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

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

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

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – August 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES IA Caps Referral Fees at 50% for Participating Policies, Effective 1 Oct 2025 Insurers Must Publicly Disclose Audited Financials Under RBC Regime to Boost Market Transparency Under The New Requirement MARKET NEWS Insurance Authority Encourages Relocation of Investment Decision Functions for Life Insurers to Hong Kong ENFORCEMENT NEWS Tahoe Life was fined $10 million for unauthorized transactions IA Secures Conviction Against YAN Zhiyu for Non-Compliance with Investigation Regulatory News 1. IA Caps Referral Fees at 50% for Participating Policies, Effective 1 Oct 2025 The IA issued a circular on 1 September 2025, outlining regulatory expectations for referral fees paid by licensed insurance broker companies in relation to participating policies. This guidance applies to authorized insurers and licensed insurance intermediaries dealing with long-term business. It builds on prior communications, including the 22 May 2024 circular on referral business models and the 30 July 2025 Practice Note on remuneration structures. Key Requirement: Referral Fees Ratio Cap : Insurance broker companies shall not pay referral fees to any referrers above a Benchmark* , which is calibrated as 50% of the total commission receivable by the broker companies from an authorised insurer for introducing, arranging and servicing a participating policy Scope of Circular : The new regulatory expectation will not be applied to the business lines which regulators are SFC and MPFA Effective Date : All licensed insurance broker companies and authorized insurers should comply with this circular by 1 October 2025 . * As stated in the circular on 1 September 2025, the Benchmark is calibrated as 50% of the total commission receivable by a licensed insurance broker company from an authorized insurer for introducing, arranging and servicing a participating policy. SIGNIFICANCE: This circular address concerns over business models that may incentivize misconduct, such as shifting regulated activities to unlicensed referrers or offering indirect rebates. By establishing a clear benchmark and requiring justifications for deviations, the IA aims to promote fair treatment of customers, enhance market integrity, and sustain the long-term health of Hong Kong's insurance sector amid evolving distribution practices. 2. Insurers Must Publicly Disclose Audited Financials Under RBC Regime to Boost Market Transparency Under The New Requirement On 8 August 2025, the IA issued a circular to the Chief Executives of all authorized insurers ( excluding intermediaries ), detailing public disclosure requirements under IO for the first financial year adopting the Risk-based Capital (“ RBC ”) regime (financial years commencing on or after 1 January 2024). This initiative aims to enhance market transparency ahead of the full enactment of the Insurance (Public Disclosure) Rules in 2026. The IA conducted a public consultation on the draft Insurance (Public Disclosure) Rules on 14 March 2025 , with conclusions issued on 8 August 2025 . While the full Disclosure Rules are planned for introduction to the Legislative Council and effective in 2026, insurers are required to disclose quantitative information for the transitional year. Audited Financial Statements All authorized insurers, excluding those with approved transitional arrangements under rule 88 of the Insurance (Valuation and Capital) Rules, marine insurers, captive insurers, or special purpose insurers (collectively "exempted insurers"), must publish their audited financial statements. These are the statements submitted to the IA under rule 3 of the Insurance (Submission of Statements, Reports and Information) Rules, disclosed in their original language without translation. Disclosure Statement All authorized insurers except exempted insurers and Lloyd’s must publish a disclosure statement using the standard templates in Annex 1 (English) and Annex 2 (Chinese). The statement must be provided in English with a Chinese translation or vice versa. Focus on quantitative information; qualitative information is optional if deemed necessary. Disclosures must conform to the valuation and capital requirements under the Insurance (Valuation and Capital) Rules, or any variations/relaxations under sections 10(3) or 130(1) of the IO. Include a statement (referring to section 5 of the disclosure statement) made by a controller (as defined in section 13A(12) of the IO) or a director, on either the English or Chinese version. SIGNIFICANCE: This circular promotes early transparency in the insurance sector under the new RBC regime, enabling stakeholders to assess insurers' financial positions. By mandating public disclosures, the IA fosters greater market integrity, accountability, and confidence in Hong Kong's insurance industry as it transitions to risk-based supervision. Market News 3. Insurance Authority Encourages Relocation of Investment Decision Functions for Life Insurers to Hong Kong According to reports from Bloomberg dated 5 August 2025, the IA has been actively encouraging major life insurance companies, such as AIA Group Limited (1299.HK) (友邦保險控股有限公司), to relocate their investment decision-making functions from Singapore back to Hong Kong. This initiative, which reportedly began in early 2024, aims to address emerging challenges in the competitive landscape between the two financial hubs. Regulatory Oversight Under the IA's Guideline on Outsourcing (GL14) , the IA can monitor outsourcing arrangements, including detailed agreements with delegated investment managers, such as amounts and locations involved. In at least one instance, the IA has scrutinized whether Hong Kong-based teams retain final decision-making authority over delegated mandates. Objectives The push is intended to foster greater employment opportunities in Hong Kong across insurers, fund managers, and legal firms, while ensuring prudent asset management to mitigate excessive concentrations in risk types, counterparties, and investment tools. The launch event featured engaging discussions among executives from regulators, tech giants, and telecom providers on emerging scam trends and joint strategies to protect the public. SIGNIFICANCE: An IA spokesperson commented: “Currently, there is no statutory requirement for life insurers to maintain assets or make investment decisions in Hong Kong. However, all authorized insurers should prudently manage their assets to avoid excessive concentration in risk types, counterparties, and investment instruments. This is crucial to ensure that insurers can promptly meet claims and fulfill contractual obligations, thereby protecting policyholders’ interests. Additionally, in line with international best practices, the IA will appropriately consider potential legal and operational restrictions on capital transfers between jurisdictions when conducting resolution and recovery planning for individual authorized insurers.” This development highlights the IA’s commitment to enhancing Hong Kong’s position as a leading financial center by promoting local decision-making and job creation in the insurance sector. By encouraging the repatriation of key functions, the IA seeks to bolster market resilience, reduce dependency on external jurisdictions, and align with global regulatory standards for risk management and policyholder protection. Enforcement News 4. Tahoe Life was fined $10 million for unauthorized transactions On 2 September 2025, the IA issued a public reprimand to Tahoe Life Insurance Company Limited (泰禾人壽保險有限公司 ) (“ Tahoe Life ”) and imposed a fine of $10 million, to be borne by its shareholders’ fund. Key Details: Background of Tahoe Group The Tahoe Group was a high-profile, Fujian-based real estate conglomerate founded by Mr. Huang Qisen (黄其森先生) (also the former director of Tahoe Life). It specialized in developing luxury residential properties, often with a traditional Chinese architectural theme, known as "Courtyard" series. The company's downfall began around 2017-2018 as the Chinese government implemented stricter policies to curb corporate debt and speculation in the property sector ("Three Red Lines" policy). This made refinancing existing debt extremely difficult. Current Tahoe Life Tahoe Life is currently under the direct control of government-appointed Managers due to a severe failure in corporate governance and regulatory compliance. Disciplinary Actions The IA's actions stem from related party transactions conducted by Tahoe Life between July 2019 and April 2020 without prior IA consent. These transactions involved Tahoe Group Global (Co.) Limited. The IA determined that Mr. Huang Qisen and Mr. Ge Yong (葛勇先生), directors of Tahoe Life at the time, are no longer considered fit and proper persons. Both individuals have since stepped down from their key management roles. Appointment of Managers On 26 July 2024, the IA invoked Section 35(2)(b) of the Insurance Ordinance (Cap. 41) to appoint Mr. Derek Lai, Mr. Forrest Kam of Deloitte Touche Tohmatsu, and Mr. Oliver Cheng of Deloitte Advisory (Hong Kong) Ltd as Joint and Several Managers to take full control of Tahoe Life’s affairs, business, and property. This followed the appointment of Advisors in August 2023 under Section 35(2)(a) to provide recommendations, which Tahoe Life failed to act upon, including not submitting audited financial statements for 2022 and 2023, failing to secure new strategic investors, and not improving corporate governance. For more details, please refer to press release issued by the IA on 16 August 2023 . Supervisory Measures To protect policyholders, the IA has implemented several measures, including: Asset ring-fencing Strengthened internal controls Investment restrictions These measures, combined with the appointment of Managers, aim to ascertain Tahoe Life’s financial and solvency position, preserve capital resources, and identify recovery solutions in the best interest of policyholders. Impact on Policyholders The IA assures that all policies issued by Tahoe Life remain unaffected. The Managers are responsible for maintaining full business operations, including customer service, premium payments, and claims settlement. Policyholders are advised to carefully assess their circumstances and avoid hasty decisions, as life insurance products are designed for long-term maturity. SIGNIFICANCE: The IA’s actions underscore its commitment to ensuring robust governance and compliance within the insurance industry. By addressing unauthorized related party transactions and enforcing stringent supervisory measures, the IA aims to safeguard policyholder interests, uphold market integrity, and reinforce trust in Hong Kong’s insurance sector. 