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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!

Review of Custody of Virtual Assets Compliance Impact Alert: Custody of Virtual Assets Aug 2025 Disclaimer: Contents contained in this document including should not be regarded as a substitute legal and / or compliance advice in any circumstances and shall not be reproduced (in whole or in part), distributed or otherwise passed on to any other person without our prior written consent. Language: English version only I. INTRODUCTION Overview The Securities and Futures Commission (“ SFC ”) has issued a guidance on expected standards for the safe keeping of client’s virtual assets held by SFC-licensed virtual asset trading platform (“ VATP ”) operators and their associated entities (collectively, “ VA Operators ”). Compliance with the guidance will address potential vulnerabilities exposure and provides good market practices to VA Operators. General We do not accept or assume responsibility for the ongoing update of the contents of this Compliance Impact Alert document in accordance with the applicable regulatory requirements nor to any person reliance upon the contents of this document. For the avoidance of doubt, the information contained in this document is for reference only and should not be considered as a complete set of regulatory requirements. In case there is any conflict regarding contents or understanding between this document and the Full Circular, the Full Circular shall prevail. For all purposes, the English version of this document shall be original. In the event of any subsequent translation into any other language, this English language version shall prevail. Construction Unless the context otherwise requires, all terms used in this document shall bear the same meaning as in the Guidelines for Virtual Asset Trading Platform Operators (“ VATP Operator Guideline ”), Management, Supervision and Internal Control Guidelines for Persons Licensed by or Registered with the Securities and Futures Commission (“ Internal Control Guidelines ”).All singular terms and expressions shall have the same meanings in plural forms, and vice versa. A reference to any gender also denotes to other genders. II. OVERSEAS INCIDENTS ON VA PLATFORMS Below highlights the reported cybersecurity incidents affecting overseas virtual asset platforms which resulted in substantial financial losses. 1. Compromised third-party wallet solutions – attackers injected malicious code which altered platform user interface. 2. Inadequate access control – allowed unauthorized access to approval devices. 3. Insufficient systematic and independent verification of transactions – failed to prevent fraudulent activities. 4. Blind approval of transactions - signers approved forged transactions without verifying the details of the content. These incidents highlight critical vulnerabilities in virtual asset custody and offer actionable lessons for institutions, exchanges, and individual users. The SFC conducted a targeted review of VA Operators’ custody control measures to assess their resilience against similar vulnerabilities. Based on its findings, the SFC determined that key control measures implemented by VA Operators were insufficient. To address these gaps, the SFC established minimum requirements as a guide aiming to foster a standardized framework and promoting best practices in virtual asset custody. III. SFC EXPECTED STANDARDS The following standards elaborate on the SFC’s guidance in its VATP Operator Guideline and related FAQs and thematic guidance. Scope Expected Standards 1. Senior Management Responsibilities Ensure effective policies, procedures and internal control are in place. Suitable, qualified and experienced individuals are appointed to oversee the daily operation of the business. At least, one Responsible Officer or Manager-in-Charge to oversee the daily operation related to VA custody. 