instead of Nickel 3. OKX Expressed Interested in Virtual Asset Service Provider Licence in Hong Kong 4. SFC Published Quick Licensing Guides for Family Offices and Private Equity Firms 5. SFC Issued Quarterly Report to Highlight the Latest Development in the Financial Industry 6. HKEX Commenced to Test the New FINI Settlement Platform to Shorten the IPO Period 7. SFC Banned Citigroup Global Markets Asia Limited’s Former Responsible Officer for 10 Years 8. SFC Reprimanded and Fined City International Futures (Hong Kong) Limited for AML Breaches 9. SFAT Affirmed SFC Decision to Reprimand and Fine I-Access Investors Limited over System Failure 10. SFC Banned Wong Kwun Shing for Life for Stock Manipulation 11. Five More Arrested in SFC and ICAC Joint Operation against Sophisticated Ramp-and-dump Syndicate 12. Court Reaffirmed SFC’s Restriction Notices related to a Suspected “Ramp-and-dump” Scheme MARKET NEWS 1. Hong Kong Regulators Welcomed UBS AG’s acquisition of Credit Suisse AG The SFC and the HKMA welcomed the announcements made by the Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank (SNB) on 20 March 2023 of the acquisition of Credit Suisse AG (CS) by UBS AG. It was stated that the operations of CS merely comprised a branch under the HKMA and two licensed corporations under the SFC, and were maintained intact to continue as usual in its banking and trading services. The total assets of CS amounted to about HKD100 billion which represented an insignificant portion of less than 0.5% of the entire banking sector in Hong Kong. The Hong Kong banking sector is resilient with strong capital and liquidity positions with total capital adequacy ratio of locally incorporated authorized institutions stood at 20.1% at the end of 2022, well above the international minimum requirement of 8%. SIGNIFICANCE: It was quite a big deal for two large Swiss Banks, one of UBS to take over its long-time rival Credit Suisse for about USD3.2 billion, to prevent CS from being liquidated which once was an emblem of pride of Switzerland. Another point of interest was the controversial way the FINMA rescued this giant bank by writing down the USD17 billion of AT1 bond to zero value, an administrative tact dumbfounded many bondholders as the Swiss government was rescuing a renowned historical bank at the expense of its prestige in the long-established heritage of the banking industry! 2. LME Warehouse Delivers Stones Instead of Nickel Nickel delivered by London Metal Exchange (LME) approved warehouse firm turned out to be stones, and nine warrants or 54 tonnes of nickel valued around USD1.3 million were cancelled. The incidence shaken the confidence in nickel trades, and was shocking to traders in the LME system and over the world. Warehousing sources said that the substitution of stones for nickel would have been discovered if the standard operating procedures of checking the weight of bagged nickel briquettes before warranting for delivery had been properly observed. In the wake of the incidence, the LME, a subsidiary of the HKEX, reacted by immediately reminding the operators to strictly comply with the weighting requirements of all metals. Again, the LME postponed nickel trading during Asian hours by a week to March 27 after the reported incidence. SIGNIFICANCE: It is really ironical that a well-established LME system, now a full-owned subsidiary of the HKEX, a renowned exchange in an international financial centre as Hong Kong, would have come up with such embarrassing incidence; not to mention the nickel crisis in March last year where the trading of nickel had been suspended, unprecedented for decades ever since 1988 when prices jumped to a record above USD100,000! 