5. IA Secures Conviction Against YAN Zhiyu for Non-Compliance with Investigation On 3 September 2025, the Eastern Magistrates' Courts convicted Mr. YAN Zhiyu (顏志裕先生) and imposed a fine of $10,000 for failing to attend an investigation interview without reasonable excuse. This interview was related to an investigation into the suspected misappropriation of premium payments belonging to two policyholders, constituting a breach of section 64ZZL(1) of the Insurance Ordinance (Cap. 41) (“ IO ”). Conviction and Penalty Mr. YAN Zhiyu was found guilty of non-compliance with the requirement to attend an interview as part of the IA’s investigation. The court imposed a fine of $10,000 for this violation. Legal Obligations Under section 64ZZL(1) of the IO, individuals may be required to attend interviews or provide assistance to support the IA’s regulatory oversight of insurance intermediaries. Failure to comply without reasonable excuse can lead to severe penalties: · On indictment: A fine of up to $200,000 and imprisonment for up to 1 year. · On summary conviction: A fine of up to $50,000 (level 5) and imprisonment for up to 6 months. SIGNIFICANCE: This conviction underscores the IA’s commitment to enforcing compliance with its regulatory processes. By holding individuals accountable for failing to cooperate with investigations, the IA aims to protect policyholders, ensure the integrity of insurance intermediaries, and maintain trust in Hong Kong’s insurance sector. The case highlights the importance of adhering to statutory obligations to facilitate effective regulation and safeguard consumer interests. [End of ComplianceOne Insurance Newsletter – August 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 – Feb 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES 1. SFC convenes inaugural VA Consultative Panel meeting 2. SFC sets out ASPIRe roadmap as blueprint to navigate Hong Kong as a global virtual asset hub 3. Hong Kong's market watchdog reviews 8 brokerages amid IPO oversubscription frenzy 4. SFC Supports Listing of Alternative Funds to Boost Investor Options 5. SFC Leads Regional Consensus on Sustainability, Tech, and Investor Protection 6. SFC proposes to relax position limits for key exchange-traded derivatives 7. SFC flags cybersecurity incidents in a thematic review report MARKET NEWS 8. SFC supports government budget measures 9. HashKey Capital is granted approval for VA discretionary accounts management services ENFORCEMENT NEWS 10. SFC Imposes Restriction Notices on Money Concepts Entities 11. SFC Launches Insider Dealing Case Against Wong Pak Ming Regulatory Updates 1. SFC convenes inaugural VA Consultative Panel meeting Earliest on 14 FEB, the SFC had convened an inaugural meeting of the Virtual Asset Consultative Panel (“ VACP ”) for the licensed virtual asset trading platforms (“ VATP ”s). Chaired by the SFC’s Executive Director of the Intermediaries Dr Eric Yip, the VACP comprises all the licensed VATPs represented by members of their senior management, and is expected to provide invaluable contribution to the SCF’s formulation of regulatory policy to further facilitate the development of a sustainable and resilient virtual asset ecosystem. Members of the VACP will collaborate towards the aim of identifying policy priorities, paving way for market and regulatory developments. As added by Dr Eric Yip, “The SFC looks forward to close collaboration with the members to encourage and develop innovation while ensuring adherence to regulatory standards in this rapidly changing landscape”. SIGNIFICANCE: The VACP is a good example of SFC’ s proactive engagement with the licensed VATPs in addition to its previous engagement in launching the swift licensing process for new VATP applicants with a streamlined approach. 2. SFC sets out ASPIRe roadmap as blueprint to navigate Hong Kong as a global virtual asset hub The SFC outlined 12 major initiatives to enhance the security, innovation and growth of Hong Kong’ s virtual asset (“ VA ”) market under a five- pillar “ ASPIRe ” roadmap, which stands for Access, Safeguards, Products, Infrastructure and Relationships. A snapshot of the pillars and initiatives: FIVE-pillars (incorporating the TWELVE initiatives) “ A-S-P-I-Re ” Roadmap for a Resilient Virtual Asset Ecosystem (1) Pillar A (Access) – Streamline market entry through regulatory clarity Key objectives: (i) Expand market accessibility (ii) Encourage responsibility participation (iii) Enhance investor opportunities Initiative 1 : Establish licensing regimes for OTC trading and custody services Initiative 2 : Attract global platforms, order flows and liquidity providers (2) Pillar S (Safeguards) – Optimising compliance burdens without compromising security Key objectives: (i) Align compliance requirements (ii) Adopt risk-proportionate oversight (iii) Promote regulatory clarity Initiative 3 : Explore adopting a dynamic approach to custody technologies and storage ratios Initiative 4 : Enhance insurance and compensation frameworks Initiative 5 : Clarify investor onboarding and product categorization (3) Pillar P (Products) – Expand product offerings and services based on investor categorisation Key objectives: (i) Enable risk-appropriate investment tools (ii) Safeguard retail investors (iii) Mitigate potential risks Initiative 6 : Explore regulatory framework for professional investor-exclusive new token listings and virtual asset derivative trading Initiative 7 : Explore virtual asset margin financing requirements aligned with securities market risk management safeguards Initiative 8 : Consider allowing staking and borrowing/lending services under clear custody and operational guidelines (4) Pillar I (Infrastructure) – Modernise reporting, surveillance and cross-agency collaboration Key objectives: (i) Strengthen market-wide oversight capabilities (ii) Early detection of illicit activities and misconduct (iii) Safeguard investor assets Initiative 9 : Consider solutions for efficient regulatory reporting and deploy advanced surveillance tools to detect illicit activities Initiative 10 : Strengthen local cross agency collaboration and promote cross border cooperation with global regulators (5) Pillar Re (Relationships) – Empower investors and industry through education, engagement and transparency Key objectives: (i) Enhance investor understanding (ii) Foster industry participation (iii) Promote fit-for-purpose policy making Initiative 11 : Consider regulatory framework for financial influencers (Finfluencers) to address new investor engagement channels Initiative 12 : Cultivate sustainable communication and talent network SIGNIFICANCE: Encountered with the ever-changing VA ecosystem, market participants are facing challenges from all edges: institutional-retail bifurcation, fragmented liquidity, and regulatory arbitrage risk due to discrepancies in development of VA regulatory regimes across regions; the SFC is pioneering itself with a pragmatic ASPIRe roadmap to secure and gradually materialize the mission of positioning Hong Kong as an international VA hub. 3. Hong Kong's market watchdog reviews 8 brokerages amid IPO oversubscription frenzy On 14 February 2025, a press release showing the SFC’s explicit concern with the oversubscription frenzy in IPO offering observed recently from eight brokers. Some key points are worth noted: the SFC will examine the brokers IPO financing policies, and advise that brokers should take into consideration the clients’ repayment ability, and set appropriate loan limit to avoid overfinancing; in November 2023 a couple of years ago, a circular form the SFC had been posted to remind brokers of the need to adopt a prudent risk management policy in providing IPO subscription services to its clients, in particular after the launch of FINI on 22 November then; since under the new FINI settlement, brokers are only required to pay for the maximum number of shares allotted in the IPO instead of the “full amount” of the subscriptions, thus allowing opportunities to further scale up the leverage offered to the clients. It is observed that some brokers tend to accept large subscription orders without collecting sufficient initial subscription deposits from clients as minimum upfront payments; brokers tend to take advantage of “the exemption to pay the full amount” to grant more IPO loans to the clients with larger multiples which further add fuel to boost up the oversubscription frenzy. SIGNIFICANCE: The FINI mechanism shortens the settlement period from “t+5” to “t+2” while at the same time alleviating the financial costs burden of having to pay the full amounts of subscription in previous arrangements. Though initial intention of the FINI is to streamline the IPO settlement process, it unexpectedly allows the possibility for more speculative IPO overfinancing activities. Market participants also expect the SFC to provide more clear guidelines on the margin-financing policies, not only as reference for prudent risk management, but also as a note of reminder to brokers of the potential risk of breaching the financial resources requirements amid the vehement buoyancy of IPO offerings. 4. SFC Supports Listing of Alternative Funds to Boost Investor Options The SFC of Hong Kong has issued new regulatory circular to encourage the listing of closed-ended alternative funds on the Stock Exchange of Hong Kong Limited (“ SEHK ”). Announced on 17 February 2025, this move aligns with the HKSAR Government’s 2024 Policy Address to expand private equity fund distribution and solidify Hong Kong’s position as a global asset management hub. Key takeaways: Funds already listed on recognized international exchanges may also qualify, subject to comparable regulations. Size & Scale: Funds must be sizeable (HK$780 million market cap), with management companies managing at least HK$780 million in alternative assets. Diversification: Funds should invest in well-balanced portfolios, with borrowing capped at 30% of net asset value (NAV). Transparency: NAV must be published quarterly, and offering documents must detail investment strategies, risks, and valuation methods. Investor Education: Management companies are urged to educate investors before launching these funds in Hong Kong. SIGNIFICANCE: “We’ve always welcomed closed-ended alternative funds,” said Ms. Christina Choi, SFC’s Executive Director of Investment Products. “This clarity will help investors tap into opportunities managed by top-tier asset managers.” This initiative broadens Hong Kong’s investment landscape, offering sophisticated investors access to alternative assets while maintaining robust safeguards. The SFC aims to balance innovation with investor protection, reinforcing the city’s financial competitiveness. 5. SFC Leads Regional Consensus on Sustainability, Tech, and Investor Protection The SFC has taken a pivotal role in shaping the future of capital market regulation across the Asia-Pacific, forging a united front with regional counterparts at the International Organization of Securities Commissions (“ IOSCO ”) Asia-Pacific Regional Committee (“ APRC ”) meetings held from 19 Feb 2025 to 21 Feb 2025, in Da Nang, Vietnam. Key takeaways: Collaborative Roadmap: Chaired by SFC CEO Ms. Julia Leung, the APRC brought together over 70 regulators from 19 jurisdictions to align on tackling scams, online harm, and investment fraud, while leveraging technology for regulatory innovation. Supervisory Cooperation: Vietnam’s State Securities Commission (“ SSC ”) joined as the 14th signatory to the APRC Multilateral Memorandum of Understanding (“ SMMoU ”), a milestone witnessed by Vietnam’s Finance Minister Mr. Nguyen Van Thang and celebrated during a signing ceremony. Global Dialogue: Ms. Leung co-chaired the EU-Asia-Pacific Forum on Financial Regulation, driving discussions on digitalization, fintech, and sustainable finance with European and regional financial leaders. Unified Approach to Emerging Challenges Regulators agreed on strategies to combat scams and harness generative AI and other technologies to enhance oversight. SFC senior executives also contributed to Enforcement and Supervisory Directors’ Meetings, sharing insights on enforcement trends, virtual asset safekeeping, and tech-driven supervision. Ms. Leung, in her keynote at the SSC Vietnam Symposium, underscored the APRC’s role: “This platform fosters collaboration essential for trust in our growing markets. Together, we can navigate emerging trends and risks effectively.” SIGNIFICANCE: As capital markets evolve with technology and sustainability at the forefront, the SFC’s leadership in the APRC reinforces Hong Kong’s role as a regulatory hub. This consensus sets the stage for stronger investor protection and innovation-friendly frameworks across the region. On the sidelines, Ms. Leung met with SSC Chairwoman Ms. Vu Thi Chan Phuong to deepen supervisory ties, focusing on crypto regulation and shared capital market priorities. Vietnam’s SMMoU entry marks a step forward in regional cooperation, enhancing information-sharing among Asia-Pacific regulators. For Ms. Leung’s full speech and more details, visit the SFC website . 