2. Client Cold Wallet Infrastructure Establish and implement strong internal controls and governance procedures for private key management to ensure all cryptographic seed and private keys are securely generated, stored and backed up. Perform appropriate due diligence on Hardware Security Modules (“ HSM ”) provider before engagement and an ongoing basis. Conduct proper due diligence to ensure that HSM vendor is capable of continuous and committed in maintaining HSM security. 3. Client Cold Wallet Operation Using air-gapped devices for seed and private key generation and safeguarding. Conduct a regular review on any material changes or modifications to processes, systems or authorized personnel before implementation. Implement a robust systematic control to prevent unauthorized transactions from the cold wallet. Using a dedicated device with restricted functionality and limited connectivity for transaction approval, with integrity checks and physical access restrictions. Displaying transaction details in a clear, human-readable format allowing signers to review the information before proceeding. 4. Use of Third-party Providers Maintain continuous oversight, evaluating security controls, incident reporting, and disaster recovery capabilities. Strict segregation of duties and oversight mechanisms for wallet system code management. Establish emergency procedures and conduct regular Business Continuity Plan (“ BCP ”) drills. 5. Ongoing Real-time Threat Monitoring Real-time reconciliation of on-chain client assets with the ledger balance. Ensure alert thresholds are effectively calibrated for timely detection of potential issues. Robust mechanisms to detect unauthorized intrusions to critical wallet infrastructure. Monitoring processes should cover both custody system and its dependencies. Security Operations Centre (“ SOC ”) or equivalent function should ensure 24/7 monitoring on its security processes. Develop a structured framework for handling security alerts and managing incidents according to severity and risk levels. 6. Training and Awareness Transaction signers must undergo comprehensive training to fully understand verification requirements and appropriate handling procedures. Effective manual transaction review or approval to prevent blind signing. These expected standards apply to VA Operators only. However, VA custody expectations tend to be replicated across regulated sectors in Hong Kong. Therefore, it is recommended that anyone providing custody services or custody technology solutions consider these requirements and expected standards to mitigate associated risks. IV. KEY ACTIONS AND RECOMMENDATIONS VA Operators must continuously update their systems and process. Below are the key actions recommended in custody of client’s virtual assets. 1. Evaluate custody framework: Strengthen custody controls aligning with the SFC’s guidance for VA Operators. 2. Conduct regular compliance reviews: Integrate expected standards into periodic evaluations. 3. Monitor developments: Stay updated on evolving best practices and regulatory changes, especially as new threats and vulnerabilities surface. 4. Engage with regulators: Consult the SFC when considering adjustments to existing approaches. The ongoing consultation on virtual asset custodian services presents a timely opportunity for such engagement. V. How We Can Help Our team comprises experienced professionals with deep expertise in compliance, risk management, and policy review and development in identifying gaps between the regulatory expectations in the circular and your current policies and procedures. We understand the complexities of regulatory requirements and provide tailored solutions to meet your specific needs and close any material gaps. Our expertise ensures adherence to regulatory standards and enhances overall compliance practices. If you have any questions, please feel free to reach out to your manager-in-charge or our Compliance Support, or Contact Us .