3. OKX Expressed Interest in Virtual Asset Service Provider licence in Hong Kong OKX, the second largest crypto exchange and a Web3 technology company, announced on 28 March 2023 that is would apply for a licenses of the virtual asset service provider (VASP) through its entity set up in Hong Kong, namely for the Type 1 & 7 licenses under the SFC regime of the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance 2022 to be in effect from 1 June 2023. Lennix Lai, OKX Managing Director of Global Institutional, had stated that regulation and licensing were key to the success of the crypto and Webs sector, and OKX found immense potential in Hong Kong in its strong determination to establish a robust regulatory framework and furnish a niche for licensing the virtual asset industry. Another crucial character, Bing Zhao, OKX General Counsel, also reiterated the commitment of OKX to collaborate with the SFC through the application process, and was keen to demonstrate how conversant and versatile OKX was in fulfilling the robust standards under the prevailing licensing regime. SIGNIFICANCE: While jurisdictions over the world are tightening their grips on crypto exchanges, HK is taking a contrarian and proactive approach to formulate a licensing regime for attracting potential VASP applicants, and through their participation the efforts to develop Hong Kong as a financial virtual asset hub has been further leveraged. 4. SFC Published Quick Licensing Guides for Family Offices and Private Equity Firms The SFC published quick reference guides on 22 March 2023 to help family offices, private equity firms, hedge fund managers and overseas and Mainland industry professionals better understand the SFC’s licensing regime. “ By providing useful, important and frequently sought information to prospective licence applicants via the quick reference guides, the SFC encourages more family offices and private equity businesses to operate in Hong Kong, ” said Mr Keith Choy, the SFC’s Interim Head of Intermediaries. SIGNIFICANCE: As stated in the circular, the SFC has actually been working on the licensing regime of family offices and private equity firms long before with consultations since 2020 as shown in the circulars below: (1) Circular on licensing obligation of family offices (7 Jan 2020) (2) Circular to private equity firms seeking to be licensed (7 Jan 2020) (3) Family Office FAQ (8 Sep 2020) 5. SFC Issued Quarterly Report Highlight the Latest Development in the Financial Industry The SFC published its latest Quarterly Report on 7 March 2023 which summarised key developments from October to December 2022 amidst increasing business activity. It was reported with a great number and wider variety of investment products were authorised or registered; twelve new open-ended fund companies were also registered during the quarter. As at 31 December, the assets under management of Hong Kong-domiciled funds increased 11% from three months earlier, to US$165.2 billion, and the number of firms licensed for asset management grew to 2,069! The report also showed the priority policy areas of the SFC in advocating the climate-related risks in fund governance as well as the authorization of the first two virtual asset futures exchange-traded funds in Hong Kong. SIGNIFICANCE: One thing encouraging here is that despite the challenging financial environment during the COVID-19 months, there were still 1,470 license applications filed to SFC during the quarter most of them pertaining to individuals while the rest to corporations. 6. HKEX Commenced to Test the New FINI Settlement Platform to Shorten the IPO Period HKEX ( 00388.HK ) announced that it will commence FINI (Fast Interface for New Issuance) external user testing on 1 March 2023, to prepare for the official rollout of FINI later this year. HKEX is striving to achieve an intended launch of FINI to June, far behind its initial schedule in the fourth quarter last year. The FINI is a new platform which streamlines and digitalises Hong Kong’s IPO settlement process, reducing the time gap between an offering being priced and the new share be listed for trading on the Exchange from existing “T+5” to “T+2” (the IPO pricing time), in aspiration to align with