6. SFC proposes to relax position limits for key exchange-traded derivatives On 27 February 2025, the SFC launched a Consultation proposing to increase the position limits for exchange-traded derivatives based on the three major stock indices in Hong Kong to keep pace with market development. To facilitate hedging activities of market participants, the proposals will lift the current position limits for the futures and options contracts as the table shown below: Underlying Index Existing position limit (net long/short position delta) Proposed position limit (net long/short position delta) Hang Seng Index (HSI) 10,000 15,000 (↑50%) Hang Seng China Enterprises Index (HSCEI) 12,000 25,000 (↑108%) Hang Seng TECH Index (HSTECH) 21,000 30,000 (↑43%) SIGNIFICANCE: These will enable Hong Kong’ s derivatives markets to keep pace with the growth in the market capitalisations of major stock indices and trading volumes of their constituents over the past years, without introducing additional risks to the markets. As Ms Julia Leung said, “ The relaxation of position limits will not only allow market participants to enjoy greater flexibility in managing positions, but also promote the liquidity and efficiency of both the derivatives and broader markets. ” 7. SFC flags cybersecurity incidents in a thematic review report Material cybersecurity incidents in recent years involving cyberattacks against licensed corporations (“ LC ”s) aroused attention of the SFC as LCs were vulnerable to significant business disruptions or hacking of client accounts. A Report on the 2023/24 Thematic Cybersecurity Review of Licensed Corporations (“ Report ”) was issued by the SFC on 6 February 2025 where eight incidents of material cybersecurity breach were reported to SFC between 2021 and 2024, examples identified are: unauthorized access to trading in clients’ account through loopholes in the network security of the LCs; end-of-life (“ EOL ”) software and weak algorithm for encrypting client data. In the light of these insufficient management oversight and inadequate controls on cybersecurity measures, the SFC has set out in the Report some standard of conduct expected of the LCs in relation to phishing detection and prevention, EOL software management, remote access control, third-party IT service providers management and cloud security. SIGNIFICANCE: As emphasized by Dr Eric Yip, the SFC’ s Executive Director of Intermediaries, that the LCs should take all necessary measures to tackle the sophisticated and prevalent cyberattacks, and failure to address these threats would cause detrimental influence on the LCs, their clients as well as the entire financial system in such a highly interconnected and digitalised world. Senior management should recognize the critical importance of safeguarding from and mitigating the cybersecurity risks by making reference to the Report for details. Market News 8. SFC supports government budget measures The SFC has expressed strong support for the Hong Kong government’s 2025-2026 budget measures, unveiled by Financial Secretary Paul Chan on 26 February 2025. These initiatives aim to solidify Hong Kong’s status as a leading international financial hub. Key takeaways: Boosting Securities and Derivatives Markets: SFC Chairman Dr. Kelvin Wong praised the budget for advancing Hong Kong’s securities, derivatives, and asset management sectors, reinforcing its competitive edge. Tech-Focused Listing Channel: The SFC will collaborate with Hong Kong Exchanges and Clearing Limited (“ HKEX ”) to launch a "technology enterprises channel," streamlining listings for tech and biotech firms. Listing Regime Refinement: A comprehensive review of listing rules, vetting processes, and market structures is underway, including exploring post-delisting trading mechanisms and optimizing dual/secondary listing thresholds. Risk Management Enhancements: The SFC will soon consult on raising position limits for key index derivatives to better serve investors. RMB Bonds and Fixed Income Hub: Partnering with the Hong Kong Monetary Authority, the SFC is crafting a roadmap to develop primary and secondary bond markets, alongside hosting a flagship forum in late 2025 to highlight Hong Kong’s strengths. Virtual Assets and Fintech: Following a mid-February regulatory roadmap, the SFC will guide the sustainable growth of Hong Kong’s virtual asset market, aligning with the government’s upcoming policy statement on blending traditional finance with innovative tech. SIGNIFICANCE: SFC CEO Ms. Julia Leung emphasized ongoing collaboration with regulators and stakeholders to strengthen Hong Kong’s role as a fixed income and currency hub, advance virtual asset markets, and deepen ties with Mainland China and global markets. The SFC’s proactive stance signals a dynamic year ahead for Hong Kong’s financial ecosystem. 9. HashKey Capital is granted approval for VA discretionary accounts management services Following the approval from SFC, Hashkey Capital is now able to offer discretionary account management services for virtual assets to professional investors (“ PI ”s) subject to type 9 license. This approval enables HashKey Capital to deliver customised services to professional investors subject to a pre-approved list of exchanges across the entire investment lifecycle ranging from: (i) tailored investment mandates: from spot investments to OTC trading and derivatives; (ii) flexibility in trading platforms: to offer discretionary account management service across a multiple of exchanges available to the clients taking into consideration the issues of compliance, operational efficiency; (iii) seamless strategy execution: providing a full-fledged discretionary account management from buying, selling, asset allocation, monitoring, rebalancing and final reporting. SIGNIFICANCE: Hindered by the complex virtual assets landscape, investors are always averse to the unforeseeable risks beyond their investment perspectives; discretionary account management services offer a bespoke solution by shifting the burden of regulatory and technical complexities from investors to professional market practitioners who are more conversant in the newly evolving regime. Enforcement News 10. SFC Imposes Restriction Notices on Money Concepts Entities The SFC took decisive action on 18 February 2025, issuing restriction notices to Money Concepts (Asia) Holdings Limited (“ MCAH ”) and its subsidiary, Money Concepts Asset Management Limited (“ MCAM ”). The SFC cited potential risks to the investing public and the broader public interest as key drivers for the restrictions. Restriction in Place: Both firms are barred from engaging in any licensed regulated activities—directly or via agents—without prior SFC approval, until further notice. SIGNIFICANCE: The move stems from concerns over their honesty, reliability, integrity, and competence in conducting regulated activities, raising doubts about their fitness to remain licensed. 11. SFC Launches Insider Dealing Case Against Wong Pak Ming The SFC kicked off criminal proceedings against businessman Wong Pak Ming on 27 February 2025, at the Eastern Magistrates’ Court. Wong, former chairman and controlling shareholder of Transmit Entertainment Limited (formerly Pegasus Entertainment Holdings Limited), faces charges of insider dealing tied to the company’s shares. Case Details Allegations : Wong is accused of counselling or procuring someone to trade Pegasus shares between 25 August 2017 and 17 October 2017, while possessing inside information about the company. Background : Pegasus, listed on Hong Kong’s Growth Enterprise Market in 2012 and later moved to the Main Board in 2015, was renamed Transmit Entertainment in March 2018 after Wong sold his controlling stake. Legal Basis : Insider dealing violates section 291 of the Securities and Futures Ordinance (“ SFO ”) . SIGNIFICANCE: No plea has been entered yet. The case is adjourned to March 27, 2025. Wong was released on $200,000 cash bail with conditions to stay at his provided address, notify police of any residence change, and inform the SFC 24 hours before leaving Hong Kong.This prosecution highlights the SFC’s ongoing efforts to combat market misconduct. [End of ComplianceOne Newsletter –February 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – June 2023 The topics discussed in this monthly newsletter are as follows: No "light-touch regulation" in Hong Kong new crypto rules SFC updated guidance to prepare for HKD-RMB Dual Counter Model HKEX’s New IPO Settlement Platform (FINI) to be launched in October HK Aiming to invite 200 family offices domiciled in Hong Kong by the end of 2025 130 Sustainability-Linked Bonds and ESG ratings of hundreds of listed companies displayed on the STAGE The SFC Annual Report 2022-23 SFC banned Xie Yanxiong for life for fraudulence and misrepresentation Taiping Securities (HK) Co Limited was fined $1.3 million for internal control failures over employee dealings Four people charged following SFC and Police joint operation against securities fraud and illegal short selling SFC obtained disqualification orders against former directors of National Agricultural Holdings Limited MARKET NEWS 1. No "light-touch regulation" in Hong Kong new crypto rules As Hong Kong has been advocating to global arena of its determination to develop HK as an international financial hub for virtual assets; in an interview at Bloomberg, the HKMA Chief Executive Eddie Yue Wai-man said that, “We will let them create the ecosystem here and that actually brings a lot of excitement. But that doesn’t mean light-touch regulation. ” Hong Kong has started marching into a new licensing regime for virtual assets service providers with effect from 1 June, and is preparing to grant the access to retail-investor participation for trading major tokens like Bitcoin and Ether. Apart from the regulatory guidelines published by the SFC, further guidelines for banks on serving crypto clients are still under progress. Despite negative news like bankruptcy of FTX exchange, and the high profile demonstration of the US officials to crack down on digital-asset business with enforcement actions, Hong Kong has been lowering its crypto guardrail to a “ reasonable and sustainable level ” from previous tight environment before. Aside from permits for virtual-asset platforms, a mandatory licensing regime for stablecoins — a type of crypto token that’s meant to hold a constant value — is due by 2023-2024. SIGNIFICANCE: Though regulatory bodies are showing that the surveillance of virtual asset landscape in Hong Kong is analogous to regulatory regime in other regions, and are by no means lenient compared with others, it cannot be denied that Hong Kong is one of the few jurisdictions where the government proactively participating in the nourishment and development of regulatory regime to foster the nascent growth of virtual assets business. It is also noted that the government is facilitating the onerous due diligence process of virtual asset exchanges to open bank accounts with local banks in Hong Kong which has always been a tough issue for many new participants or awaiting licensees in the virtual assets licensing regime. 