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 - February 2024 The topics discussed in this monthly newsletter are as follows: 1. SFC welcomes government budget measures 2. SFC reminds transitional arrangement for public VATP application period has ended on 29 February 2024 3. SFC reprimands and fines PICC Asset Management (Hong Kong) Company Limited $2.8 million for fund management failures 4. SFC bans Lam Ching Chiu and Wong Siu Fung for five years for bribery offences 5. SFC secures first criminal conviction of securities fraud via illegal short selling MARKET NEWS 1.SFC welcomes government budget measures On 28 Feb 2024, the SFC announced that its welcome note to the new government budget 2024-2025. Mr. Tim Lui, Chairman of the SFC, said: “ The proposed initiatives will boost Hong Kong’ s competitiveness as a global asset and wealth management hub and fund-raising centre. ” And he further added that: “ Building on a decade of success for our mutual market access schemes, we will continue to deepen connectivity with Mainland markets, especially the Greater Bay Area, as well as consolidate Hong Kong’ s position as a leading offshore renminbi hub and a premier risk management centre. ” On the operation side, Ms Julia Leung, Chief Executive Officer of the SFC also said: “ We will work closely with HKEX to improve the market microstructure, reduce transaction costs and enhance market efficiency. ” It is worth noting that the SFC shares the view of the importance of reducing transaction costs, the minimum bid-ask spread in stock trading which are conducive to improving liquidity in the market. There are also other cost-saving measures and incentives like the extension of the Grant Scheme for Open-ended Fund Companies and Real Estate Investment Trust (REITS), stamp duty waiver for REITS etc. SIGNIFICANCE: It is not hard to notice that a regulatory body as SFC also publicly announces its support to the government even in economic measures intended to serve as catalyst to bolster the economy; the HKSAR government is harnessing strengths and supports from all side to consolidating financial resilience in Hong Kong. 2. SFC reminds transitional arrangement for public VATP application period has ended on 29 February 2024 The SFC announced a reminder note on 1 March 2024 of the deadline (29 February) for virtual asset trading platforms (VATPs) to submit licence applications; and those existing VATPs which do NOT submit applications would have to close down their business by 31 May 2024 pursuant to the transitional arrangement. Investors dealing with VATPs operating in Hong Kong which are not on the “List of licensed virtual asset trading platforms” or on the “List of virtual asset trading platform applicants” are urged to close their accounts with these VATPs or transfer to SFC-licensed VATPs for trading virtual assets. The SFC further reminds the public that the applications submitted by applicants on the “List of virtual asset trading platform applicants” are still being processed and they may – or may not – be approved . Hence, trading on these platforms carries a risk. From the SFC’s List of virtual asset trading platforms up to 1 March 2024, there are 24 applicants on the list, and it is odd that the popular platforms like Coinbase and Kraken are not on the list of 24 applicants. Besides, two applicants - Ammbr, BitHarbour – withdrew their applications and one application from Meex was returned by the SFC. It is also noted that Huobi HK re-submitted its application on 26 February 2024. SIGNIFICANCE: With the JPEX scam still fresh in mind, the SFC strongly urges investors to trade virtual assets only on SFC-licensed VATPs because they may expose themselves to unprotected risk on unlicensed platforms. ENFORCEMENT NEWS 3. SFC reprimands and fines PICC Asset Management (Hong Kong) Company Limited $2.8 million for fund management failures On 5 February 2024, the SFC made an announcement to reprimand and fined PICC Asset Management (Hong Kong) Company Limited (PICC) $2.8 million over its failures to discharge duties as the manager of a Cayman-incorporated fund between May 2018 and May 2020. From investigation of the SFC, it was found that PICC had failed to: (i) properly manage the fund to ensure its investments were in line with the stated investment objectives and