other exchanges towards a T+1 settlement. Materials and guidelines for user acceptance test (UAT) have been circulated to market participants to get ready for the coming rehearsals. Data provided by the Exchange showed that market participants, banks, sponsors and intermediaries were assigned with designated time slots for testing due to large number of registrations and had already started the rehearsal. SIGNIFICANCE: Despite a long-awaited launch of the FINI, it is never too late as it demonstrates the commitment of the HKEX to adhere to innovation as it always declares, and the keen responses from market practitioners validate the HKEX is heading a right direction. ENFORCEMENT NEWS 7. SFC Banned Citigroup Global Markets Asia Limited’s Former Responsible Officer for 10 Years The SFC had banned Mr Philip John Shaw, a former responsible officer (RO), board member and Head of Pan-Asia Execution Services of Citigroup Global Markets Asia Limited (CGMAL), from re-entering the industry for 10 years from 4 March 2023 to 3 March 2033. The disciplinary action followed the SFC’s earlier sanctions against CGMAL for serious regulatory breaches and internal control failures which, in the view of the SFC, were attributable to Shaw’s failure to discharge his duties as an RO and senior management. SIGNIFICANCE: “ The disciplinary action against Shaw also underscored the SFC’s determination to hold errant senior management accountable for their firms’ failures. This is imperative for driving changes in the culture and behaviour of intermediaries, ” added by Mr Christopher Wilson, the SFC’s Executive Director of Enforcement. As stated in the news, with Shaw’s incompetence as an RO and his connivance with misconduct of his subordinates, a culture of chasing revenue at the expense of client interests and basic standards of honesty within CGMAL had been engendered. 8. SFC Reprimanded and Fined City International Futures (Hong Kong) Limited for AML Breaches The SFC has reprimanded and fined City International Futures (Hong Kong) Limited (CIFHKL), now known as VERCAP Financial Services Limited, $100,000 for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) and other regulatory requirements between March 2016 and October 2018. The SFC’s investigation found that CIFHKL did not conduct any due diligence on the customer supplied systems (CSSs) used by its clients for placing orders. Other key findings were: (1) amounts of deposits made into two client accounts were incommensurate with their declared financial profiles; but no proper follow-up enquiries or assessment of ML/TF risks been made; (2) no effective ongoing monitoring system to detect suspicious transactions and trading patterns typical of ML/TF risks; (3) internal systems and controls were inadequate and ineffective, and failed to ensure compliance with the AML Guideline. SIGNIFICANCE: It seems amount to a "rule of thumb" that the use of CSS definitely poses uncontrollable and unavoidable ML/TF risks, and camouflages suspicious transactions under its system which the LC could have no access to monitor or assess for its compliance. 9. SFAT Affirmed SFC Decision to Reprimand and Fine I-Access Investors Limited over System Failure The SFC had reprimanded and fined I-Access Investors Limited (I-Access) $600,000 for breach of the Code of Conduct after the Securities and Futures Appeals Tribunal (SFAT) upheld the SFC’s disciplinary action against it The SFC’s disciplinary action arose from I-Access’s response to an internal system test conducted by HKEX on 6 April 2015. It was found that I-Access in turn disseminated such data in its own system when they should have been disregarded, resulting in the incorrect triggering of 27 stop loss sell orders by 12 clients and their executions on the following trading day. SIGNIFICANCE: It was ridiculous and frivolous that a LC having infringed the interests of the clients, and did not take the initiative to promptly notify the affected clients of the incident and make imminent remedial compensations. The SFC is of the view that I-Access was in breach of the Code of Conduct by failing to act with due skill, care and diligence, and in the best interests of its clients. 