2. SFC updated guidance to prepare for HKD-RMB Dual Counter Model The SFC published on 6 June 2023 a revised guidance on short selling reporting and stock lending record keeping to prepare for the launch of the HKD-RMB Dual Counter Model in the Hong Kong securities market on 19 June 2023. The Guidance Note on Short Selling Reporting and Stock Lending Record Keeping Requirements has been updated to cover inter-counter transactions of securities under the Dual Counter Model; and practical and operational examples can be found in the Frequently Asked Questions for Short Position Reporting as well. Suffice to say that the Guidance Note clarified that as HKD and RMB counters for the same security are of the same class, the following inter-counter transactions fall within the current framework: when an investor buys a security at one counter first and sells at another, the sale is considered an ordinary sale, and when a Dual Counter Model market maker sells a security at one counter and buys it at another, the inter-counter transaction falls under the current exemption, subject to certain conditions. SIGNIFICANCE: As Ms Julia Leung, the SFC Chief Executive Officer, had said, “the SFC supports dual counter trading, which will help promote the renminbi’s internationalisation and use as an investment currency.” With such dual counter in place, it provides an effective and efficient mechanism for market makers with improved market liquidity and helps minimise price differences between the two counters. 3. HKEX’s New IPO Settlement Platform (FINI) to be launched in October HKEX announced on 28 June of the launch of FINI, its innovative IPO settlement platform, in October this year, which significantly shortened the time between the pricing of an IPO and the trading of shares from five business days (T+5) to two business days (T+2). HKEX Chief Executive Officer Nicolas Aguzin said: “By digitalising, streamlining and modernising IPO settlement workflows, FINI will shorten the time between IPO pricing and the start of trading, enhancing market efficiency and strengthening the competitiveness and attractiveness of Hong Kong’s IPO market.” Following the successful completion of the FINI External User Testing earlier in June, HKEX will arrange market practice sessions and market rehearsals in July and August, to simulate interactive, end-to-end IPO settlement operations under FINI, paving the way for full migration to FINI in October. The new platform will also introduce a new public offer pre-funding model to help alleviate the scale of funds that are locked up in over-subscribed IPOs. 4. HK Aiming a target to invite 200 family offices domiciled in Hong Kong by the end of 2025 The Financial Secretary, Paul Chan, delivered a speech on 12 June in the launch of a family office network, proclaiming a plan to develp Hong Kong as a premier hub for family offices and a target of 200 family offices to be established by the end of 2025 has been on schedule. On the government side, legislations have been passed to enhance the competitiveness of the tax system for family offices, and with concerted efforts from various regulatory bodies like the SFC and HKMA, to fuel the momentum for accelerating the development . SIGNIFICANCE: Having recovered for the 2019 social movement and the global epidemic of COVID-19, the HKSAR government has been endeavoring to start off the engine for moulding Hong Kong not only as international financial centre as it is used to be, but also a pioneer around the world for the nascent virtual asset licensing regime and a premier hub for the growth of family offices. 5. 130 Sustainability-Linked Bonds and ESG ratings of hundreds of listed companies displayed on the STAGE Mr Wilfred Yiu, Co-Chief Operating Officer & Head of Equities of the HKEX stated that up to end of May this year, the Sustainable & Green Exchange (STAGE) has displayed more than 130 Sustainability-Linked Bonds and ESG ratings of hundreds of listed companies in Hong Kong. Mr Yiu also said in a forum that the number of ESG ETFS listed on HK continued to grow, and there was a total of 11 ESG ETF amounting in market capitalization of HKD 2.5 billion dollars, with turnover approaching HKD 6 million dollars. Beside the First Carbon Futures ETF listed last year, through the Stock Connect came another new China A Low Carbon Index ETF and the first Greater Bay Area Climate Transition ETF listed in Hong Kong in March this year. Mr Yiu further pointed out that the Exchange’s ESG reporting requirements had incorporated certain key recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), proposing for the issuers to prepare for the mandatory TCFD-aligned climate-related disclosures by 2025. 6. The SFC Annual Report 2022-23 The SFC published its Annual Report 2022-23 on 21 June 2023, which sets out its achievements in the past year as well as its vision for nurturing high-quality market growth and upholding world-class regulation to advance Hong Kong’s position as a leading international financial centre. Some key achievements included: the introduction of Swap Connect; launch of a new lsiting regime for specialist technology companies with limited or no revenue or track record; the investor identification regime for Hong Kong (HKIDR); the Hong Kong Dollar-Renminbi (RMB) Dual Counter Model for the secondary market trading of a first batch of stocks; the regulatory requirements for the new licensing regime for virtual asset trading platforms effective in June; the proposed risk management guidelines for licensed persons dealing in futures Mr Tim Lui, Chairman of SFC, said, “ We are committed to strengthening market resilience and integrity and expanding the breadth and depth of our financial markets as a premier gateway to Mainland China .” The Chief Executive Officer, Ms Julia Leung, also said, “ We strive to promote sustainable and responsible development of our financial markets whilst safeguarding investor interests and managing market risks through our robust regulation, vigilant supervision and resolute enforcement action. ” SIGNIFICANCE: The transition from 2022 to 2023 was fraught with many challenging changes lauched by the regulatory bodies and its determination to crack down on the investment fraud and social media ramp and dump scams which were detrimental to the integrity of the financial market Hong Kong has strived to uphold. Nowadays, maintaining in compliance is not merely an obligation to be fulfilled, but more of a challenge to be encountered amid such avalanche of regulatory innovations formulated and launched by the HKSAR government while orchestrating a regulatory landscape to accomodate the latest developments in the international financial markets. ENFORCEMENT NEWS 7. SFC banned Xie Yangxiong for life for fraudulence and misrepresentation The SFC had banned Mr Xie Yangxiong, a director of Wansom Asset Management (Hong Kong) Limited (WAML) and Wansom Securities (Hong Kong) Limited (WSL), from the industry for life. It was found in the SFC investigation that Xie, who had access and control of bank accounts of WAML and WSL, was providing false information of both firms to SFC in support of their license applications in July and August 2018. In the case, Xie deliberately made deposits in the bank accounts of WAML and WSL, and then withdrew the same amount afterwards. With the withdrawn funds into consideration, the liquid capital condition of both WAML and WSL would fail to meet the regulatory requirement for their licenses to be granted. Further that Xie also failed to ensure that WAML and WSL should have notified the SFC of their liquid capital deficits within one business day of their liquid capital falling below the required level. The SFC was of the view that the misconduct of WAML and WSL was the direct result of Xie’s consent or connivance, and his conduct cast serious doubt on his fitness and properness to be a “regulated person”! SIGNIFICANCE: Given the fact that Xie was also the sole owner of the entity which wholly owned WAML and WSL. Although Xie was not a licensed person under the Securities and Futures Ordinance (SFO), he came within the definition of a “regulated person” under section 194(7)(c) of the SFO which includes a person who is or at the relevant time was involved in the management of the business of a licensed corporation. 8. Taiping Securities (HK) Co Limited was fined $1.3 million for internal control failures over employee dealings The SFC had reprimanded and fined Taiping Securities (HK) Co Limited (TSCL) $1.3 million for internal control failings in relation to employee dealings between 1 January 2016 and 30 November 2018. It was found in the investigation that TSCL failed to put in place adequate and effective internal controls over monitoring of employee dealings, and the senior management, compliance department and responsible officers (RO) did not have a clear understanding of their roles and duties as well. The SFC also found that TSCL failed to communicate its personal dealing policy applicable during the relevant period to all employees and ensure their compliance with it. 9. Four people charged following SFC and Police joint operation against securities fraud and illegal short selling Four suspects appeared at the Eastern Magistracy on 23 June 2023 charged with offences of fraud with alternative charge of illegal short selling following an earlier joint operation of the SFC and the Police against fraudulent activities in securities transactions and illegal short selling. Suspicious trading activities during an intensive investigation of suspected ramp-and-dump activities were discovered which were found to involve suspected money laundering and other fraudulent activities, the case was referred to the Police. 10. SFC obtained disqualification orders against former directors of National Agricultural Holdings Limited The SFC had obtained disqualification orders in the Court of First Instance against a former executive director Mr Liu Yong, and two former independent non-executive directors, Ms Kathy Chiu Kam Hing and Mr William Fan Chung Yue of National Agricultural Holdings Limited (NAH). Liu was disqualified for three years while Chiu and Fan for 20 months from being any director, liquidator, or receiver or manager of any corporation in Hong Kong including NAH or any of its subsidiaries and affiliates. The Court proceedings followed the SFC’s investigations into allegations of a series of misconduct orchestrated by NAH’s controlling shareholder Parko (Hong Kong) Limited (Parko), the former chairman Mr Chen Li-Jun and three other senior officers of NAH (Chen and others) from 2015 to 2017. The orders were made having regard to the findings that Liu, Chiu and Fan had neglected or omitted to identify or rectify the misconduct of Chen and others. They also failed to raise concerns, queries or seek necessary information in relation to the significant and questionable transactions discovered in SFC’s investigation as above. 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 ”.