restrictions; (ii) implement adequate and effective internal controls to manage the fund from any over-concentration risks of non-compliance in just three stocks; and (iii) supervise the designated investment manager (“IM”) in his investment activities of the fund. SIGNIFICANCE: It is ironical indeed that the fund’ s investment objective was to achieve capital preservation and steady capital appreciation through primarily investing in a diversified portfolio of equity securities; yet what the IM had been doing was to concentrate on a few stocks and not to comply with the stop loss procedures to preserve the capital! The IM was like acting unleashed from the mandate restrictions of the fund at all. 4. SFC bans Lam Ching Chiu and Wong Siu Fung for five years for bribery offences The SFC made an announcement on 6 February 2024 that Mr Lam Ching Chiu and Mr Wong Siu Fung, both former licensed representatives of Nerico Brothers Limited, from re-entering the industry for five years starting from 6 February 2024 following their criminal convictions of bribery offences. Lam and Wong were found guilty in August 2022 at the District Court of paying the then chief executive officer (CEO) of Hong Kong Financial Engineering Company Limited (HKFECL) bribes in relation to utilising a computerised algorithmic programme used for futures trading from late 2014 to early 2015. It was found that the CEO asked Lam and Wong for commission for each profitable transactions through the use of the trading programme where both of them were not alerted if the practices were known or acceptable to HKFECL. SIGNIFICANCE: In deciding the sanctions, the SFC considered that Lam and Wong were not fit and proper persons to be licensed to carry on regulated activities due to their criminal convictions. They were both sentenced to imprisonment, with suspension for two years. 5. SFC secures first criminal conviction of securities fraud via illegal short selling The Eastern Magistrates’ Court on 27 February 2024 convicted Ms Christine Yeung Tak Sum guilty of securities fraud involving illegal short selling in proceedings brought by the SFC. The case was found that Yeung submitted a settlement instruction form to her broker Aristo Securities Limited pretending she had 15 million shares in Aurum Pacific (China) Group Limited (Aurum) in another brokerage firm, and then sold the share which she did not have. After illegal short-selling Aurum shares, she proceeded to buy back the same quantity of shares at a lower price to cover her short-sold positions within the same day, making an illicit profit of about HKD602,600. SIGNIFICANCE: Intermediaries should be aware of their obligation to implement and maintain appropriate measures to comply with the short selling requirements and to be mindful of red flags indicating illegal short selling by its clients, especially clients with no sound rationale for not executing the sell instructions directly through their original brokers. 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

香港海關於2024年1月2日成功偵破一宗涉及未註冊鑽石交易的案件，並拘捕了涉案公司的一名董事。On 2 January 2024, Hong Kong Customs and Excise Department (the “Customs”) successfully uncovered a case involving unregistered diamond trading and arrested the involved director. 香港海關偵破未註冊鑽石交易案件 一名公司董事被捕 香港海關於2024年1月2日成功偵破一宗涉及未註冊鑽石交易的案件，並拘捕了涉案公司的一名董事。該公司未經註冊進行多宗金額逾12萬港元的鑽石交易，這不僅違反了香港的法律規定，也暴露出一些貴金屬及寶石業務經營者對監管規範的忽視。 根據香港海關的報告，該公司在沒有依照《打擊洗錢及恐怖分子資金籌集條例》所要求的註冊情況下，進行了數宗總額超過12萬港元的鑽石交易。所有在香港從事貴金屬及寶石交易的商業活動，如果涉及12萬港元或以上的交易金額（無論是現金還是非現金支付），均需向海關註冊。 涉及的董事被捕後，已獲准保釋，但案件仍在進一步調查中。海關強調，任何未註冊的貴金屬及寶石交易商，無論其業務規模大小，都不應忽視這一法律要求。根據法律規定，未註冊進行大額交易者將面臨最高10萬元港幣罰款及最多6個月監禁的處罰。 海關提醒所有貴金屬及寶石交易商，註冊過渡期已經結束，所有業務必須在獲得註冊後才能進行金額為12萬港元或以上的交易。如果您不確定是否需要註冊或如何進行註冊，建議儘早聯繫專業的合規顧問，避免因違法交易而承擔高額罰款和刑事責任。 《貴金屬及寶石交易商監管制度》簡介 所有涉及貴金屬和寶石業務的公司和個人，必須遵守香港特區政府於2023年4月1日實施的新規範，即《貴金屬及寶石交易商監管制度》。該制度要求所有在香港經營貴金屬及寶石交易，並進行12萬港元以上交易的商家必須註冊，並接受海關的監管。 註冊類別 交易方式 A類註冊人 非現金交易 B類註冊人 現金交易及非現金交易 ** 更多關於貴金屬及寶石交易商註冊的資訊，請參考 天匯合規網站 上的詳細指引 ** 根據《打擊洗錢及恐怖分子資金籌集條例》（第615章）的要求，未經註冊的交易不僅涉及法律風險，還可能引發洗錢和恐怖分子資金籌集等金融犯罪問題。所有貴金屬及寶石交易商在進行大額交易前，必須先向香港海關註冊，以確保合規經營。 為什麼需要監管？ 貴金屬和寶石，尤其是鑽石、金、銀等高價值商品，往往成為洗錢、資金籌集和其他非法活動的工具。