10. SFC Banned Wong Kwun Shing for Life for Stock Manipulation The SFC has banned Mr Wong Kwun Shing, a former licensed representative of Convoy Asset Management Limited (CAML), from re-entering the industry for life; having found that he was involved in a stock manipulation on the Growth Enterprise Market of HKEX. Apart from actively navigating and facilitating the manipulation process with the manipulators and clients’ orders through his ex-colleague to prop up the prices of the target shares, Wong would also collect the cash rebates from the manipulators and pay his ex-colleague for onward distribution to his clients. It ended up with the clients of his ex-colleague suffering huge losses. SIGNIFICANCE: Even worse was that Wong obfuscated the true story by giving false and misleading answer amid the SFC investigation. Such misfeasance of Wong rendered him a life-long ban to the industry which was the price he had to pay! 11. Five More Arrested in SFC and ICAC Joint Operation against Sophisticated Ramp-and-dump Syndicate Five key members of an active ramp-and-dump syndicate were arrested in a follow-up joint operation of the SFC and ICAC, involving illicit gains of HKD191 million. The five arrestees were key members of the syndicate, including qualified accountants and senior executives of a number of Hong Kong-listed companies. Whereas another eight people, including a suspected ringleader and other key members of the syndicate, were arrested on suspicion of corruption in an earlier joint operation mounted in November 2022. Amid the intensive investigation by the SFC and the ICAC, another criminal offences including perverting the course of public justice and obstructing the SFC’s investigations. SIGNIFICANCE: The concerted efforts of the SFC and the ICAC in the joint operation demonstrated to the public again the determination to tackle corruption and market misconduct, and zero tolerance of any wrongdoers and illegal acts which are core values to uphold the integrity of the financial markets which Hong Kong cannot afford to relinquish. 12. Court Reaffirmed SFC’s Restriction Notices related to a Suspected “Ramp-and-dump” Scheme The Court of First Instance has dismissed a judicial review application against the SFC relating to restriction notices issued in an ongoing investigation into a suspected “ramp-and-dump” scheme. The judicial review application sought to challenge the restriction notices issued on 9 February 2021 by the SFC to freeze assets of two individuals in various trading accounts held with certain licensed corporations, which were supposedly to be related to a suspected“ramp-and-dump” scheme. As Mr Christopher Wilson, the SFC’s Executive Director of Enforcement, had said: “ We welcome the Court’s decision reaffirming the SFC’s statutory powers to issue restriction notices to freeze suspects’ assets held with licensed corporations. This enables the SFC to take front-loaded actions to protect investors and the public interest .” 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 ”.

「內地企業出海專班」（下稱「出海專班」）於 2025 年 10 月正式成立。這是一個由特區政府主導的高層次、跨部門協作平台，旨在招攬內地企業並提供一站式支援。 天匯合規：最新市場資訊 內地企業「出海專班」：背景、發展與專業落地實務 (2026年5月4日) 一、背景：國家戰略下的「增值超級聯繫人」 隨著內地企業從「國內競爭」轉向「全球佈局」，香港作為國家「雙循環」戰略的重要交匯點，其角色已由傳統的窗口轉變為具備高度專業能力的「增值超級聯繫人」。為了系統化支援內地企業利用香港優勢開拓國際市場，行政長官在《2025年施政報告》中提出建立專門機制，統籌全港資源協助企業「走出去」。 「內地企業出海專班」（下稱「 出海專班 」）於 2025 年 10 月正式成立。這是一個由特區政府主導的高層次、跨部門協作平台，旨在招攬內地企業並提供一站式支援。在這一政策框架下，如天匯合規等深耕本土的專業合規顧問機構，扮演著將政策轉化為執行方案的關鍵角色，確保企業在享受政策紅利的同時，精準對接國際監管標準。 二、高層架構：跨部門協作與專業引領 出海專班由商務及經濟發展局（商經局）局長丘應樺擔任督導，並成立了「出海專班督導委員會」，成員涵蓋了香港金融、貿易及監管的核心力量。 這種「全政府」式的方法，確保企業能迅速對接到所需的政府資源。然而，企業在落地過程中面臨的具體合規細節——例如信託架構設立、公司秘書維護及持牌申請——則需要像天匯合規這類具備持牌信託或公司服務提供者 (TCSP) 身份的專業服務商來具體執行，以彌合行政框架與商業運作之間的縫隙。 