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

The topics discussed in this monthly newsletter for Licensed Corporations are as follows: ComplianceOne Newsletter – October 2025 The topics discussed in this monthly newsletter are as follows: MARKET NEWS SFC Supports Market’s Initiatives on Regulatory Compliance for Digital Asset Funds and Tokenised Funds Navigating Fast-evolving Capital Markets through Balanced Regulation – the Golden Mean SFC and Québec’s AMF Enhance Regulatory Cooperation on Supervision of Cross-border Investment Management Activity Enforcement News - Intermediary SFC Reprimands and Fines UBS AG $8 million for Professional Investor Misclassification SFC Suspends MTF Securities and its Responsible Officer Over Suspicious Transaction Monitoring Failures SFC Prohibits Ex-Employee of BOCOM Over Undisclosed Nominee Account SFC Suspends Ex-employee of Shanxi Securities Over 945 Unauthorized Trade Orders ENFORCEMENT NEWS - LISTCO SFC Seeks Court Order to Freeze Assets up to $394 Million for Investors Compensation in Suspected Manipulation of Grand Talents Shares Court Penalises AMTD Global Markets Limited for Contempt of Court Due to Non-compliance with SFC Notices and Orders it to Produce Records and Pay Fine Court Order Sentenced Wong Ming Chun to 7 Years and 8 Months' Imprisonment for Money Laundering Related to Misappropriation of Listed Company Funds SFC and HKEX Collaborate in Enforcement Action Against Former Directors of Universal Star for Failure to Disclose Material Loans and Conflicts of Interest in Prospectu SFC Obtains Court Order to Freeze up to $82.4 Million of Assets Belonging to Suspected Manipulators of Smartac Shares Market News 1. SFC Supports Market’s Initiatives on Regulatory Compliance for Digital Asset Funds and Tokenised Funds The SFC showed its support to the market’s initiatives in a seminar organized by the Association of Fund Administrators of Hong Kong and the Greater Bay Area (“ AFA ”) in October for raising industry awareness of regulatory compliance standards in the fast-evolving digital asset sector. During the seminar, the AFA discussed various risk management and control measures to support the management of digital asset funds and tokenized funds. It is worth noted in the discussion of the importance for collaborative efforts within the fund industry to strengthen digital asset-related technical and regulatory compliance capabilities while adopting innovative technologies in fund management. SIGNIFICANCE: Participation of the SFC in the seminar showed its commitment to the industry as its initiative under the Pillar Re ( Re lationship) of the “ ASPIRe ” Roadmap. Dr Eric Yip, the SFC’s Executive Director of Intermediaries, said in the seminar that “b y supporting industry participants in their ongoing efforts to uphold regulatory compliance standards in managing digital asset funds and tokenized funds, we (the SFC) aim to cultivate a safe, reliable, sustainable and competitive digital asset fund ecosystem anchored in robust risk management and investor protection measures . ” 2. Navigating Fast-evolving Capital Markets through Balanced Regulation – the Golden Mean Chairman of the SFC, Dr Kelvin WONG, delivered a speech on 21 October 2025 on the perspective of the SFC in maintaining a balanced regulatory approach, cherished with a mission to ensure that the capital market of Hong Kong would “continue to thrive in a well-regulated environment that upholds integrity.” And he also expressly emphasized that the SFC plays dual roles as both a guardian and a facilitator, and put forward with the following three reflections. Some key takeaways are as follows: (1) Evolving challenges to capital markets: regulator’s perspective There are challenges to market integrity and market stability (1.1) Challenges to market integrity though remains as the world’s top three financial center, with its Fintech ranking jumping to global No.1, Hong Kong is still facing challenges stemming from gatekeeping listed issuers’ quality and forms of misconduct; encountered with increasing demand from international investors for accountability, transparency and strong board leadership given Hong Kong as the world’s top IPO listing center; enhancing listing market quality, particularly the standards of corporate governance, is not without challenges; over the years, there were cases of misconduct, false disclosure or accounting fraud that were jeopardizing the interests of the investors, and damaging public trust; besides, evolving financial fraud, scams and deception cases also pose significant risks. (1.2) Challenges to market stability external risk factors threaten to exacerbate market volatility and systemic vulnerabilities, including geo-economic fragmentation and shifts in monetary policies; our market resilience has stood the test of time as an effective shield against unexpected external shocks when global trade tensions intensified, HK was able to withstand the extreme volatility with no system failure in normal operations; digitalisation, algorithmic trading and heightened market connectedness pose profound risks to systemic stability by amplifying vulnerabilities and accelerating the transmission of shocks; monitoring mechanism and resilience framework to mitigate system risks remain as deep concerns. (2) A balanced regulatory approach in fostering sustainable development In meeting the above challenges, Dr WONG shared his view of “ Golden Mean ” to maintain a balance between competing extremes; and to align the dual roles of investor protection and market development. (2.1) Safeguarding investors by upholding high standards of corporate governance, companies can improve their performance with rigorous internal controls and board oversight; the SFC remains steadfast in delivering high-impact enforcement actions that punish wrongdoings, deter criminality, and restore investor confidence; educating and bringing alert to the public against suspected fraud and suspicious trading platforms or products, while dedicating additional resources to anti-scam publicity campaigns. (2.2) Fostering growth opportunities Hong Kong’s evolving listing regimes and enhancement to IPO price discovery, provided fresh momentum for its listing market growth and diversification from traditional sectors; the second notable achievement is our regulatory regime for digital assets as SFC pioneered itself in adopting robust standards while preserving the long-term potential; (3) Proactive stakeholder engagement as key to balanced regulation engagement is essential to attaining that Golden Mean in the regulatory approach; through open dialogues with the financial industry which enables the SFC to ensure its frameworks effectively address market needs; deepened mutual understanding with industry stakeholders through numerous seminars as regular engagement efforts; SIGNIFICANCE: As Dr WONG has said in the speech, “ For the SFC, our mission is to find that Golden Mean where law, integrity, and development co-exist and reinforce each other. We believe this balanced regulatory approach has underpinned public trust in our markets for decades, and will continue to do so in the future. ” 3. SFC and Québec’s AMF Enhance Regulatory Cooperation on Supervision of Cross-border Investment Management Activity The SFC and the Autorité des marchés financiers (“ AMF ”), the financial regulator of Québec, Canada, have concluded a Memorandum of Understanding (“ MoU ”) to enhance cooperation on the supervision of investment managers of collective investment schemes operating in either market; and the two parties signed the MoU in Madrid, Spain on 27 October 2025. What the MoU has achieved? it provides for a regulatory framework for consultation, cooperation and exchange of information for regulated entities engaging in cross-border investment management services with respect to supervision and oversight; it marks a new chapter in regulatory collaboration between the SFC and the AMF in the realm of asset management; it included Québec of Canada on its list of Acceptable Inspection Regimes which facilitates the AMF-licensed managers in providing investment management services in respect of SFC-authorized funds. SIGNIFICANCE: As Mr. Yves Ouellet, the AMF’s President and Chief Executive Officer has said, “ this MoU reflects our shared commitment to fostering robust, transparent regulatory standards. By strengthening cooperation between Québec and Hong Kong, we are enabling asset managers to access new opportunities, better serve investors, and support innovation, integrity, and resilience in our capital markets . ” Enforcement News - Intermediary 4. SFC Reprimands and Fines UBS AG $8 million for Professional Investor Misclassification On 20 October 2025, the SFC publicly reprimanded and fined UBS AG (“ UBS ”) HK$8 million under section 196 of the SFO for systemic deficiencies in its internal controls, leading to the misclassification of clients as Professional Investors (“ PIs ”) over a 12-year period from 2009 to July 2022. Case Details The breaches stemmed from UBS's automated verification process, which misinterpreted the minimum portfolio requirements under the Securities and Futures (Professional Investor) Rules (“ PI Rules ”) for joint accounts, resulting in non-professional investor (“ Non-PI ”) clients being incorrectly treated as PIs. A UBS look-back review for July 2018 to July 2022 identified 560 misclassified joint accounts (including 135 non-associate and 425 parent-child accounts), with 23 accounts involved in 9,190 securities pooled lending (“SPL”) transactions and 94 accounts in 500 PI-restricted product transactions. This misclassification enabled UBS to provide securities pooled lending services without valid standing authorities or required disclosures, and to sell PI-restricted products (such as Chapter 37 bonds, accumulators, decumulators, and loss-absorption products) to ineligible clients, violating: Securities and Futures (Client Securities) Rules ; Securities and Futures (Contract Notes, Statements of Account and Receipts) Rules ; and Code of Conduct for Persons Licensed by or Registered with the SFC . Remediate Result The SFC noted aggravating factors, including the prolonged duration and a prior 2021 fine of HK$9.8 million for similar issues, but considered UBS's self-reporting (prompted by internal review and HKMA referral), cooperation, remedial enhancements to controls, and implementation of Enhanced Complaint Handling Procedures for affected clients. In result, the SFC issues public reprimand and HK$8 million fine against UBS. For more details of the case, please refer to STATEMENT OF DISCIPLINARY ACTION SIGNIFICANCE: This disciplinary action underscores the SFC's emphasis on robust internal controls for accurate client classification to protect non-professional investors from unsuitable products and services. It highlights recurring compliance risks in automated systems for global firms like UBS, serving as a reminder for licensed entities to regularly review interpretations of regulatory requirements, especially post-amendments, to avoid prolonged breaches and escalating penalties. The case also demonstrates the value of self-reporting and remediation in mitigating sanctions, while reinforcing inter-regulator cooperation in upholding market integrity in Hong Kong's financial sector. 