由於這些交易通常金額巨大且難以追蹤，若缺乏有效的監管，將容易成為金融犯罪的溫床。這一註冊制度旨在提高對貴金屬和寶石交易的監管透明度，確保該行業避免用作洗錢、資金籌集等非法活動的渠道。 如您有任何疑問，或需要協助完成註冊過程，請隨時 聯繫我們 。我們提供專業的合規顧問服務，幫助您輕鬆應對監管要求。 此外，參加 天匯合規網上持續培訓平台 – Thinkific 提供的貴金屬及寶石交易商（”DPMS”）線上培訓課程，了解更多貴金屬及寶石業務經營的合規知識。 The Customs Reveal another Unregistered Diamond Trading Case On 2 January 2024, Hong Kong Customs and Excise Department (the “Customs”) successfully uncovered a case involving unregistered diamond trading and arrested the involved director. The company had conducted multiple transactions exceeding HK$120,000 in diamond sales without the required registration, violating Hong Kong’s legal regulations and highlighting the negligence of some precious metals and gemstone traders regarding the regulatory framework. According to the Customs, the company carried out several transactions exceeding HK$120,000 in total, without registering as required by the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“AMLO”) (Cap. 615). All businesses engaging in precious metals and gemstone transactions in Hong Kong involving amounts of HK$120,000 or more (whether in cash or non-cash payments) are required to register with the Customs. The arrested director has been released on bail; investigation still ongoing. The Customs emphasized that all precious metals and gemstone traders, regardless of the size of their business, must comply with Dealers in Precious Metals and Stones (“DPMS”) Regulatory Regime. Violate the registration rule can result in fines of up to HK$100,000 and a maximum of 6 months' imprisonment. The Customs urges all precious metals and gemstone traders that the grace period for registration has ended, and must register before engaging in transactions of HK$120,000 or more. If you are unsure whether you need to register or how to register, it is advisable to contact a professional compliance advisor to avoid any legal breaches. Dealers in Precious Metals and Stones (“DPMS”) Regulatory Regime All entities and individuals involved in the precious metals and gemstones business must comply with the new regulations under the DPMS implemented by the Hong Kong SAR government on 1 April 2023. The system requires businesses engaging in precious metals and gemstones transactions of HK$120,000 or more to register and be monitored by the Customs. Registration Categories Registration Categories Category A Non-cash transactions Category B Cash and non-cash transactions For more information about registering as a precious metals and gemstones trader, please refer to the detailed guidelines on the ComplianceOne website. In accordance with the AMLO, unregistered transactions not only carry legal risks but may also trigger money laundering and terrorist financing concerns. All traders must register with the Customs before engaging in large transactions to ensure compliance. Why Is Regulation Needed for DPMS? Precious metals and gemstones, especially diamonds, gold, and silver, are often used for money laundering, fundraising for terrorism, and other illicit activities. These transactions typically involve large sums of money and untraceable. Without regulation, they can become a breeding ground for financial crimes. The DPMS regulatory regime aims to increase transparency in the precious metals and gemstones market and ensure that the industry is not used for money laundering, terrorist financing, or any other illegal activities. If you have any questions or need assistance with the registration process, please feel free to Contact Us . We provide professional compliance advisory services to help you meet legal requirements smoothly. For more compliance knowledge, join the DPMS online training course on ComplianceOne Onling Training Platform - Thinkific .

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