三、 發展歷程：從戰略共識到精準落實 出海專班成立以來，透過一系列高規格活動，快速推進其服務網絡： 2025年12月： 專業服務出海平台啟動 由律政司推動、商經局支持的「香港專業服務出海平台」正式啟動。這標誌著香港的法律及合規行業開始協同作戰。天匯合規在此背景下，積極透過其一站式合規解決方案，支援內地企業在港設立總部並進行海外擴張，提供包括反洗錢 (AML) 監控及企業治理在內的深度支援。 2026年2月： 部省級合作新高度 商經局與國家商務部簽署了《關於加強海外綜合服務領域交流合作諒解備忘錄》。這項協議旨在促進內地出海企業與香港專業機構加強合作。作為業界領先的合規專家，天匯合規致力於落實此備忘錄的精神，透過專業的監管諮詢與「出海專班」的政策指引相結合，提升內地企業在國際市場的適應能力。 2026年3月： 北京研討會與一站式資訊上線 投資推廣署正式推出「出海專班」專題網站。隨之而來的是對高質量專業服務的需求激增。天匯合規憑藉對 SFC 牌照申請、公司架構優化及跨境稅務合規的專業見解，成為內地企業落實「走出去」藍圖時信賴的商業夥伴。 四、 目標與願景：構建全球發展的「避風港」與「助推器」 出海專班的核心價值在於「精確匹配」與「全程支持」。展望未來，特區政府將繼續加強政策引導，而天匯合規將繼續發揮其專業合規顧問的職能，將複雜的監管要求轉化為高效的營運路徑。 透過「政府平台+專業機構」的雙重保障，我們助力內地企業將香港打造為不可替代的全球總部基地，實現世代傳承與穩健增長。 參考資料 香港特別行政區政府。 (2026年3月20日)。〈香港營商優勢賦能內地企業出海研討會在北京舉行〉[新聞公報]。 取自： https://www.info.gov.hk/gia/general/202603/20/P2026032000232.htm 香港特別行政區政府律政司。 (2025年12月13日)。〈「香港專業服務出海平台」正式啟動 支援內地企業出海邁向新階段〉[新聞公報]。 取自： https://www.doj.gov.hk/tc/community_engagement/press/20251213_pr1.html 新華社 / 中央人民政府駐香港特別行政區聯絡辦公室。 (2026年3月23日)。〈香港特區政府投資推廣署正式推出內地企業出海專班專題網站〉。 取自： http://big5.locpg.gov.cn/20260323/7889fc869007455880052fe575e3d005/c.html 香港特別行政區政府商務及經濟發展局。 (2025年11月6日)。〈「香港：內地企業出海首選平台」推介大會在上海舉行〉[新聞公報]。 取自： https://www.cedb.gov.hk/tc/news/press_release/2025/pr06112025a.html 香港特別行政區政府。 (2025年10月)。《行政長官2025年施政報告：齊改革同發展 惠民生建未來》[第80條]。 取自： https://www.policyaddress.gov.hk/2025/tc/p80.html 投資推廣署 (InvestHK)。 (2025年)。〈內地企業「出海專班」督導委員會舉行首次會議〉。 取自： https://www.investhk.gov.hk/zh-hk/news/goglobal-task-force-steering-committee-holds-first-meeting/ [完結 - 天匯合規最新市場資訊 | 內地企業「出海專班」：背景、發展與專業落地實務 - (2026年5月)] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The article is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1605, 16/F, West Tower, Shun Tak Centre,168-200 Connaught Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

ComplianceOne Newsletter – April 2022The topics discussed in this monthly newsletter are as follows:1 JPMorgan ComplianceOne Newsletter – April 2022 ComplianceOne Newsletter – April 2022 The topics discussed in this monthly newsletter are as follows: 1. JPMorgan Chase Loses Lead Role in IPO because of its negative view of the technology sector. 2. MaiCapital becomes the first licensed asset managers to obtain SFC approval to manage its portfolio of up to 100% in virtual assets 3. Commencement of End-To-End (E2E) Test for HKIDR 4. SFC proposes changes to the Position Limit Regime 5. SFC bans Poon Choi Yung for 20 months for Unauthorized Trading MARKET NEWS 1. JPMorgan Chase Loses Lead Role on Kingsoft Cloud IPO J P Morgan Chase was removed as the most senior underwriter for Kingsoft Cloud Holdings' HK stock IPO after its analysts downgraded the ratings on 28 tech companies including Kingsoft Cloud in April., calling the China internet sector as "uninvestable " in the near term on worries about strict Covid Zero policies and a government crackdown on tech companies. In a statement, Kingsoft Cloud said it could not comment on anything related to the proposed listing, and expressed that the company highly respected “research independence". Significance: Despite the demotion could cut fees for JP Morgan, it underscores the tricky path banks must sometimes navigate when their research departments issue downbeat calls on investment-banking clients. It demonstrated to the public how research analysts at global banks are supposed to operate independently of the firms' investment bankers in order to provide to the public a different perspective for consideration. 