5. SFC Suspends MTF Securities and its Responsible Officer Over Suspicious Transaction Monitoring Failures The SFC has imposed a four-month suspension on Mr. Joey Lo Wai Hon (羅偉漢) (“ Mr. LO ”), effective from 30 September 2025 to 29 January 2026. MR. LO, a former responsible officer (“ RO ”) and manager-in-charge at MTF Securities Limited (泰富證券有限公司) (“ MTF ”) (formerly Magusta Securities Limited), was found to have failed in overseeing credit risk management and suspicious transaction monitoring. Failures in Credit Risk Management MTF granted substantial trading limits to three new clients (Client A, B, and C) shortly after they opened cash trading accounts in January 2021. Each client deposited only HK$10,000, yet MTF approved limits of HK$4 million for Clients A and C, and HK$5 million for Client B—without client applications or adequate due diligence. Notable Red Flags included: Trading limit exceeded client’s declared annual income No records of income proof, bank statements, trading history, or personal reputation checks. Client A ✓ Client B ✓ ✓ Client C ✓ ✓ Mr. LO, as an RO and Credit Committee member, was responsible for assessing creditworthiness and setting limits. However, he approved these at the request of MTF's substantial shareholder without independent scrutiny, potentially risking a liquid capital deficit if the clients defaulted. Suspicious Trading Patterns and Reporting Delays These three clients used nearly all their limits to trade shares of a Hong Kong-listed company (“ Company X ”) between 22 and 27 January 2021, generating profits from HK$3.8 million to HK$5.3 million. The trades exhibited suspicious features indicative of potential market misconduct and money laundering: Clients bought shares at low prices just before a surge, without any apparent positive news. Clients sold at high prices in the first minute of the afternoon session before a 68% price collapse, followed by further declines. The trades accounted for 46%, 52%, and 30% of Company X's daily turnover during the period. Post-trade, clients withdrew nearly all proceeds and conducted no further activity, inconsistent with their financial profiles. The above patterns aligned with AML Guideline indicators (e.g. unusual transaction sizes, rapid withdrawals etc.) Mr. LO did not investigate or report promptly. MTF only filed a suspicious transaction report (“ STR ”) to the Joint Financial Intelligence Unit (“ JFIU ”) in late July 2021, after SFC intervention. For the full details, refer to the SFC's press release dated 2 October 2025 , and Statement of Disciplinary Action . SIGNIFICANCE: The SFC deemed Lo guilty of misconduct, questioning his fitness and properness. Regarding to such matter, Licensed Corporation (“ LC ”) should reference the below table for ensuring its compliance: Due Diligence LC must rigorously assess client financials before granting credit, avoiding undue influence from shareholders. Monitoring Systems Implement effective, ongoing transaction reviews to detect anomalies like unusual price movements or disproportionate trades. Timely Reporting Suspicious activities must be documented, investigated, and reported without delay to authorities like the JFIU and SFC. In June 2025, the SFC also prohibited Ms. WONG Lai Suen, another former MTF RO and executive director, from re-entering the industry for six months. ( See Enforcement News – WONG Lai Suen ) This enforcement action reinforces the SFC's commitment to upholding market standards amid evolving risks. Firms should review their policies against the Code of Conduct, Internal Control Guidelines, and AML Guideline to mitigate similar exposures. 6. SFC Prohibits Ex-Employee of BOCOM Over Undisclosed Nominee Account On 27 October 2025, the SFC prohibited Mr. CHENG Lai Ho (鄭禮豪) (“ CHENG ”), a former licensed representative accredited to: Bank of Communications Co., Ltd. (交通銀行股份有限公司); and Bank of Communications (Hong Kong) Limited (交通銀行（香港）有限公司) (collectively, “ BOCOM ”); from re-entering the securities industry for seven months, from 27 October 2025 to 26 May 2026, pursuant to section 196 of the SFO. Case Details The sanction arises from CHENG's repeated violations of BOCOM's Staff Dealing Policy and Employee Code between April 2017 and April 2022, which aligned with regulatory requirements under paragraph 12.2 of the Code of Conduct for Persons Licensed by or Registered with the SFC. Key breaches included failing to disclose two pre-existing personal securities accounts at other institutions, opening and controlling an undisclosed nominee securities margin account in his mother's name (where he conducted over 260 unreported trades), and violating the minimum 13-trading-day holding period on at least 12 occasions after 15 July 2020. Reasons for the Disciplinary Action The SFC found CHENG's actions wilful and dishonest, as he deliberately used the nominee account to evade BOCOM's monitoring and internal controls, despite attending compliance trainings and signing false declarations. In determining the penalty, the SFC considered the five-year duration of the misconduct, the need for deterrence, CHENG's cooperation, and his clean prior record, noting no harm to clients or the market. For more details, please refer to STATEMENT OF DISCIPLINARY ACTION . SIGNIFICANCE: This disciplinary action underscores the SFC's stringent enforcement of internal compliance policies to mitigate conflicts of interest and maintain the integrity of licensed representatives, serving as a strong deterrent against deliberate evasion of employer monitoring and regulatory standards in Hong Kong's securities sector. It highlights the importance of honest disclosures and adherence to fitness and propriety requirements, potentially influencing firms to strengthen oversight of employee trading activities. 7. SFC Suspends Ex-employee of Shanxi Securities Over 945 Unauthorized Trade Orders On 28 October 2025, the SFC suspended Mr. TANG Wai Choi (鄧偉財) (“ TANG ”), a former licensed representative of Shanxi Securities International Limited (山證國際證券有限公司) (“ SSIL ”), for seven months from 28 October 2025 to 27 May 2026, pursuant to section 194 of the SFO. Case Details The disciplinary action stems from TANG's misconduct between 10 July 2019 and 10 December 2019 (Relevant Period): During which he logged into a client's securities account using the client's password and placed 945 orders via the internet without valid written authorization from the client or SSIL's knowledge, thereby circumventing internal controls and creating a false appearance that the trades were placed directly by the client. Additionally, TANG failed to maintain proper records of the client's order instructions, breaching paragraph 3.9 of the Code of Conduct for Persons Licensed by or Registered with the SFC ( Code of Conduct ), which requires time-stamped records and telephone recordings for agency orders. This exposed the client to risks of unauthorized trading, deprived SSIL of audit trails, and violated General Principle 2 (Diligence) of the Code of Conduct. The SFC deemed TANG guilty of misconduct and not fit and proper to remain licensed, considering the duration and frequency of the breaches, the need for deterrence, and his otherwise clean record. The investigation originated from a probe into a suspected ramp-and-dump scheme involving securities transactions handled by TANG at SSIL. For more details, please refer to STATEMENT OF DISCIPLINARY ACTION . SIGNIFICANCE: This enforcement action highlights the SFC's commitment to upholding professional standards among licensed representatives by addressing breaches that undermine client protections and internal controls, serving as a deterrent against unauthorized account access and inadequate record-keeping that could facilitate market misconduct in Hong Kong's securities industry. It reinforces the importance of compliance with the Code of Conduct to maintain market integrity and prevent risks such as trade disputes or unauthorized activities. Enforcement News - LISTCO 8.SFC Seeks Court Order to Freeze Assets up to $394 Million for Investors Compensation in Suspected Manipulation of Grand Talents Shares On 30 September 2025, the SFC filed an application with the Court of First Instance for an interim order to freeze assets up to $394,067,589. This amount represents the estimated losses suffered by investors affected by an alleged sophisticated ramp-and-dump scheme involving the shares of Grand Talents Group Holdings Limited (廣駿集團控股有限公司) ( 08516.HK ) (“ Grand Talents ”), which was listed on the GEM board of the Stock Exchange of Hong Kong Limited in October 2018. The application is part of broader legal proceedings under section 213 of the Securities and Futures Ordinance (“ SFO ”) against 16 defendants, including suspected masterminds, accused of manipulating Grand Talents shares between June 2021 and June 2022. The SFC aims to prevent the defendants from disposing of their assets in Hong Kong to secure funds for potential compensation to victims. The following table provides a chronological summary of key events in the Grand Talents case (for reference only): Date Remarks Source 25 Apr 2023 The SFC issued a notice under Sections 204 and 205 of the SFO imposing restrictions on four client accounts at Silverbricks Securities Company Limited, totaling HK$94,610,762.71, due to suspected manipulative trading in Grand Talents shares from 24 November 2021 to 14 June 2022, leading to a 93% share price plunge on 15 June 2022. The notice aims to prevent asset dissipation amid investigations into possible false trading, price rigging, and stock market manipulation. G.N. 2821 5 Aug 2025 The SFC issued a notice under Sections 204 and 205 of the SFO prohibiting Tiger Brokers (HK) Global Limited from dealing with assets in a specified account (no. 63820919) linked to suspected manipulative trading in Grand Talents shares from 24 November 2021 to 14 June 2022, which culminated in a 93% share price drop on 15 June 2022. The restrictions are to preserve assets during ongoing investigations into potential violations including false trading and stock market manipulation. G.N. 4982 29 Sep 2025 The SFC applied for an interim court order to freeze assets up to HK$394,067,589 from 16 defendants, including suspected masterminds, in an alleged social media ramp-and-dump scheme manipulating Grand Talents shares from June 2021 to June 2022. The court granted an interim injunction against four defendants, with the matter adjourned for the remaining 12. This action aims to secure funds for investor compensation estimated at the frozen amount. SFC - Press Release Court Orders to the 16 defendants To date, the Court has granted an interim injunction against 4 of the defendants, restraining them from dealing with assets up to $394 million, which remains in force until further order. For the remaining 12 defendants, the Court has issued directions and adjourned the matter to a future date. The SFC has indicated it will refrain from further comments as proceedings are ongoing. SIGNIFICANCE: This enforcement action by the SFC underscores its commitment to combating market manipulation and protecting investors in Hong Kong's financial markets. By seeking asset freezes, the regulator aims to preserve resources for restitution, deterring similar schemes that erode market integrity and investor confidence. It highlights the SFC's proactive use of legal tools to address complex frauds, such as social media-driven ramp-and-dump operations, and reinforces the importance of transparency and accountability in securities trading, potentially setting precedents for future cases involving cross-border or digital manipulation tactics. 9. Court Penalises AMTD Global Markets Limited for Contempt of Court Due to Non-compliance with SFC Notices and Orders it to Produce Records and Pay Fine On 13 October 2025, the Court of First Instance ordered AMTD Global Markets Limited (現稱:奧翱驁集團（香港）證券有限公司, 前稱: 尚乘環球市場有限公司) (“ AMTD ”, formerly known as orientiert XYZ Securities Limited and currently known as oOo Securities (HK) Group Limited) to produce records and pay a fine for contempt of court, following proceedings initiated by the SFC under section 185 of the SFO. The Court ordered AMTD to comply with the outstanding requests by 19 January 2026 and imposed a fine for past non-compliance, with the amount to be determined later. It rejected AMTD's excuses, including changes in ownership, management, and loss of records, deeming them unreasonable. Case Overview: Period/Date Remarks Prior to 2023 SFC issues notices under sections 181, 182, and 183 of the SFO to AMTD, requiring records, documents, and answers related to IPO investigations involving suspected fraud and misleading information. 30 Jan 2023 SFC issues a notice under section 183 of the SFO; Court later finds AMTD not liable for non-compliance with this specific notice. 23 Nov 2023 SFC commences legal proceedings under section 185 of the SFO against AMTD and its former executives (including Lo Chi Hang, Philip Yau Wai Man, and See Hiu Lun) for non-compliance with notices in IPO-related investigations. 13 Oct 2025 Court of First Instance rules AMTD in contempt, orders compliance by 19 January 2026, and imposes a fine (amount to be determined later); rejects AMTD's excuses for non-compliance. Case Number: HCMP 2027/2023 19 Jan 2026 Deadline for AMTD to comply with outstanding SFC notice requests. To be determined Court to decide the amount of the fine imposed on AMTD for contempt. Current Status of the Case The Court ordered AMTD to comply with the outstanding requests by 19 January 2026 and imposed a fine for past non-compliance, with the amount to be determined later. It rejected AMTD's excuses, including changes in ownership, management, and loss of records, deeming them unreasonable. SIGNIFICANCE: The SFC's Executive Director of Enforcement, Mr. Christopher Wilson, stated: “The SFC does not tolerate non-compliance with the SFO. Non-compliance undermines the SFC’s ability to discharge its regulatory functions and erodes the integrity of Hong Kong’s capital markets. The SFC will take robust enforcement action against non-compliance.” This ruling emphasizes the SFC's zero-tolerance approach to non-compliance with investigative notices, highlighting the importance of licensed entities maintaining proper records and cooperating fully to uphold market integrity. It serves as a precedent for robust enforcement against excuses like corporate changes, potentially deterring similar failures in IPO-related probes and reinforcing regulatory oversight in Hong Kong's capital markets, with cross-border cooperation exemplified by the UK FCA's involvement. 