為規管虛擬資產場外交易 (Virtual Asset OTC)， 香港政府擬根據《打擊洗錢及恐怖分子資金籌集條例》(第615章) (《打擊洗錢條例》)設立虛擬資產場外交易服務提供者發牌制度。我們就此準備了簡易的說明。 虛擬資產場外交易的發牌事宜 [Mar 2024] 為規管虛擬資產場外交易 (Virtual Asset OTC)， 香港政府擬根據《打擊洗錢及恐怖分子資金籌集條例》( 第6 1 5 章) (《打擊洗錢條例》)設立虛擬資產場外交易服務提供者發牌制度。財經事務及庫務局(財庫局) 已在2024年2月8日展開公眾諮詢。公眾諮詢為期兩個月至2024年4月12日。 根據政府的數字，全港約有200多間實體虛擬資產場外交易店 (包括以自動櫃員機操作的場外交易)正在運作，以及約有 200多個數碼平台或活躍網上貼文在 提供虛擬資產買賣服務。這些業務日後將需要申請發牌並受到監管。 監管原則: 香港政府在2022年10月曾發表《有關香港虛擬資產發展的政策宣言》，表明在 「相同業務、相同風險、相同規則」 的原則下，政府致力就虛擬資產活動完善規管框架以及充分保障投資者。 適用人士: 1) 任何人如在香港 從事 有關任何虛擬資產現貨交易服務的業務 2) 或向香港公眾 積極推廣 提供虛擬資產場外交易服務 適用法例: 虛擬資產場外交易營運者須遵守《打擊洗錢條例》附表 2 所訂的打擊洗錢及恐怖分子資金籌集規定和其他規管要求，包括適當人選準則及其他海關關長認為相關的因素。 業務模式: 實體店 (包括自動櫃員機) 或數碼平台。 豁免發牌: 1) 個人與個人 (peer-to-peer) 之間的虛擬資產買賣 2) 已獲發牌的虛擬資產交易平台、持牌法團、認可機構和穩定幣發行人 其他規管要求: 1) 只可涵蓋在至少一所獲證監會發牌的虛擬資產交易平台上供零售投資者交易的代幣 (現時只有 比特幣(BTC) 和 以太幣(ETH) )，以及在擬議穩定幣發行人發牌制度落實後，獲香港金融管理局(金管局) 發牌的發行人所發行的 穩定幣 ; 2) 所有使用的錢包及帳戶都需要海關關長登記; 3) 在指定條件下才可以進行匯出; 4) 與打擊洗錢相關的規定: (i) 委任合規主任和洗錢報告主任; (ii) 具體相關資格／知識和經驗的高級管理層; (iii) 業務穩健; (iv) 具有操守; (v) 風險管理; 及 (vi) 備存記錄。 不容許的業務: 1) 由一種虛擬資產轉換另一種虛擬資產的交易; 2) 直接或間接保管／暫存顧客的虛擬資產; 3) 任何形式的虛擬資產顧問或轉介服務; 4) 提供虛擬資產衍生工具或其他金融產品 (包括但不限於質押、借貸及保證金交易)。 牌照期限和過渡期: 1) 牌照期限: 兩年 2) 過渡期: 不設「被當作已獲發牌」 或 設有「被當作已獲發牌」 以上資料只為立法建議的一部份，我們需要等到完成整個立法流程才會正式生效，我們估計此監管框架最快可在2024年年底至2025年年中啟動發牌的程序。 資料參考: 有關規管虛擬資產場外交易的立法建議-公眾諮詢 (財經事務及庫務局) https://www.fstb.gov.hk/fsb/tc/publication/consult/doc/VAOTC_consultation_paper_tc.pdf 天匯合規顧問有限公司 2024年3月27日

主題： 虛擬資產是否不可靠？虛擬資產交易平台如何分辨真偽？去中心化技術是否成為騙子聚集的溫床？ 天匯合規顧問有限公司 ("天匯合規") 將與柏奇商業顧問服務有限公司("KPI") 共同舉辦研討會！ 今次研討會主要討論 從JPEX平台的倒下，分享虛擬資產牌照及法規對行業發展的重要 。 活動詳情： 主題： 虛擬資產是否不可靠？虛擬資產交易平台如何分辨真偽？去中心化技術是否成為騙子聚集的溫床？ 日期：2023年10月12日（星期四） 時間：17:00-18:30 形式：實體 (30人)/ 線上會議Zoom (上限100人) 費用：港元100 (實體)/港元50 (線上會議Zoom) 語言：廣東話 地點：尖沙咀星光行5樓533室 培訓時數：1.5小時 *培訓出席證書將在研討會後通過電子郵件發放。 演講嘉賓： Ivan Leung - 柏奇商業顧問服務有限公司董事 Tao Wong - 天匯合規顧問有限公司合伙人 Peter Chong - Centralin Analytics創始人 報名請透過以下超連結: https://docs.google.com/forms/d/e/1FAIpQLSfxWsqUBCnIPUZN_jM0mIFGqf7cOW71vZ_Rza2c4w7SqWdDqQ/viewform?usp=sf_link 如需進一步資訊，請WhatsApp+852 54908117 聯絡陳小姐 (Tiffany Chan)。 天匯合規顧問有限公司

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter –April 2025 The topics discussed in this monthly newsletter are as follows: 1. IA releases provisional statistics of New Business Premiums for 2024 2. Hong Kong Welcomes New Captive Insurer, Strengthening Its Role as a Global Risk Management Hub 3. Process Review Panel conduct review on IA’s Internal Process in Enhancing its Operation 4. China Taping Former Manager Admit to Multi-Million Dollar Fraud Scheme Market News 1. IA releases provisional statistics of New Business Premiums for 2024 On 25 April 2025, IA has released its provisional statistics for 2024, revealing a robust year for Hong Kong’s insurance industry. Total gross premiums reached HK$637.8 billion, underscoring the sector’s resilience and growth. However, one of the most striking trends is the significant contribution of Mainland visitors to the market’s expansion. A summary of the provisional statistics is at Annex . Mainland Visitors: A Driving Force In 2024, new business premiums derived from Mainland visitors totaled HK$62.8 billion, marking a 6.5% increase from the previous year. This figure accounts for 28.6% of the total new office premiums for individual business, highlighting the critical role Mainland visitors play in Hong Kong’s insurance landscape. Policy Preferences : The majority of these policies were settled at regular intervals, with whole life, critical illness, and medical policies making up approximately 59%, 28%, and 5% of the total, respectively. This preference for long-term, protection-oriented products reflects the trust Mainland visitors place in Hong Kong’s insurance offerings. Market Share : The HK$62.8 billion in premiums from Mainland visitors is a testament to Hong Kong’s reputation as a premier destination for high-quality insurance products. Factors such as the city’s regulatory stability, diverse product range, and the perceived reliability of its insurers continue to attract Mainland buyers. Overall Market Performance The overall insurance sector (including PRC visitors above-mentioned) also demonstrated strong performance in 2024: Long Term Business : New office premiums (excluding Retirement Scheme business) surged by 21.4% to HK$219.8 billion, primarily fueled by Non-Linked individual business, which saw a 22.8% increase to HK$208.1 billion. In-Force Business : Total revenue premiums for in-force business rose by 11.4% to HK$537.4 billion, with claims and benefits paid to policyholders increasing by 6% to HK$352.5 billion. General Business : The general insurance sector thrived, with total gross premiums reaching HK$100.5 billion and an overall operating profit of HK$8.1 billion. SIGNIFICANCE: The IA’s data underscores the growing interdependence between Hong Kong’s insurance market and Mainland visitors. The sustained interest from Mainland visitors can be attributed to several factors: Product Diversity: Hong Kong offers a wide range of insurance products that may not be as readily available or competitively priced in PRC. Regulatory Trust: The city’s stringent regulatory framework, overseen by the IA, provides assurance of policyholder protection and market stability. Investment Opportunities: Many policies, particularly whole life and participating products, are seen as attractive long-term investment vehicles by Mainland buyers. As the sector continues to evolve, this relationship is likely to deepen, with Mainland buyers remaining a pivotal source of growth. The next update on Mainland visitor premiums will be released alongside the provisional statistics for the first half of 2025, offering further insights into this dynamic segment. 2. Hong Kong Welcomes New Captive Insurer, Strengthening Its Role as a Global Risk Management Hub On 2 May 2025, IA has authorized Wayfoong (Asia) Limited, a wholly-owned subsidiary of the HSBC Group, as Hong Kong’s newest captive insurer. This marks a historic moment as it is the first captive insurer established by a multinational enterprise based in Hong Kong, reinforcing its growing prominence as a global risk management center. What is a Captive Insurer? A captive insurer is a specialized insurance company created by a parent corporation to provide coverage for its own risks. Unlike traditional insurers, captives are designed to meet the unique needs of large businesses, particularly those with operations spanning multiple regions. They enable companies to: Customize risk coverage tailored to their specific operations. Enhance efficiency by managing risks internally. Optimize resources and potentially lower insurance costs. For multinational enterprises with a wide geographical footprint, captive insurers are a strategic tool to handle diverse and complex risks effectively. For more details of Captive Insurer: IA - Regulatory Requirements on Captive Insurers Government Backing The Hong Kong government has played a key role in this development by: Offering a 50% tax concession for local captive insurers, making the city more competitive. Collaborating with the insurance industry to promote diversified growth. SIGNIFICANCE: The arrival of Wayfoong (Asia) Limited as a captive insurer is a game-changer for Hong Kong, affirming its role as a global risk management hub and paving the way for future growth in the insurance sector. Mr. Christopher Hui, Secretary for Financial Services and the Treasury, welcomed the move, saying, “The decision of HSBC to set up a captive insurer here underscores its solid confidence and firm commitment in Hong Kong. Given the current global situation where risks take on new dimensions, we will continuously revisit our policy tools to attract more multinational enterprises.” Mr. Clement Cheung, CEO of the IA, stated, “This decision reflects our growing attractiveness and promising potential as a key captive domicile, leveraging the unique advantages of Hong Kong to facilitate multinational enterprises in managing their global operations.” IA News Updates 3. Process Review Panel conduct review on IA’s Internal Process in Enhancing its Operation On 29 April 2025, Process Review Panel for the IA (“ PRP ”) has published its 2024 Annual Report , offering valuable insights into the IA’s regulatory processes. Established in 2019, the PRP is an independent body dedicated to ensuring the IA’s internal procedures and operational guidelines remain fair, transparent, and efficient. The report reviews 20 selected cases from 1 January to 31 December 2023, covering licensing, complaint handling, and disciplinary actions. PRP’s Key Observations and Recommendations PRP highlighted areas for improvement while recognizing the IA’s progress in enhancing its operations. Here are the key points: Clear Timelines and KPIs Needed: The PRP observed inconsistencies in case handling times due to undefined timelines and Key Performance Indicators (“ KPIs ”). It recommends setting target timelines for all case types and establishing KPIs to track performance. Addressing Delays: Delays, linked to manpower shortages and high case volumes (e.g. over 2,600 CPD non-compliance cases), prompted the PRP to suggest continuous monitoring and process streamlining, such as returning incomplete applications promptly. Standardizing Disciplinary Processes: The IA’s framework for CPD non-compliance cases was praised, but the PRP advised extending standardized processes to other straightforward cases, like false qualifications, for greater consistency. Expanding the Disciplinary Panel (“ DP ”) Pool: The PRP proposed broadening the DP pool with expertise in areas like risk management and compliance to speed up complex case handling. Regular Review of Procedures: A formal mechanism for regularly updating operational guidelines was recommended to keep pace with regulatory changes. Positive Improvements: The PRP applauded the IA’s streamlined disciplinary workflows via the Disciplinary Executive Process (“ DEP ”) and improved document preparation for reviews, boosting efficiency and collaboration. IA’s Commitment to Improvement Progressive Implementation: Target timelines for licensing and KPIs for investigations and disciplinary actions will be introduced soon. Operational Enhancements: Staffing stabilization and automation (e.g. via the Insurance Intermediaries Connect platform) are in progress. Disciplinary Improvements: The DEP will be refined, and a tariff framework for common offenses will expedite resolutions. Regular Reviews: A biennial review cycle for key procedures will be maintained. SIGNIFICANCE: The 2024 Annual Report reinforces the PRP’s role in upholding the IA’s procedural integrity and efficiency. IA’s proactive response signals its dedication to continuous improvement, solidifying its status as a top-tier regulator. The PRP also invites feedback from the public and market participants—reach out to the PRP Secretariat at prpia@fstb.gov.hk Enforcement News 4. China Taping Former Manager Admits to Multi-Million Dollar Fraud Scheme On 15 April 2025, a former assistant manager at China Taiping Insurance (Hong Kong) Co., Ltd., 周銳坤 (“ CHAU ”) and three of his subordinates have admitted to defrauding the company of over HK$4.59 million through a scheme involving fake insurance policies. The group used puppet insurance agents and false policies to claim commissions and allowances. Background Between February 2021 and October 2022, CHAU allegedly used other people's names and paid approximately HK$3.48 million in premiums himself to submit nine fake insurance policies to China Taiping. He falsely claimed that his subordinates were the handling agents for these policies. This deception led the company to pay out over HK$4.59 million in commissions and allowances to the accounts of the four individuals. CHAU has admitted to nine counts of fraud. His three subordinates, each admitted to one count of money laundering. The case has been adjourned to June 11 for sentencing, with all defendants remanded in custody. One of the subordinates also confessed that she did not handle any policies and was paid by CHAU to facilitate the transfers. SIGNIFICANCE: This case underscores the importance of robust fraud detection and prevention measures in the insurance sector, as the financial and reputational fallout from such incidents can have lasting effects on a company’s operations and market position. Case Number: DCCC1163/2024 [End of ComplianceOne Insurance Newsletter – April 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

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