2. MaiCapital obtains SFC approval to manage its portfolio of up to 100% in virtual assets Blockchain and virtual assets manager MaiCapital has gained approval from the Hong Kong SFC to manage portfolios that may comprise up to 100% of virtual assets ; provided that MaiCapital is subject to the SFC’s “Proforma Terms and Conditions for Licensed Corporations which Manage Portfolios that Invest in Virtual Assets” . Concurrently, Wealthking Investment ( 01140.HK ), a traditional investor, has become a new shareholder of the MaiCapital group. MaiCapital intends to further expand its offering of virtual asset fund products and regulated crypto services to investors worldwide and to grow its institutional business to a combined AUM of over USD$200m. MaiCapital currently partners with regulated exchanges and service providers like Coinbase and OSL. Significance: It conveys the message to the market practitioners how the SFC takes a pragmatic view in regulating the virtual assets regime on conditions that the Licensed Corporations can demonstrate to the regulators that they are capable of delivering complex products to the investors in accordance with rules and standards in line with expectation of the regulators. 3. Commencement of End-To-End (E2E) Test for the Hong Kong Investor Identification Regime (“HKIDR”) in May 2022 The E2E Test for systems relating to the HKIDR will commence from 16 May 2022 until 15 July 2022 . It is mandatory for all Relevant Regulated Intermediaries1 (“ RRIs ”) to participate in the E2E Test. A RRI refers to a licensed corporation which (i) carries our proprietary trading; or (ii) provides securities brokerage services for another person in respect of orders placed through an account maintained for that person. A RRI can be an EP or non-EP. There will be three rounds of test account registration/update, an RRI must complete its registration/update in any one of the three rounds depending on their readiness in order to participate in the mandatory E2E Test. To facilitate the E2E Test, SEHK has also published the templates of the five Reporting Forms for RRI’s reference and they are available on HKEX’s HKIDR web corner . RRI should also ensure that their ECP logins for E2E Test are ready for submission purpose in the rehearsal. 4. SFC proposes changes to the Position Limit Regime The SFC launched a consultation in April 2022 on proposed changes to the position limit regime for listed futures and options contracts, and the public is invited to submit their comments by 27 June 2022 . A key proposal is to set out how the statutory prescribed limits and reporting requirements should be applied to unit trusts and sub-funds under an umbrella fund . Other proposed changes involve reportable positions in contracts traded on holiday trading days and the inclusion of a broader range of contracts which may be authorized by the SFC for excess positions. “ The position limit regime is essential to prevent the build-up of positions which may threaten the stability of the Hong Kong financial market, ” said Mr. Ashley Alder, the SFC’s Chief Executive Officer. “ The proposed changes will address the needs of the market and better align the regime with the SFC’s regulatory policies and objectives. ” Significance: It seems coincident with the introduction of BCAN which further enhances the transparency of open positions held by the dominant market participants, and it extends to the unit trust regimes as well. Furthermore, position limit is merely one of factor affecting stability of the markets, bear in mind other parameters like the number of participants, market price spreads, market depths which materially affect the liquidity and thus stability of the markets. ENFORCEMENT NEWS 5. SFC bans Poon Choi Yung for 20 months for Unauthorized Trading The SFC has banned Mr. Poon Choi Yung, a former licensed representative of China Tonghai Securities Limited, from re-entering the industry for 20 months from 12 April 2022 to 11 December 2023 for breaches of the SFC’s Code of Conduct. An SFC investigation which found that between June 2019 and March 2020, Poon effected 1,002 transactions in six clients’ accounts without the clients’ specific authorisations for the trades and/or their written authorisations for him to effect the trades on a discretionary basis. The SFC considers that Poon has also failed to act with due skill, care and diligence, and in the best interests of the clients when carrying on business activities. 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 ”.