10. Court Order Sentenced Wong Ming Chun to 7 Years and 8 Months' Imprisonment for Money Laundering Related to Misappropriation of Listed Company Funds On 22 October 2025, the SFC welcomed the High Court's conviction and sentencing of Mr. WONG Ming Chun (王名俊) (“ WONG ”), the former financial controller and company secretary of Hua Han Health Industry Holdings Limited (華瀚健康產業控股有限公司) ( 00587.HK ) (“ Hua Han ”), for two counts of money laundering. Case Details The case originated from the SFC's investigation into suspected false or misleading disclosures in Hua Han's financial statements from 2013 to 2015, which uncovered the misappropriation of fundraising proceeds. These findings were referred to the Police for further action. Hua Han, listed on the Main Board of The Stock Exchange of Hong Kong Limited since 2002 and delisted in 2020 , was involved in health industry operations, highlighting vulnerabilities in financial controls within sectors that may intersect with insurance and investment products. Enforcement Act and Court Order WONG pleaded guilty to the charges under section 25(1) of the Organized and Serious Crimes Ordinance ( Cap. 455 ), stemming from the misappropriation of funds raised by Hua Han in 2015. He was sentenced to seven years and eight months' imprisonment and disqualified from serving as a director of any Hong Kong company for 12 years without court leave, pursuant to section 168E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance ( Cap. 32 ). [Court Case: HCCC 402/24] SIGNIFICANCE: This conviction emphasizes the critical role of financial gatekeepers, such as controllers and secretaries, in upholding corporate integrity and investor trust. As noted by SFC's Executive Director of Enforcement, Mr. Christopher Wilson, failures in these positions not only breach fiduciary duties but also threaten market stability. For the insurance sector, it serves as a reminder of the need for robust internal controls to prevent similar abuses, particularly in entities handling policyholder funds or linked investments, reinforcing collaborative enforcement efforts between regulators to maintain transparency and deter financial misconduct. 11. SFC and HKEX Collaborate in Enforcement Action Against Former Directors of Universal Star for Failure to Disclose Material Loans and Conflicts of Interest in Prospectus On 23 October 2025, the SFC and the Stock Exchange of Hong Kong Limited (“ HKEX ”) announced a collaborative enforcement outcome resulting in disciplinary action against: Mr. LU Qingxing (呂慶星) (“ LU ”), former non-executive director; and LU’s son, Mr. LYU Zhufeng (呂竹風) (“ LYU ”), former executive director; of Universal Star (Holdings) Limited (星宇（控股）有限公司) ( 02346.HK ) (“ Universal Star ”). Case Details The action stems from: SFC's investigation into the directors' failure to disclose 13 outstanding loans totaling approximately RMB49 million where a Universal Star subsidiary served as co-borrower or guarantor, in the company's May 2019 IPO prospectus. These loans, taken out by LU between April 2017 and April 2019, primarily benefited him personally (with at least RMB44 million paid directly to him and RMB2 million to LYU, who transferred it to the subsidiary). The undisclosed loans represented material financial liabilities, breaching disclosure obligations to the sponsor and other directors. Additionally, post-IPO, the pair caused the subsidiary to pledge its property as security for the loans without the knowledge or approval of other directors, independent shareholders, or the compliance adviser—violating Listing Rules on major and connected transactions. This conduct also involved unmanaged conflicts of interest, as LU personally profited, constituting a breach of fiduciary duties that prejudiced investors. The SFC shared its investigation findings, including loan and pledge evidence, with HKEX, leading to the disciplinary sanctions. Regarding the STATEMENT OF DISCIPLINARY ACTION : HKEX issued a "Prejudice to Investors’ Interests Statement" (PII Statement), indicating that the directors' continued board tenure would have harmed investors, along with a public censure. Both individuals, who resigned in 2021 and 2023 respectively, agreed to settle without contesting the breaches. SIGNIFICANCE: This collaborative enforcement action between SFC and HKEX underscores the regulators' commitment to accountability in corporate governance, particularly for directors of listed entities, to safeguard investor interests and market transparency. The case reinforces the value of inter-regulator cooperation in detecting and addressing misconduct that could erode trust in Hong Kong's capital markets. 12. SFC Obtains Court Order to Freeze up to $82.4 Million of Assets Belonging to Suspected Manipulators of Smartac Shares On 27 October 2025, the Court of First Instance granted an interim injunction order sought by the SFC under section 213 of the SFO against 12 individuals suspected of manipulating shares of Smartac International Holdings Limited (環球智能控股有限公司) ( 00395.HK ) (“ Smartac ”, formerly Smartac Group China Holdings Limited, delisted from the HKEX Main Board on 20 February 2023). Case Details The proceedings form part of broader SFC legal actions against the former chairman and non-executive director of Ding Yi Feng Holdings Group International Limited (renamed Carmen Century Investment Limited on 3 July 2025), along with 28 other suspects and one corporate entity, for their roles in the alleged manipulation. Separately, in September 2025, the SFC obtained a consent order to freeze assets of one additional suspect, while an application for another remains pending. The interim injunction remains in effect until the next court hearing on 27 March 2026. Court Order The Court of First Instance prohibits the suspects from removing, disposing of, dealing with, or diminishing the value of their assets in Hong Kong up to $82.4 million, ensuring sufficient assets are available for potential restoration orders if contraventions of the SFO are proven. This action relates to alleged market manipulation of Smartac shares between 31 October 2018 and 11 March 2019. Enforcement News Consolidate Table: Remarks Source/Linkage SFC issues restriction notices to 14 brokers to freeze client accounts linked to suspected Smartac manipulation. 25 Jun 2019 SFC commences MMT proceedings against Sui Guangyi, two entities, and 28 suspects for alleged Smartac manipulation. 12 Nov 2024 SFC applies for asset freeze up to $82.4m against 14 suspects; obtains consent order for one suspect; hearing adjourned to 24 October 2025. 12 Sep 2025 Scheduled next hearing for the interim injunction order. 27 Oct 2025 SIGNIFICANCE: This court order highlights the SFC's proactive enforcement strategy to preserve assets in market manipulation cases, protecting investor interests and ensuring potential remedies for affected parties. By targeting a group allegedly involved in coordinated misconduct over an extended period, it underscores the regulator's commitment to combating sophisticated financial crimes that undermine market integrity, while the ongoing proceedings may set precedents for handling multi-party manipulations in Hong Kong's capital markets. [End of ComplianceOne Newsletter – October 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 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 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 – October 2022 ComplianceOne Newsletter – October 2022 The topics discussed in this monthly newsletter are as follows: 1. The SFC Considers Authorization of Virtual Asset Futures Exchange Traded Funds ( VA Futures ETFs ) 2. HKEX Announces the Launch of Core Climate - A New International Carbon Marketplace 3. Court orders Sound Global ( 0967.HK ) Chairman to Purchase Shares from Investors 4. SFC Reprimands and Fines Asia Research & Capital Management Limited HK$1.75 million and Bans its MIC of Compliance 5. Former Account Executive of Fullbright Securities Limited Convicted of Securities Fraud 6. Court Convicted Wong King Hoi for Obstruction of SFC's Search Operation 7. SFC Bans a Former Licensed Staff of China Galaxy for Violation of Company's Staff Dealing Policy MARKET NEWS 1. The SFC Considers Authorization of Virtual Asset Futures Exchange Traded Funds (VA Futures ETFs) The SFC would consider authorizing exchange traded funds (ETFs) that obtain exposure to virtual assets (VAs) primarily through futures contracts for public offering in Hong Kong. Unlike before in 2018 NOV where only professional investors are allowed to have exposure to VAs, and having witnessed the rapid evolution of the VA landscape; a Joint Circular in January 2022 between the SFC and the HKMA has announced that licensed and registered intermediaries are allowed to offer VA Futures ETF to retail investors in HK. For reasons that it has been observed that there are meaningful developments in the VA ecosystem recently and some of the initial concerns over VA Futures ETFs have become increasingly manageable and could be adequately addressed with proper safeguards, disclosure and investor education. SIGNIFICANCE: Despite the recent developments and innovations, the exposure to spot VAs are still restricted to professional investors only. Whereas VA Futures ETFs seeking for SFC authorization have to meet applicable requirements including the followings: (i) Management companies should demonstrate at least three years’ proven track record with relevant experience. (ii) Only VA futures traded on conventional regulated futures exchanges are allowed currently, only Bitcoin futures and Ether futures on CME are allowed. (iii) The management company is expected to adopt a flexibility investment strategy in the portfolio composition (iv) Disclosure of the product key facts statement is required. (v) Intermediaries are obliged to comply with the applicable requirements under the Code of Conduct when distributing the derivative products. (vi) Investor education should be provided. 2. HKEX Announces the Launch of Core Climate - A New International Carbon Marketplace HKEX announced on 20 OCT 2022, the launch of the Core Climate , a new international carbon marketplace that helps connect capital and resources with climate-related opportunities in Hong Kong, Mainland China, Asia and beyond. The HKEX is committed to provide an easy-access, one-stop, integrated carbon marketplace that includes trading, custody and settlement functions for investors and project owners across the climate value chain, contributing to the realization of global carbon neutrality goals. What is Core Climate: (i) Trading platform : investors can source, purchase, settle and retire voluntary carbon credits in phases. (ii) Trusted marketplace : provides best-in-class market infrastructure and effective, transparent and certified carbon credits and instruments that corporates and investors can use to deliver on their commitment to net zero. (iii) Global community : Core Climate builds Hong Kong’s position as a leading global finance center connecting capital with climate-related products and opportunities in vicinity and around the world. SIGNIFICANCE: HKEX is demonstrating to the world that Hong Kong , as an international financial center, also entrusts with itself the obligation to committing to building a more low-carbon and healthy community to our next generations. As CO-Head of Markets Glenda So said: " We see Core Climate developing to become essential infrastructure, part of our highly connected international ecosystem, matching investment capital with new climate projects, technologies and business models. This will accelerate the shared Net Zero transition and secure a sustainable future for coming generations .” ENFORCEMENT NEWS 3. Court orders Sound Global ( 0967.HK ) Chairman to Purchase Shares from Investors The Securities and Futures Commission (SFC) has obtained an order in the Court of First Instance against the chairman and executive director of Sound Global Ltd. (Sound Global), Mr. Wen Yibo, to purchase shares held by the other shareholders of the company at a price to be determined by the Court – after he was found to have orchestrated a scheme to falsify the company’s bank balances and fabricated relevant bank statements and balance confirmations. And the Court also issued a disqualification order for 12 years against Wen. As Mr Ashley Alder, the SFC’s Chief Executive Officer said: “ The share purchase order represents an important milestone in the SFC’s efforts to protect the investing public from wrongful conduct by management of listed companies and our determination to deploy our full range of regulatory tools to tackle market misconduct and uphold market integrity .” 4. SFC Reprimands and Fines Asia Research & Capital Management Limited HK$1.75 million and Bans its MIC of Compliance The SFC has reprimanded and fined Asia Research & Capital Management Limited (ARCM) HK$1.75 million for failures relating to its non-compliance with the European Union’s short selling reporting requirements (EU Regulation) and to promptly notify the SFC of its material regulatory breaches. The SFC has also banned Mr. Billy Wong Yim Chi, ARCM’s former Head of Compliance and Operations and Manager-In-Charge (MIC) for Compliance for two months from 10 October 2022 to 9 December 2022 for reason that ARCM’s failures to comply with the EU Regulation were directly attributable to Wong’s failure to discharge his duties as ARCM’s MIC for Compliance and a member of its senior management during the material time. The SFC also considers Wong’s conduct fell short of the standard required of him as MIC for Compliance. SIGNIFICANCE: This case seems to be the first instance since the introduction of the MIC regime that a person entrusted with MIC function is sanctioned by the SFC for his incompetence in discharging the duties for the licensed corporation. It conveys a signal to the licensed corporations and the MIC candidates that non-licensed personnel taking the roles of MIC are supposed to assume the same degree of accountability in the eyes of the SFC. 5. Former Account Executive of Fullbright Securities Limited Convicted of Securities Fraud The Eastern Magistrates’ Court has convicted Mr. Danny Fung Kwong Shing, a former account executive of Fulbright Securities Limited, of the offences of engaging in fraud or deception in transactions involving securities under the Securities and Futures Ordinance (SFO) in a criminal prosecution brought by the SFC. Fung admitted that he had employed a fraudulent scheme of effecting transactions between two accounts, one of his friend and one of his client (without proper authorization from the client), rendering the client a loss and his friend a profit instead. Fung was remanded in custody pending sentence on 27 October 2022 after pleading guilty to all 25 charges; and was later sentenced to two-and-a-half months’ imprisonment following his conviction. 6. Court Convicted Wong King Hoi for Obstruction of SFC's Search Operation The Eastern Magistrates’ Court has convicted Mr. Wong King Hoi (aka「 摸魚 」) after he pleaded guilty to a charge of obstructing employees of the SFC in the execution of a search warrant . When the SFC executed the search warrant at Wong’s residence, Wong allegedly delayed in giving the SFC search team access to his residence and attempted to dispose of four objects including two mobile phones and two notebooks. Wong was remanded in custody pending sentence on 10 November 2022. 7. SFC Bans a Former Licensed Staff of China Galaxy for Violation of Company's Staff Dealing Policy The SFC has banned Ms. Tang Shiyi, a former licensed staff of China Galaxy International Securities (Hong Kong) Co., Limited and China Galaxy International Futures (Hong Kong) Co., Limited (collectively, CGI), from re-entering the industry for 10 months from 29 October 2022 to 28 August 2023. The disciplinary action follows an SFC investigation which found that between July 2019 and February 2021, Tang: (i) failed to obtain CGI’s approval to open and maintain two securities trading accounts with an external brokerage firm and conducted 148 personal trades through the said accounts; (ii) dealt in a stock on CGI’s restricted list; (iii) engaged in day-trading on two occasions, in violation of CGI’s staff dealing policy; (iv) concealed the above securities trading accounts by providing a false and misleading declaration to CGI. The SFC considers that Tang’s conduct, which was willful and dishonest, calls into question her fitness and properness to be a licensed person . SIGNIFICANCE: Tang circumvented CGI’s internal control policies and her conduct prevented CGI from monitoring and reviewing its employees’ trading activities to ensure compliance with laws and regulations. It reminds the licensed persons that taking a frivolous attitude in complying with internal policies will not be construed by the SFC as a lesser breach as compared to violation of prevailing governing rules. 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 for insurance are as follows: ComplianceOne Insurance Newsletter – June 2025 The topics discussed in this monthly newsletter are as follows: 1. CPD Compliance Reporting Guidelines for 2024/2025 2. IA Conducts Undercover Inspections of Un-Licensing Activities 3. IA Enforces Retrospective Compliance with Broker Companies under SROs Regime 4. IA Bans Two Intermediaries for Fabricating Policies Regulatory News 1. CPD Compliance Reporting Guidelines for 2024/2025 The IA has released comprehensive guidelines in a circular dated 6 June 2025, outlining the Continuing Professional Development (“ CPD ”) compliance reporting procedures for individual licensees and appointing principals for the Assessment Period 2024/2025 (1 August 2024 to 31 July 2025). This newsletter highlights the essential details. Key Deadlines Deadline What to do before the deadline 31 July 2025 Individual licensees must complete their required CPD hours 30 September 2025 Individual licensees must submit CPD Declarations to the IA via Insurance Intermediaries Connect (“ IIC ”) or to their appointing principals 31 October 2025 Appointing principals must report the CPD compliance status of their appointed licensees to the IA How to accessing CPD Information via IIC Individual Licensees : Log into IIC > select "CPD Requirement and Compliance Status" from the left menu to check required CPD hours and compliance status. Appointing Principals : Use IIC Supervisor or Admin accounts to search individual licensees’ CPD status or download CPD Lists under the "Report" option, selecting "CPD hours required for the Assessment Period 2024/2025." Reporting Procedures Individual licensees can submit CPD Declarations in two ways: 1. Direct Submission via IIC: Deadline : 30 September 2025. Before 31 July 2025 : Submit only if CPD hours are fully completed (status: "Yes"). 1 August to 30 September 2025 : Submit regardless of compliance status ("Yes" or "No"). 1 October to 15 November 2025 : Update submissions for those initially reporting shortfalls ("No") with rectified status. 2. Submission via Appointing Principals: Licensees submit CPD Declarations to principals by 30 September 2025 . Principals verify and report to the IA via IIC by 31 October 2025 . CPD Requirements and Penalties Minimum CPD Hours : 15 hours, including 3 hours on "Ethics or Regulations," except for travel agents with restricted scope licenses (3 hours total). Penalties : Shortfall < 8 hours : $600 fine per hour, must be rectified by 31 October 2025, or face a 3-month suspension (continuing until resolved) and potential license revocation. Shortfall ≥ 8 hours : $600 fine per hour, immediate 3-month suspension (continuing until resolved), with possible revocation if unresolved. Non-submission by 30 September 2025 : May trigger an IA investigation for fitness and propriety; false declarations risk license revocation and a 12-month ban. SIGNIFICANCE: The IA notes a rise in CPD compliance from 90% (2021/2022) to 99% (2023/2024) and urges full compliance in 2024/2025 to uphold professional standards in Hong Kong’s insurance market. For further assistance, email cpd@ia.org.hk (general inquiries) or licensing@ia.org.hk (IIC-related matters). Market News 2. IA Conducts Undercover Inspections of Un-Licensing Activities The IA has recently taken proactive measures to protect the interests of policyholders and uphold the integrity of the insurance industry. Ms. Maria Tsui, Head of the Enforcement Department, highlighted the IA’s increased focus on street sales activities in Tsim Sha Tsui, which have raised concerns due to a surge in the number of sales personnel conducting promotional activities in the area. On a weekend in early June 2025, the IA conducted a targeted surveillance operation in Guangdong Road, Tsim Sha Tsui. Undercover officers, acting as mystery shoppers, engaged with sales personnel to gather detailed information about these street sales practices. The findings from this operation have been shared with the relevant insurance companies to address any identified issues and prevent future non-compliance. Passersby witnessed suspected IA’s Undercover Inspections ( Source: Social Media – 3 May 2025 ) IA’s Guidelines related to MCV Unlicensed referrers In May 2024, IA issued Circular which outlines key principles to regulate referral business models for licensed insurance broker companies. This circular focuses particularly on long-term insurance products and clients from Mainland China, referred to as Mainland China Visitors (MCV). Its primary goal is to prevent unlicensed selling practices within the insurance industry. Unlicensed referrers are restricted to introducing potential clients to licensed insurance brokers. They are explicitly prohibited from providing regulated advice, explaining insurance products, or engaging in any sales activities related to insurance products. Such sales activities must only be conducted by individuals or entities holding a valid license from the IA. Undertaking these actions without proper licensing is illegal and carries significant consequences. Violations of these regulations can lead to criminal charges, especially in regions like Mainland China, where insurance laws are strictly enforced. Furthermore, non-compliance with the IA’s guidelines may result in severe disciplinary measures for licensed entities. These measures include, but are not limited to, suspension of licenses, substantial fines, and public reprimands. SIGNIFICANCE: Ms. Maria Tsui emphasized that the Enforcement Department is strengthening its monitoring capabilities to collect intelligence and detect any misconduct or harmful practices that could affect policyholders or tarnish the industry’s reputation. The IA is committed to early intervention, using public education and regulatory actions to deter wrongdoing before it escalates into systemic issues that could lead to severe disciplinary measures or criminal prosecution. In addition to on-the-ground surveillance, the IA is leveraging technology and data tools to monitor online activities and social media platforms for intelligence gathering. Recognizing the value of industry collaboration, the IA is also working closely with industry organizations to encourage the sharing of information and knowledge, further enhancing its monitoring effectiveness. Enforcement News 3. IA Enforces Retrospective Compliance with Broker Companies under SROs Regime On 2 July 2025, the IA has taken disciplinary action against two licensed broker companies for failing to comply with essential regulatory standards aimed at protecting policyholders. These cases highlight the importance of maintaining separate client accounts and securing adequate professional indemnity insurance. These violations breached guidelines under the three Self-Regulatory Organizations (“ SROs ”) and the current Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules (Cap. 41L) . Case 1: Century Investment Planning Limited Century Investment Planning Limited, a former licensed insurance broker company, received a public reprimand for the following breaches (incident occurred from April 2019 to March 2020): Failure to deposit client monies into a separate account on multiple occasions. Misuse of client funds. Delayed settlement of premiums payable to an insurer. Case 2: Unnamed Broker Company A second broker company was fined $12,000 for inadequate professional indemnity insurance (Incident took place in 2019): Miscalculation of required coverage under the SROs. Resulting in a shortfall of $11.8 million in coverage. No policyholders were harmed in either case, and both companies fully cooperated with the IA during the disciplinary proceedings. SIGNIFICANCE: The IA stresses that segregating client monies and maintaining sufficient professional indemnity insurance are non-negotiable requirements for insurance intermediaries. These safeguards are critical to ensuring policyholder security. The authority has made it clear that failure to comply will lead to proportionate disciplinary measures. 4. IA Bans Two Intermediaries for Favrucating Policies On 12 June 2025, the IA announced the ban of two insurance intermediaries, Ms. LEUNG Wai Mei (“ LEUNG ”) and Ms. Ip Ka Ying (“ IP ”), from acting as insurance intermediaries for 12 months and 21 months respectively. This disciplinary action was taken due to their unethical practice of creating bogus policies to meet sales targets. Details of the Misconduct Ms. LEUNG Wai Mei: Fabricated two policy applications by misusing a client’s personal information. She certified a fake proof of identity for her son and attempted to conceal her actions by changing her correspondence address. Ms. IP Ka Ying: Fabricated eight policy applications using personal details from clients and friends. Additionally, she fraudulently accepted exclusions of personal liabilities related to premises owned by two applicants. The IA has described these actions as "iniquitous and premeditated," highlighting that such misconduct severely damages the trust and professionalism expected of insurance intermediaries. SIGNIFICANCE: The IA stresses that segregating client monies and maintaining sufficient professional indemnity insurance are non-negotiable requirements for insurance intermediaries. These safeguards are critical to ensuring policyholder security. The authority has made it clear that failure to comply will lead to proportionate disciplinary measures. [End of ComplianceOne Insurance 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 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk