The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – Dec 2024 The topics discussed in this monthly newsletter are as follows: 1. The SFC grants 4 more VTAP licenses under swift licensing process 2. HKEX Data Marketplace is launched 3. Mainland-Hong Kong Mutual Recognition of Funds enhancements to take effect on 1 January 2025 4. SFC Quarterly Report states greater connectivity is driving Hong Kong’s capital markets a further step forward 5. The SFC launched “Don’t be Sucker” campaign to raise anti-scam awareness 6. A joint investigation by SFC and ICAC on suspected misconduct in public office 7. Fund manager Ng Ka Shun banned for life by SFC and fined $1.7 million for window-dressing FRR 8. SFC reprimands and fines Ever-Long Securities Company Limited $3 million for sponsor failures 9. Alpha Advice is on suspicious list of the SFC for its deceptive unauthorised advertisements on Facebook Market News 1. SFC grants 4 more VTAP licenses under swift licensing process On 18 December 2024, the SFC granted licenses to four virtual asset trading platforms (“ VATPs” ) under the swift licensing process for handling deemed-to-be-licensed VATP applicants (“ deemed applicants ”). In First-Phase , the SFC will engage proactively with senior management and ultimate controllers of the deemed applicants (or the VATPs) through onsite inspections, and provide feedback with the VATP to reach a rectification plan. The SFC will grant a conditional license that requires the VATP to complete penetration test and vulnerability assessment with satisfactory results. The VATP can then operate on a restricted scope of business as a licensing condition; and the VATP can proceed to engage a suitable External Assessor (“ EA ”) to perform the Second-Phase Assessment through a Tripartite Agreement with the SFC and the EA. The revamped Second-Phase will focus on VATP’s policies, procedures, system and controls (“ P&P ”) if these are suitably designed and implemented. The VATP is required to assess and revise its P&P in response to the findings & exceptions identified by the EA and the SFC with remediation measures. Upon completion of the Second-Phase Assessment, the licensing condition(s) that restricts the scope of business of the VATP will eventually be uplifted . SIGNIFICANCE: A clear roadmap has been posted in another Circular as Appendix to provide a comprehensive guidance to the VATPs who are interested to acquire a VATP license, and helps alleviate the burden from the previous onerous procedures. 2 . HKEX Data Marketplace is launched On 18 December 2024, the HKEX announced the launch of the HKEX Data Marketplace (the “ Platform ”), a web-based platform that offers data users a more intuitive experience in accessing HKEX’s historical and reference data. The new Platform allows modern interface with multiple data delivery channels, including cloud transfer, to obtain data directly from the HKEX and offers investors with optimal user experience and convenience. In its initial stage, the Platform will provide shareholding data from the Central Clearing and Settlement System (“ CCASS ”) for commercial use, as well as historical full book data from HKEX’s securities and derivatives markets, and securities market daily non-trading reference data. The HKEX will progressively add more data product offerings and functionality to the Platform, including tools to customise data, and additional options for data delivery, supporting the evolving needs of global investors. More details are available in the HKEX website . SIGNIFICANCE: Given the vogue of global investors for richer and more insightful market data to complement their investment strategies, the HKEX is pioneering itself to seize the opportunities as commented by Bonnie Y Chan, the HKEX CEO, that “ We are therefore delighted to be launching the HKEX Data Marketplace, providing clients with value-added services from our universe of comprehensive proprietary market data, further enhancing the vibrancy and attractiveness of Hong Kong’s financial markets. Data and analytics will complement our core business and present new and exciting opportunities for us as an adjacency. ” Opportunities are for those who are well prepared. 3. Mainland-Hong Kong Mutual Recognition of Funds enhancements to take effect on 1 January 2025 On 20 December 2024, the SFC made a publication of the revised Provisions on the Administration of Recognised Hong Kong Funds (香港互認基⾦管理規定) by the China Securities Regulatory Commission (“ CSRC ”) and also the revised operating guidelines jointly by the People’ s Bank of China and the State Administration of Foreign Exchange (國家外匯管理局), for the purpose of implementing the enhancements to the Mutual Recognition of Funds (“ MRF ”) scheme. Key takeaways of the enhancement: (i) The MRF is one of the five measures on the capital market cooperation announced by the CSRC on 19 April 2024; (ii) Relaxation of the sales limit on the value of units of a recognised fund sold to investors from 50% to 80% of the fund’s total assets; (iii) Relaxation of overseas delegation restriction which provides more opportunities for international asset managers to offer more offshore solutions and products to investors in Mainland with their expertise and knowledge. SIGNIFICANCE: The straight impact of the relaxation of the sales limit is an anticipated increase in maximum potential sales value on the Mainland by three times. Ms Julia Leung, CEO of the SFC, has said, “ We also feel confident that these enhancements will significantly increase the diversity as well as the scale of products under the MRF, thus injecting fresh momentum into the scheme .” The MRF enhancements becomes effective from 1 January 2025. 4. SFC Quarterly Report states greater connectivity is driving Hong Kong’s capital markets a further step forward On 12 December 2024, the SFC publicly a Quarterly Report showing that Hong Kong’ s capital markets have continued to reap benefits since the third quarter from the success of Connect schemes with the Mainland and breakthroughs in Middle East market connectivity. Highlights in the quarterly report are: (a) Hong Kong’ s ETF market continued to grow, with the market capitalisation of ETFs up 34% year-on-year (YoY). (b) The numbers of both corporate and individual licence applications received by the SFC increased in the quarter, up 56% and 23% YoY, respectively. (c) The SFC is reviewing 15 licence applications from virtual asset (“ VA ”) trading platforms (11 deemed to be licensed), and is on track to license a few deemed operators this year under a swift licensing process ( Remark: Our comment on the licensing process is also covered in this Newsletter ). (d) A number of leading Mainland enterprises went public through IPOs in Hong Kong after the Mainland announced support measures in April last year. (e) The Court of First Instance handed down the heaviest jail sentence on market manipulation cases (i.e. the enforcement news on 22 July 2024 ) since the Securities and Futures Ordinance took effect. SIGNIFICANCE: As Ms Julia Leung, CEO of the SFC, said, “ Our ETF market has achieved new milestones this year with continued robust growth in eligible ETFs under the Connect scheme and with new connectivity to the Middle East. Going forward, with broadening mutual market access with the Mainland, the SFC will strive to elevate Hong Kong to a global hub for multi-asset investing and offshore renminbi fixed-income business. ” 5. The SFC launched “Don’t be Sucker” campaign to raise anti-scam awareness On 13 December 2024, launched a new anti-scam campaign titled “ Don’t be Sucker ” to raise public awareness of the common tactics used in fraudulent schemes, as part of its ongoing efforts to caution investors against investment scams especially in the digital realm. The main character in this campaign promulgated by the SFC is named Shui Yu (⽔⿂) which symbolises an impulsive, simple-minded and gullible personality, an easy target of the investment scams. The focus is on three common scam scenarios, namely online romance scams, impersonation, and deceptive tips from financial influencers. As Ms Julia Leung, CEO of the SFC, said, “ Like enforcement, education is another essential prong of our efforts to maintain financial market integrity and protect investors against fraudsters. ” To achieve this aim, the SFC adopts more innovative approach on Shui Yu to attract audience among investors of all age groups, especially the young generation, delivering to them the message to “stay cool-headed towards too-good-to-be-true investment offers” coming upon them. Complimented with this was a series of catchy reap song and music video , and YouTube channels which reinforce the SFC’s fraudulence prevention message to and to cultivate the audience with a mindset of alertness. To go further, the SFC also set up booths themed “Rescuing Shui Yu” providing fund and educational games for all age groups at large. SIGNIFICANCE: Preventive education is always more preferred to learning a lesson by paying a heavy cost with regret. The crux is not to be greedy, and be alert to any temptations in the camouflage like "it is now or never!" Enforcement News 6. A joint investigation by SFC and ICAC on suspected misconduct in public office The SFC confirmed that a former staff member is one of the three individuals in a case of suspected misconduct in public office brought by the ICAC as a result of a joint investigation which remains ongoing. The other two defendants are a senior government counsel of the Department of Justice and a registered nurse of the Hospital Authority. The joint investigation was triggered by an internal probe of the SFC followed by its suspicion of obtaining and misusing of confidential information came to its attention. It was found in the SFC’s investigation that the former staff had acted on his own with other two individuals mentioned above, and the Commission is looking into potential violations under the Securities and Futures Ordinance. SIGNIFICANCE: The SFC upholds the highest standard of integrity and takes any misconduct seriously. It had conducted a thorough review of its internal policies regarding the handling of confidential information and conflict of interest. Further, the employment of the former staff had been terminated, and the matter was under investigation by the ICAC. 7. Fund manager Ng Ka Shun banned for life by SFC and fined $1.7 million for window-dressing FRR On 23 December 2024, it was announced that SFC had banned Mr Ng Ka Shun (“ NG ”), responsible officer (RO) of Agg. Asset Management Limited (“ Agg” ), for life and fined him $1.7 million for window-dressing Agg’ s financial resources and mismanaging two funds. Key findings of the case are as follows. (1) Window-dressing the financial resources NG misled the SFC into believing that Agg had satisfied the financial requirements for a licence by window-dressing the firm’ s liquid capital as of 31 March 2017. NG continued to conceal the fact of Agg’s inability to maintain sufficient liquid capital of HKD3 million after obtaining the license for a period of 34 months from May 2017 to February 2020 by providing misleading information in the financial returns submitted to the SFC. (2) Deficiencies and substandard conduct in fund management The SFC also found that Agg mismanaged two funds in its capacity as investment manager which seriously jeopardised the interests of the funds’ investors. The issues identified are: a) Conflicts of interest and risk management Agg invested all of its assets in debentures issued by companies controlled by Ng, resulting in Ng granting loans to himself with investors’ subscription; b) Investment within mandate, safety of fund assets and valuation Agg failed to properly safeguard the fund’ s assets by allowing Ng to withdraw part of the investors’ subscriptions from the fund ultimately for his own benefits; Agg further failed to ensure that the fund’ s investments were in line with its stated investment objective and its assets were valued properly. SIGNIFICANCE: This lifelong ban imposed by the SFC indicated the severity of the breach which not only jeopardised the integrity of the market, but induced investors with substantial loss which transcended the bottom-line of the regulatory body; a deterrent message must be manifested to the wrong-doers that they have to pay for their misfeasance. 8. SFC reprimands and fines Ever-Long Securities Company Limited $3 million for sponsor failures On 27 December 2024, the SFC reprimanded and fined Ever-Long Securities Company Limited (“ Ever-Long” ) $3 million for failing to discharge its duties as the sole sponsor in the application of Coastal Corporation Limited (“ Coastal ”) in 2016 to list on the Growth Enterprise Market (“ GEM ”) of the Stock Exchange of Hong Kong Limited (“ SEHK ”). At the material times, Coastal and its subsidiaries (“ Coastal Group” ) were providers of vessel chartering services based in Singapore. The important incidence was the change of business model. In January 2014, Coastal’s subsidiary underwent a change of business model from leasing vessels to one of Coastal’s connected persons (Connected Person A) to leasing them to the top customer, an independent third party. Under this business arrangement, the top customer was able to utilise the vessels to provide bunkering services to its customers, which included another connected person of Coastal (Connected Person B). This leasing arrangement accounted for over 50% of Coastal Group’s revenue for each of the financial years ended 30 June 2015, 2016 and 2017, which fell within the track record periods of Coastal’s listing applications. Findings in the investigation showed Ever-Long was charged with: (1) Failure to perform proper due diligence on rationale for and legality of leasing arrangement which might involve a license requirement in Singapore. (2) Failure to perform proper due diligence on operations of leasing arrangement and Coastal’s business : the descriptions of the operation model of the leasing arrangement in the Application Proof and relevant agreements were at odds with evidence available to Ever-Long. (3) Failure to perform proper due diligence on deemed connected transactions Though under the Application Proof, the Coastal’s directors considered it prudent to deem the transactions between Coastal’s subsidiary and the top customer as connected transactions under the GEM Listing Rules; Ever-Long failed to conduct reasonable due diligence to ascertain and ensure the basis and accuracy of such disclosure. (4) Failure to disclose a known material issue to SEHK and ensure completeness of information in Application Proof Despite Ever-Long’s knowledge of the top customer’s lack of licence and the materiality of the same to Coastal’s suitability for listing, Ever-Long did not disclose this in the Application Proof and its submission to SEHK. SIGNIFICANCE: The SFC is of the view that Ever-Long’s conduct failed to fulfil the standards expected of it as a sponsor and breached the requirements of the Code of Conduct. 9. Alpha Advice is on suspicious list of the SFC for its deceptive unauthorised advertisements on Facebook On 19 December 2024, the SFC warned the public of Facebook advertisements paid by Alpha Advice in relation to a suspicious investment product “Litigation Asset-Backed Notes” or “90-Day Notes” The advertisements appeared to be targeting Hong Kong investors, and contain references to the common features of debentures which are not authorised by the SFC. In the view of the SFC, these advertisements may constitute “prospectuses” under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (“ CWUMPO ”) without the SFC’ s authorisation for registration, and have already been posted on the Suspicious Investment Products Alert List on 19 December 2024. SIGNIFICANCE: The SFC urges the public not to invest in any securities (including debentures) without a document authorised by the SFC for registration and/or issue, where appropriate. The public should also be vigilant and sceptical about “too-good-to-be-true” investment opportunities when making investment decisions. [End of ComplianceOne Newsletter –January 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 - July 2024 The topics discussed in this monthly newsletter are as follows:  Consultation conclusions for legislative proposal to implement regulatory regime for stablecoin issuers in Hong Kong Enduring strength of Hong Kong as leading international asset and wealth management hub, a SFC survey 2023 SFC is to launch new online application and submission system for investment products Financial resources management and compliance with the Securities and Futures (Financial Resources) Rules SFC sets clear timeline for implementing an uncertificated securities market in Hong Kong HKMA takes disciplinary action against DBS Bank (Hong Kong) Limited for contraventions of the AML-CTF Ordinance Hedge Fund manager ordered to disgorge HKD5.6 million illicit profits from false trading and disqualified for four years MARKET NEWS 1. Consultation conclusions for legislative proposal to implement regulatory regime for stablecoin issuers in Hong Kong The Financial Services and the Treasury Bureau ( FSTB ) and the Hong Kong Monetary Authority ( HKMA ) jointly issued the consultation conclusions on 17 July 2024 on the legislative proposal to implement a regulatory regime for fiat-referenced stablecoin ( FRS ) issuers in Hong Kong. The consultation ended in February with 108 response submissions received; most of the respondents agreed with: the existing increased prevalence and evolving development of virtual assets (VAs); the view that a regulatory regime should be introduced for FRS issuers in order to facilitate proper management of potential monetary and financial stability risks, as well as providing transparent and suitable guardrails; the proposed regulatory requirements and implementation arrangements. The Secretary for Financial Services and the Treasury, Mr. Christopher HUI, also demonstrated his consent to the view that a licensing regime for FRS issuers will further strengthen the VA regulatory framework in Hong Kong in line with international standards. The Chief Executive of the HKMA, Mr Eddie Yue also added “ we believe that a well-regulated environment is conducive to the sustainable and responsible development of the stablecoin ecosystem in Hong Kong .” SIGNIFICANCE: The FSTB and the HKMA will take into account the views and suggestions from respondents in finalising the legislative proposal for implementing the regulatory regime, with a view to introducing a bill into the Legislative Council as soon as possible. Actually, in early stage on 12 March 2024, the HKMA had announced the launch of the stablecoin issuers sandbox arrangement with parties interested in issuing FRS in Hong Kong, and the applicants have to come up with proposed operations under a sandbox arrangement conducted within a limited scope and in a controllable manner. 2. Enduring strength of Hong Kong as leading international asset and wealth management hub- a SFC survey 2023 On 12 July 2024, an annual survey by the SFC further affirmed the theme of Hong Kong’s position as a premier asset and wealth management hub with a highly-diversified investor base, globalised asset allocation and robust fund inflows. According to the Asset and Wealth Management Activities Survey 2023 published that date, key findings of the Survey were as follows: investors outside Mainland China and Hong Kong accounted for 54-56% of total AUM in the past five years; 60% of the assets managed in Hong Kong were allocated to overseas markets; the number of Type 9 asset management firms increased steadily by 12% to 2161 as of June 2024; overall AUM grew 2% year-on-year in 2023 to HKD31,193 billion, while net fund inflows surged 342%; a strong net fund inflow for Hong Kong domiciled SFC-authorized funds with 93% year-on-year growth to HKD87 billion in 2023; with a strong net fund inflow of HKD33 billion in Q1 of 2024! the AUM of Mainland-related firms’ asset and wealth management business grew 4% to HKD2,676 billion, with net fund inflows increased 16% to HKD153 billion; the number of registered open-ended fund companies (OFC) surged 118%! SIGNIFICANCE: As Ms Christina Choi, the SFC’s Executive Director of Investment Products, had said: “ The survey’ s findings underscored the enduring strengths of Hong Kong’ s asset and wealth management industry, particularly the market’ s growing breadth and depth, as well as its resilience in the face of unprecedented challenges and macro headwinds .” Despite the negative figures of increasing number of securities brokers opting for exit plans to cease business, Hong Kong is undergoing a structural innovation to navigate to other scope of the financial industrial regime, in particular the recent remarkable development in nascent virtual assets and wealth management landscape. 3. SFC is to launch new online application and submission system for investment products On 8 July 2024, the SFC announced its launch of a new online application and submission system named e-IP for investment products administered by the Investment Product Division (IDP) on 29 July 2024 . The e-IP is developed on the existing WINGS portal that digitalises all processes and serves as a one-stop online platform for e-IP users to facilitate the following procedures: (i) submit new product applications; (ii) proceed with post-authorisation or registration submissions; (iii) track the progress of applications; (iv) maintain information profiles of investment products and (v) settle fee payments. To start off, e-IP users are advised to activate their e-IP administrator accounts and review the account administration arrangements like account delegation to advisory firms (if applicable), or any permission rights to be assigned. SIGNIFICANCE: For market participants to get familiarized with the new system, the launch will be accompanied by a three-month parallel run of the existing application and regulatory submission channels until 29 October 2024 . Briefing sessions, user guides and online clips are all available on the SFC website. 4. Financial resources management and compliance with the Securities and Futures (Financial Resources) Rules (FRR) On 3 July 2024, the SFC published a circular which elaborated on the SFC’s expectations regarding the governance and internal controls standards of licensed corporations ( LCs ) for monitoring their compliance with the FRR of the SFO. During its monitoring of LCs’ financial resources adequacy, the SFC has discovered various cases of deficiencies, typical examples were: (i) inadequate control over the liquid capital monitoring; (ii) ineffective management oversight; and (iii) failure to employ competent and qualified staff for calculating and monitoring liquid capital; (iv) late notification to SFC regarding the deficit of required liquid capital ( RLC ). With respect to FRR monitoring, five crucial areas SFC would focus on: (1) Expected Standards (a) an LC must at all times maintain liquid capital NOT less than the RLC, and cease operation immediately in case it fails to do so; (b) an LC should be aware of the internal controls over the FRR compliance as breach of which would lead to sudden cessation of operation and incur adverse impact on its clients’ interests; (c) as contravention of the FRR would cast doubt on the fitness and competence of the LC to remain licensed; it is of top priority for an LC to identify and ensure certain standards which are the minimum to be observed. (2) Governance (a) management oversight: since the ROs and MICs are primarily accountable, it is advised for an LC’s senior management to designate at least one RO or MIC to be responsible for overseeing the compliance of FRR; (b) competence: the LC should ensure the designated RO or MIC are competent and have the relevant knowledge in complying with FRR requirements; (c) FRR returns: since the FRR returns of an LC must be signed by its RO or officer approved by the SFC (each a Signer), it is necessary for an LC to produce reliable, up-to-date and accurate financial information to the Commission. (3) Internal Control Standards According to internal control guidelines, an LC should implement effective controls for its FRR compliance in areas like: (a) a maker-checker mechanism for calculation; (b) effective ongoing monitoring of its RLC status; (c) maintaining a regular projection of its liquid capital conditions; (d) any advance alerts when certain thresholds of Excess Liquid Capital ( ELC ) are triggered. (e) the frequency of liquid capital monitoring should be commensurate with the operational complexity of an LC (4) Incident Report and Remedial Measures (a) in case where an LC is aware of its failure to maintain the RLC, it should notify the SFC in full details of the incidence, the reasons for such occurrence and the immediate remedial measures to mitigate the situation. (5) Financial Distress Situation (a) In case where an LC has ceased business operations, it is still subject to all FRR requirements until the license has been revoked by the Commission. SIGNIFICANCE: LCs are strongly advised to take a look at the Appendix A where illustrative examples of deficiencies commonly discovered in FRR compliance, and expected standards are delineated in details. The examples also serve as guidelines for the LCs to follow and examine themselves if the same deficiencies in calculations have been adopted before, and to implement remedial measures accordingly in due course. 5. SFC sets clear timeline for implementing an uncertificated securities market in Hong Kong On 16 July 2024, the SFC released a consultation conclusion on its proposed subsidiary legislation, code and guidelines for implementing an uncertificated securities market ( USM ) in Hong Kong in the wake of its two consultation papers in March & October 2023 respectively. In response to market feedback, the SFC now proposed a 5-year timeline as below: subject to completing the legislative process, the USM regime will be implemented towards the end of 2025; companies whose laws are compatible with the regime will have to transition to the new regime in batches by the end of 2030; a more detailed timeline will be set to ensure an orderly transition. In the interim, the SFC will conduct a separate consultation on the maximum levels of certain USM-related fees, aiming to set upper limits in respect to the three fees charged by share registrars, i.e. transfer fees, dematerialisation fees and the fees charged for setting up a new facility since these fees may be shifted to the investors, thus affecting their participation in the USM. Under the USM arrangement, the need for manual and paper-based process will be removed, and thus enhancing the operational efficiencies with Hong Kong’s financial market infrastructure. Investors will be able to hold securities in uncertificated form electronically with better protection and convenience. ENFORCEMENT NEWS 6. HKMA takes disciplinary action against DBS Bank (Hong Kong) Limited for contraventions of the AML-CTF Ordinance On 5 July 2024, the HKMA announced its disciplinary action against DBC Bank (Hong Kong) Limited ( DBSHK ) for contraventions of AML-CTF Ordinance, and fined the bank with HKD10 million as pecuniary penalty. The disciplinary action followed an investigation by the HKMA on DBSHK’s systems and controls for compliance with the AMLO , key findings of contravention were reported during various periods between 1 April 2012 and 30 April 2019, precisely that DBSHK had failed to : obtain the copies of the identity document of 609 Authorizers of a corporate internet banking service offered by the bank; duly complete the trigger event review of customer due diligence ( CDD ) documents of 23 customer; identify transactions that have no apparent economic or lawful purpose when there were review alerts generated from its transaction monitoring system, or take any action to examine the background and purpose of these suspicious transactions in respect of 15 customers; take reasonable measures to establish the source of wealth ( SoW ) and the source of funds ( SoF ) of the high-risk customers, or take any additional measures to mitigate the risks of money laundering involved in the business relationship with 15 customers; establish and maintain effective procedures for purpose of carrying out its “ duties to continuously monitor business relationships ” with customers under section 5 of Schedule 2 to the AMLO; in particular with respect to the requirements of enhanced due diligence in high-risk situations where it is necessary to establish the principal business activities of customer in particular to SoF and SoW information; keep records required under section 20(1)(b) of Schedule 2 to the AMLO for a period of at least 5 years on the date on which the business relationship ended. SIGNIFICANCE: The AMLO and its relevant guidelines have been made available to all financial institutions, and there is no reason of ignorance or omission if the management team has taken the measures with due care, to implement the measures effectively and conduct reviews as required in order to identify, mitigate and remediate any deficiencies thus discovered. It could be deducted to the very interactive relationship between the "policies and procedures" per se and the personnel to whom these policies are applied and to be implemented! To foster a culture of compliance and integrity is an indispensable technique to harmonize such interactive relationship. 7. Hedge Fund manager ordered to disgorge HKD5.6 million illicit profits from false trading and disqualified for four years On 3 July 2024, the Market Misconduct Tribunal (MMT) had ordered Mr Jonathan Dominic Iu Wai Ching (LU), a former responsible officer of Tarascon Capital Management (Hong Kong) Limited (Tarascon), to disgorge illicit profit of over $5.6 million from false trading and disqualified him for four years following legal proceedings brought by the SFC. In findings of the investigation, on 22 trading days between August and September 2014, LU placed contemporaneous orders in the shares of Sinopharm Tech Holdings Limited and Quantum Thinking Limited through the brokerage accounts of the hedge fund managed by Tarascon and of his mother, leading to opposing orders to be executed against each other. The matched trades artificially created a false appearance of active trading in the listed shares, resulted in gains of HKD5.6 million in the brokerage account of LU’s mother at the expense of the hedge fund. The MMT has made the following orders against LU precisely as below: a disqualification order to prohibit him from being a director, effective from 28 June 2024; LU is banned from dealing in securities, futures contracts, leveraged foreign exchange contracts or CIS in HK for four years, effective from 28 June 2024; LU is not to engage in any conduct which constitutes market misconduct; LU is to pay the sum of the amount of profits gained by his market misconduct; and pay the SFC ‘s investigation costs. SIGNIFICANCE: At the material time, LU, who was responsible for managing and making investment decision for the hedge fund, was also a director, the chief investment officer, and a substantial shareholder of Tarascon. So ironical that LU was supposed to be the key management person to safeguard compliance of Tarascon and the hedge fund, and he turned out to be the main culprit to breach the rules he had to uphold by his capacity! 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 Hong Kong Government will implement enhanced regulations for licensed money lenders in two phases. The first phase in August 2026 introduces a Debt Servicing Ratio (DSR) cap for low-income borrowers and bans the use of loan referees. The second phase in June 2027 mandates... ComplianceOne's Market Insights : Mainland Enterprises "GoGlobal" Task Force: Background, Development, and Professional Implementation (May 2026) I. Background: The "Value-Added Super-Connector" in National Strategy As Mainland enterprises transition from domestic dominance to global expansion, Hong Kong’s role at the intersection of the "Dual Circulation" strategy has evolved from a traditional window to a high-capacity "Value-Added Super-Connector." To systematically support Mainland firms in leveraging Hong Kong's advantages for international growth, the Chief Executive proposed a dedicated mechanism in the 2025 Policy Address to coordinate territory-wide resources for enterprises "going global." The Mainland Enterprises "GoGlobal" Task Force was officially established in October 2025. This high-level, cross-departmental platform led by the HKSAR Government serves as a proactive one-stop hub for recruitment and support. Within this policy framework, professional regulatory consultancies such as ComplianceOne play a pivotal role in translating policy into executable solutions, ensuring that enterprises enjoy policy dividends while aligning precisely with international regulatory standards. II. High-Level Governance: Cross-Agency Synergy and Professional Leadership The Task Force is overseen by the Secretary for Commerce and Economic Development (SCED), Mr. Algernon Yau, and is guided by a Steering Committee comprising the core pillars of Hong Kong’s financial, trade, and regulatory infrastructure: Policy & Coordination: Permanent Secretaries from the Commerce and Economic Development Bureau (CEDB), Constitutional and Mainland Affairs Bureau (CMAB), Financial Services and the Treasury Bureau (FSTB), and the Innovation, Technology and Industry Bureau (ITIB). Execution & Promotion: Invest Hong Kong (acting as the Secretariat), the Trade Development Council (HKTDC), and the Productivity Council (HKPC). Finance & Risk Management: The Hong Kong Monetary Authority (HKMA), HKEX, and the Hong Kong Export Credit Insurance Corporation (ECIC). While this "Whole-of-Government" approach ensures rapid access to administrative resources, the operational success of an enterprise hinges on technical execution. Specific nuances—such as the establishment of trust structures, company secretarial maintenance, and license applications—require professional service providers like ComplianceOne, a licensed Trust or Company Service Provider (TCSP), to bridge the gap between administrative frameworks and commercial reality. III. Development Milestones: From Strategic Consensus to Precision Implementation Since its inception, the Task Force has rapidly expanded its service network through high-profile engagements and strategic agreements: November 2025: Shanghai Promotion Conference The Task Force hosted the "Hong Kong: The Preferred Platform for Mainland Enterprises to Go Global" conference, highlighting Hong Kong’s core functions in cross-border supply chain management and offshore trade. December 2025: Launch of the Professional Services Platform Initiated by the Department of Justice (DOJ) with support from the CEDB, the "Hong Kong Professional Services Going Global Platform" was officially launched. In this context, ComplianceOne actively supports Mainland enterprises in establishing headquarters and expanding overseas through its one-stop compliance solutions, providing deep support in Anti-Money Laundering (AML) monitoring and corporate governance. February 2026: Elevating Ministry-Level Cooperation The CEDB signed a Memorandum of Understanding (MOU) with the Ministry of Commerce of the People's Republic of China regarding "Strengthening Exchange and Cooperation in the Field of Overseas Comprehensive Services." As a leading compliance expert, ComplianceOne is committed to upholding the spirit of this MOU by combining professional regulatory advisory with the Task Force's policy guidance to enhance the global adaptability of Mainland firms. March 2026: Beijing Seminar & Digital Launch InvestHK and the China Council for International Investment Promotion co-organized their first large-scale event in Beijing. Simultaneously, the "GoGlobal" Dedicated Website was launched. With the surge in demand for high-quality professional services, ComplianceOne stands as a trusted partner, offering expert insights into SFC licensing, corporate structural optimization, and cross-border tax compliance. IV. Vision: A "Safe Harbor" and "Booster" for Global Growth The core value of the Task Force lies in "Precision Matching" and "End-to-End Support." Looking ahead, the HKSAR Government will continue to provide policy leadership, while ComplianceOne will continue to serve as a professional regulatory consultant, transforming complex compliance requirements into efficient operational pathways. Through this dual protection of "Government Platforms + Professional Institutions," we help Mainland enterprises transform Hong Kong into an irreplaceable global headquarters, achieving generational legacy and stable growth. Sources of Reference HKSAR Government. (2026, March 20). Seminar on empowering Mainland enterprises to go global with Hong Kong's business advantages held in Beijing [Press Release]. Retrieved from: https://www.info.gov.hk/gia/general/202603/20/P2026032000232.htm Department of Justice, HKSAR. (2025, December 13). Launch of "Hong Kong Professional Services Going Global Platform" marks new phase in supporting Mainland enterprises [Press Release]. Retrieved from: https://www.doj.gov.hk/tc/community_engagement/press/20251213_pr1.html Xinhua News / LOCPG. (2026, March 23). InvestHK officially launches dedicated website for Mainland Enterprises "GoGlobal" Task Force . Retrieved from: http://big5.locpg.gov.cn/20260323/7889fc869007455880052fe575e3d005/c.html Commerce and Economic Development Bureau. (2025, November 6). "Hong Kong: The Preferred Platform for Mainland Enterprises to Go Global" promotion held in Shanghai [Press Release]. Retrieved from: https://www.cedb.gov.hk/tc/news/press_release/2025/pr06112025a.html HKSAR Government. (2025, October). The Chief Executive’s 2025 Policy Address: Reform for Enhancement — Building a Brighter Future Together [Section 80]. Retrieved from: https://www.policyaddress.gov.hk/2025/tc/p80.html InvestHK. (2025). Mainland Enterprises "GoGlobal" Task Force Steering Committee holds first meeting . Retrieved from: https://www.investhk.gov.hk/zh-hk/news/goglobal-task-force-steering-committee-holds-first-meeting/ [End of ComplianceOne's Market Insights : Mainland Enterprises "GoGlobal" Task Force: Background, Development, and Professional Implementation – May 2026] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1605, 16/F, West Tower, Shun Tak Centre,168-200 Connaught Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

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 .

證券及期貨事務監察委員會（”證監會”）於2023年3月發佈了多份簡易參考指南簡單說明發牌及勝任能力規定。 證券及期貨事務監察委員會（”證監會”）於2023年3月發佈了多份簡易參考指南簡單說明發牌及勝任能力規定。 符合條件的內地從業人員可以省去眾多額外的考核與資格判定程序，直接在香港執業，預計將進一步加深兩地金融市場的互動。 當中包括三個主要元素分別是： 學歷及專業資格； 行業經驗及資格,以及； 香港監管架構考試 對於一些擁有足夠經驗的內地執業申請人，香港證監會可務實豁免部分相關考試，以便他們獲取牌照在香港執業。內地人員可靈活及有效地在網上提交牌照申請。 認可內地專業資格: 中國證券業協會 中國期貨業協會 中國證券投資基金業協會 若內地執業申請人已獲得中國證券業協會、中國期貨業協會或中國證券投資基金業協會的執業資格，可被視作符合相關香港持牌代表的認可行業資格。 如已擁有內地高管人員任職資格，可被視作符合相關香港負責人員的認可行業資格。 目前，證監會承認在內地取得的行業及管理經驗，並會考慮一些在無需受規範管理情況下所獲取的執業資格。證監會提到，如果申請人沒有取得大學學位但在內地取得足夠的相關行業經驗，他可以選擇完成額外的持續培訓，並通過勝任能力評估，而無需取得相關認可行業資格。 證監會例子 為了幫助從業人員更好地理解指南，證監會提供了以下例子。 例子一： 如果李先生已經持有中國內地的一般證券或期貨業務資格，在申請成為香港的持牌代表時，他可以被認可為符合第1類受規管活動（證券交易）或第2類受規管活動（期貨合約交易）的行業資格。 同樣地，如果李先生持有中國內地的基金管理資格，他可以被認可為符合第9類受規管活動（資產管理）的行業資格。 例子二： 張女士在中國內地擔任私募基金的基金經理和董事總經理已有十年。她現在被派駐到香港一家持牌的私募基金管理人子公司，擔任首席投資總監及負責人。由於張女士擁有中國內地的經濟學學位以及豐富的基金管理和領導經驗，她符合學歷、行業資格及管理經驗的要求。因此，她只需通過香港監管架構考試，便可滿足勝任能力的評估。 作為子公司的高級管理人員並擁有足夠的相關行業經驗，張女士可以申請豁免香港監管架構考試的規定，或根據相關的發牌條件，在牌照核准後六個月內通過該考試。 總體而言，證監會的努力明確表明了加強兩地金融市場互動與融合，深化金融合作的意圖。這些指南解答了常見的發牌問題，並提供了有關家族辦公室免牌照經營條件、海外行業經驗和資格的認可，以及豁免考試規定的具體資料。這將提高申請者的申請效率和成功率，同時有助於規範市場行為和促進監管的有效性。 (更多信息，請參閱證監會的發牌手冊或遊覽簡易參考指南系列)

天匯合規的聯營公司 億東金融科技有限公司 本年已正式推出東查查反洗錢客戶管理系統 (Screen-X AML/CRM Solutions)。 ComplianceOne Fintech Solutions - Screen-X AML/CRM Solutions 天匯合規金融科技解決方案 – 東查查反洗錢/客戶管理系統 天匯合規的聯營公司 億東金融科技有限公司 本年已正式推出東查查反洗錢/客戶管理系統 (Screen-X AML/CRM Solutions)。 憑藉 天匯合規 在監管合規和資訊科技領域的豐富經驗，我們透徹地了解香港、大灣區、以至全球金融監管的框架，專注為受監管的金融機構和企業提供合規科技解決方案，深入了解監管政策和行業痛點，因此，我們研發了 東查查 ，務求為金融機構提供 全自動化的反洗錢系統 ，以符合監管機構的要求，並協助金融機構 在營運上減低合規風險及提升營運的效率 。 東查查反洗錢/客戶管理系統集 認識你的客戶及客戶盡職審查 、 風險評估 、 持續監察 、 備存紀錄 等功能於一身，為您的合規工作護航，以下會詳細說明。 1. 認識你的客戶及客戶盡職審查 東查查可快速完成客戶身份驗證，包括個人和法人（公司）客戶。系統支持多種身份證件驗證，如身份證、護照、營業執照等，並可自動與國內外公開資料庫進行比對，有效降低KYC過程中的人工核查成本。 2. 客戶風險評估 東查查配備風險評估功能，根據客戶背景、行為、交易等多維度數據，自動計算客戶風險，並針對不同風險級別設定持續監察頻率，幫助您更好地管控合規風險。 3. 持續監察 東查查可設定持續監控客戶的交易活動，實時捕捉可疑交易。同時也能定期審查客戶資料，確保與實際活動保持一致。若客戶的交易模式突然變化或與其聲稱的業務模式不符，會建議進行進一步調查。 4. 備存紀錄 東查查提供客戶管理功能，能協助用戶備存必要的記錄和文件，以便日後監管審查和調查。我們採用嚴格加密及系統安全措施，例如︰數據儲存於阿里雲﹑對數據庫的數據進行加密﹑登錄加密﹑每天備份﹑接口加密，以保護極度敏感的客戶數據免受未經授權的訪問，及確保信息的機密性和完整性。 客戶反饋例 資產管理公司 東查查能準確識別高風險客戶，提供的分析報告也清楚易明，減省了大量人工審查的時間，令同事的工作變得更高效，提升了工作效能。 信託或公司服務提供者（TCSP） 公司一直非常重視反洗錢合規管理，但隨著業務快速增長，傳統的人工盡職調查已難以滿足需求。東查查的價格相宜，可以在網上自行完成購買和使用，操作非常簡便快捷。系統的客戶盡職審查和風險評估功能，大幅提升了我們的工作效率，同時又能確保合規風險的有效管控。 東查查的數據庫供應商介紹 Acuris 自2015年的收購提供了獨特的合規數據集和全球運力 作為擁有專屬的政治公眾人物 (PEPs)、制裁和負面新聞的數據提供者 由全球擁有超過200名懂多種語言的分析師組成的專屬研究團隊 獲得ISO 27001認證 擁有ACAMS認證的研究團隊 立即試用 如有任何查詢，歡迎以下列方式聯絡我們，謝謝！ If you have any questions about this order, please feel free to contact us. Thank you! https://edon.asia/ info@edon.asia (852) 3543 9099 (852) 9690 0882 https://www.youtube.com/watch?v=29FJ23T0ODc

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – May 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES Updates to intermediaries of new acceptable account opening approaches MARKET NEWS SFC-HKEX launch Technology Enterprises Channel for Technology and Biotech Companies HK Government welcomes passage of the Stablecoins Bill The Mainland-Hong Kong Swap Connect to include enriched Product Types to foster internationalization of RMB Renewed Mutual Recognition of Funds between Ireland and Hong Kong ENFORCEMENT NEWS SFC Fines Sino-Rich $2 Million and Suspends its Responsible Officer for Margin Lending Failures SFC Issues Restriction Notice to Bloomyears Limited SFC Revokes Mui Chok Wah’s Licence following Theft Conviction and Regulatory Breach of Non-disclosure The Responsible Officer of Lion Futures Limited is Banned for breach of AML/CFT Regulations SFC Prosecutes a Finfluencer for Providing Securities Advice Publicly without a License Court Convicts Brothers-in-Law of False Trading Conspiracy in Pa Shun Shares SFC Disqualifies National Agricultural Executives for Multiple Financial Misconduct Regulatory Updates 1. Updates to intermediaries of new acceptable account opening approaches On 30th May 2025, the SFC issued an update on acceptable account opening approaches allowing intermediaries to streamline the client onboarding process for overseas investors while ensuring compliance and enhancing security. These updates permit intermediaries flexibility in acceptable remote client account opening procedures. The table below lists out the updates on acceptable non-face-to-face (NFTF) account opening approaches. For more details, please refer to the SFC circular. The updates on acceptable non-face-to-face (“NFTF”) account opening approaches are summarized as below: (1) Certification services (i) Certification services recognised by the Electronic Transactions Ordinance (Cap. 553) can be employed for client identity verification in NFTF account opening where the list of recognized certificates are made available on the website of the Digital Policy Office (“ DPO ”)[1] of the Hong Kong SAR Government. (ii) Smartphones equipped with Near Field Communication (“ NFC ”) technology can be used for accessing the certification services provided by recognised Certification Authorities (“ CA ”) remote account opening. (iii) Personal (Remote) ID-Cert Class 12 (a kind of Recognised Certificate), issued by Digi-Sign Certification Services Limited , can be subscribed by overseas investors holding ePassports for remote clients onboarding. The certificates must be in compliance with the standards of Internationals Civil Aviation Organization (“ ICAO ”). (iv) Currently, more than 100 overseas jurisdictions have issued ICAO-compliant ePassports which are eligible for remote client onboarding. ————————————————— [1] The DPO was set up in July 2024 by merging the Office of the Government Chief Information Officer and the Efficiency Office. Representing a consortium of know-how of the two offices specialized in information technology (IT) and business processes re-engineering, the DPO is responsible for formulating policies on digital government, data governance and information technology. The establishment of the DPO is an important step in enhancing governance and driving the development of digital government by bolstering the Government’s capabilities in addressing long-term and strategic issues. (2) iAM Smart (i) iAM Smart is a newly included acceptable NFTF account opening approach by the SFC; (ii) It is a one-stop personalised digital services platform, which provides a reliable and independent source of Hong Kong residents’ identities, which can be used for client identity verification; (iii) iAM Smart has also been specified as a recognised digital identification system for client identity verification under paragraph 4.2.1 of the AML/CFT Guideline (June 2023); (iv) To facilitate the adoption of iAM Smart by financial institutions, an iAM Smart Sandbox Program (“ Programme ”) has been launched by the DPO in collaboration with the Cyberport, licensed intermediaries are encouraged to join the Program for access to various documentation and resources via the SFC by visiting the “ invitation letter ” for details. (v) Illustrative processes of the connection to and the adoption of iAM Smart for account opening are set out in Appendix B of the SFC circular for further reference. The SFC has published a list of eligible jurisdictions that clients may maintain bank accounts with for first payments and ongoing fund movements for the purpose of remote onboarding of overseas individual clients, currently, 15 additional eligible jurisdictions are added. SIGNIFICANCE: As NFTF account opening approaches become more prevalent, financial intermediaries should keep themselves abreast of the latest technologies available in order to widen their access to onboarding overseas clients amid the intense competition in the local market. Whereas intermediaries should be reminded that some jurisdictions may have restrictions on citizens’ investments or capital transfers beyond their territorial boundaries, thus intermediaries are advised to seek reference to the requirements of that domestic regulatory authorities when onboarding overseas clients. Market News 2. SFC-HKEX launch Technology Enterprises Channel for Technology and Biotech Companies The SFC and the Hong Kong Exchanges and Clearing Limited (the “ HKEX ”) jointly announced the launch of a dedicated technology enterprises channel (“ TECH ”) to further facilitate New IPO Listing applications from prospective Specialist Technology Companies (“ STC ”) and Biotech Companies (“ BTC ”), and introduced new confidential filing option. There are views that the establishment of TECH is a key measure for Hong Kong to consolidate its position as a global hub for capital of technology and innovation, effectively highlighting the advantages of listing in Hong Kong. TECH supports prospective STCs and BTCs in understanding applicable Listing Rules and preparing for their listing in Hong Kong before submitting formal New Listing applications, the following facilitating measures are: (i) a specialized team with relevant experience has been designated in reviewing and providing guidance on the Main Board Chapter 18A, 18C applications; (ii) engagement with the prospective STC or BTC in order to gain a deeper knowledge of their specific business; (iii) provision of guidance on the eligibility and suitability for listing on the products and services to be offered; (iv) opportunities for the STC or BTC to discuss and seek guidance from the SEHK on Listing Rules; (v a confidential filing option is made available for listing applications filed under the Main Board Chapter 18A, 18C in the wake of this announcement. SIGNIFICANCE: The TECH channel is strategically vital for Hong Kong's financial hub status. By providing pre-application guidance and confidential submissions tailored specifically for high-potential, high-risk specialist tech and biotech firms, TECH directly addresses a critical market gap. This significantly enhances Hong Kong's attractiveness and competitiveness against global rivals in capturing innovative, fast-growth companies seeking capital. 3. HK Government welcomes passage of the Stablecoins Bill The Hong Kong Government announced the passage of the Stablecoin Bill (the “Bill” ) by the Legislative Council on 21 May 2025 to establish a licensing regime for the fiat-referenced stablecoin (“ FRS ”) issuers in Hong Kong. Important takeaways with the Stablecoins Ordinance It is required to obtain a license from the Hong Kong Monetary Authority if any person who, in the course of business, issues an FRS in Hong Kong, or issues an FRS that purports to maintain a stable value with reference to Hong Kong dollars in or outside Hong Kong. Some key points to note (a) The relevant person must satisfy reserves asset management and redemption requirements which include: (i) a proper segregation of client assets; (ii) maintenance of a robust stabilisation mechanism, and; (iii) the processing of stablecoin holders’ requests for redemption at par value with reasonable conditions. (b) The relevant person must comply with other requirements which include: (i) anti-money laundering and counter-terrorist financing; (ii) risk management; (iii) disclosure and auditing; and (iv) fitness and propriety. (c) The regulatory regime will also provide better protection for the general public and investors, including: (i) only specified licensed institutions may offer an FRS in Hong Kong; (ii) only an FRS issued by a licensed issuer may be offered to a retail investor; (iii) only advertisements of licensed FRS issuance are allowed in order to avoid any fraud and scams. SIGNIFICANCE: As the Secretary for Financial Services and the Treasury, Mr Christopher Hui, had said, “ The Ordinance adheres to the ‘ same activity, same risks, same regulation ’ principle, with a focus on a risk-based approach to promote a robust regulatory environment. This is not only in line with international regulatory requirements, but also lays a solid foundation for Hong Kong’s virtual asset market …” It is also of crucial importance to know how the Bill defines the meaning of stablecoin : A " stablecoin " is a cryptographically secured digital representation of value that – (a) is expressed as a unit of account or store of economic value; (b) is used, or intended to be used, as a medium of exchange accepted by the public for any one or more of the following purposes:- (i) payment for goods or services; (ii) discharge of a debt; (iii) investment; (c) can be transferred, stored or traded electronically; (d) is operated on a distributed ledger or similar information repository; and purports to maintain a stable value with reference to:- (i) a single asset; or (ii) a pool or basket of assets". According to the above meaning, it is worth to note that stablecoins can be used as a medium of exchange for payment of goods or services owing to its stable value with reference to certain assets like fiat money and be exchanged for in equivalent value ; whereas other cryptocurrencies are only convertible to fiat money subject to prevailing market values. Most important is that the issuers of stablecoins are required to obtain a license from HKMA. 4. The Mainland-Hong Kong Swap Connect to include enriched Product Types to foster internationalization of RMB To further promote the collaborative development of financial derivatives markets on Mainland and Hong Kong, and to support a high-quality opening-up of Mainland’s financial markets, the People’s Bank of China (“ PBoC ”), the SFC and the HKMA work together to enrich the product types under the Swap Connect by the following ways: (i) tenor of the interest rate swap contracts to be extended to 30 years; (ii) the scope be expanded to cover interest rate swap contracts using the Loan Prime Rate (“ LPR ”) as the reference rate. The Timeline for Mutual Access: Back in May 2023, following the launch of the Mainland-Hong Kong interest rate swap markets mutual access scheme (“ Swap Connect ”) for opening-up of Mainland’s financial markets, transaction volume under the scheme has been growing steadily. In 2024, the Swap Connect had been enhanced to provide more flexibility for offshore institutional investors to manage their interest rate risk, increasing the attractiveness of RMB assets. As of April 2025, 20 Mainland dealers and 79 offshore investors had participated in Swap Connect, completing more than 12,000 interest rate swap transactions with an aggregate notional amount of approximately RMB 6.5 trillion. SIGNIFICANCE: It is the second round of enrichment for Swap Connect since May 2024, the operational performance is amazing as stated above. Looking ahead, the regulatory authorities in Mainland and HK will continue to leverage on this promising scenario to enhance relevant arrangements for further opening-up of the financial markets in Mainland with an aim toward internationalization of RMB in a steady manner. 5. Renewed Mutual Recognition of Funds between Ireland and Hong Kong Further to the memorandum dated back on 5th November 1997, Central Bank of Ireland (“ CBI ”) and the Hong Kong SFC enter another memorandum of understanding for Mutual Recognition of Funds (“ MRF ”) on 14 May 2025. The purpose of the Memorandum is to enhance cooperation in relation to (i) collective investment schemes; and (ii) management companies of the CIS, either in Hong Kong or Ireland. The main points of the Memorandum are as below: (1) General Principles a) under the MRF, a CBI-authorized Irish Covered Fund (CBI-authorized “ ICFD ”) seeking or has received authorization in HK, shall : (i) meet the eligibility requirements; (ii) remain authorized by the CBI, and available to retail investors; (iii) be operated/ managed by relevant laws and regulations in Ireland; (iv) be sold and distributed in compliance with applicable laws in Hong Kong; (v) ensure investors in both Ireland and Hong Kong receive fair treatment; (vi) ensure ongoing disclosure of information be made available at the same time. b) if an ICFD complies with the relevant Irish laws and regulations, it is generally deemed to have complied in the same manner with those of Hong Kong, and will enjoy a streamlined process of authorisation for offering to the public; c) the existing Acceptable Inspection Regimes on managers and Recognised Jurisdiction Schemes on funds, and the streamlined measures are still applicable to ICFD. (2) Eligibility Requirements and types of eligible funds a) the requirements are set in details in the Annex B; b) for ICFD to be authorized by SFC, it must fall within at least one of the following eligible fund types: (i) general equity funds, bond funds, mixed funds and funds that invest in other schemes; (ii) feeder funds; (iii) unlisted index funds; (iv) passively managed index tracking exchange traded funds (ETFs); (v) listed open-ended funds. c) ALL ICFD must comply with the requirements under the “Requirements applicable to all Irish Covered Funds” below. (3) Requirements applicable to all Irish Covered Funds a) Representatives in Hong Kong (i) Appoint a firm as representative in HK. b) Operational and ongoing requirements (i) Home jurisdiction supervision: remain authorized by CBI. (ii) Changes to Irish Covered Funds: either notification or approval from SFC is required from the ICFD. (iii) Breach: report to SFC if the ICFD is found in breach of domestic laws. (iv) Withdrawal of authorization. c) Sales/ distribution, offering documents, ongoing disclosure and advertisements (i) Sales/ distribution: by intermediaries licensed with SFC. (ii) Offering documents: must be complete, accurate, fair, clear and effective, and up-to-date. (iii) Ongoing disclosure: be made available at the same time in both locations. (iv) Language: in English and Chinese. (v) Advertising. (vi) Fees. (4) Requirements applicable to each specific type of Irish Covered Funds a) Please refer to Annex A for details (5) Application Process a) FASTrack (i) ICFD seeking authorization will be processed under the FASTrack. b) Two-stream approach (i) If the ICFD does not meet the FASTrack requirements, the process of “Standard Applications” stream and “Non-standard Applications” stream will apply. SIGNIFICANCE: Ireland is a dominant global hub for fund management, particularly renowned as the leading domicile for UCITS funds. Its strengths include EU market access via passporting, a favourable tax treaty network, and deep expertise. Partnering with Ireland is vital for Hong Kong as it provides crucial entry to the vast EU investor base and distribution networks, while Hong Kong offers Ireland a strategic gateway into Asian markets. Enforcement News 6. SFC Fines Sino-Rich $2 Million and Suspends its Responsible Officer for Margin Lending Failures SFC has reprimanded and fined Sino-Rich Securities & Futures Limited (“ Sino-Rich ”) $2 million for significant lapses in its margin lending policy and practices between 1 December 2017 and 30 September 2019. The firm failed to properly document its margin lending policy, neglected to enforce a requirement that clients’ credit limits be based on objective proof of their net income or net worth, and did not mandate written justifications for policy deviations. In addition, the SFC has suspended the license of Mr. Budihardjo Wilhelm Soeharsono, a responsible officer at Sino-Rich, for five months and two weeks, from 8 May 2025, to 22 October 2025. The SFC holds Mr. Budihardjo accountable for failing to fulfil his oversight duties as a senior manager during this period. Key Factors in the SFC’s Decision The SFC considered several factors when determining the penalties: Prior Disciplinary History: Both Sino-Rich and Mr. Budihardjo faced SFC sanctions previously—Sino-Rich in 2021 for anti-money laundering lapses Mr. Budihardjo in 2009 for inadequate client monitoring at another firm. Remedial Efforts: Sino-Rich has since taken steps to enhance its margin lending practices. Cooperation: The firm and Mr. Budihardjo cooperated fully with the SFC’s investigation. Financial Position: Accounting for Sino-Rich’s financial situation and cooperation, the fine was reduced from a potential $3.5 million to $2 million. SIGNIFICANCE: This disciplinary action highlights the critical need for robust compliance in margin lending, an area where lax policies can expose firms and clients to significant risks. Licensed corporations are urged to ensure their lending practices are well-documented and strictly enforced to align with regulatory standards. 7. SFC Issues Restriction Notice to Bloomyears Limited On 21 May 2025, SFC has imposed a restriction notice on Bloomyears Limited (“ Bloomyears ”), prohibiting the firm from conducting its licensed activities or managing any property, including client assets, without prior SFC approval. This decision, driven by concerns over Bloomyears’ reliability, integrity, and competence, signals potential risks to investors as the SFC’s investigation continues. SIGNIFICANCE: SFC issued the notice due to doubts about Bloomyears’ fitness and properness to remain licensed, citing deficiencies in its reliability, integrity, and ability to operate competently, honestly, and fairly. The regulator views this action as necessary to protect the investing public and uphold public interest. SFC’s investigation into Bloomyears is ongoing, suggesting that additional findings or enforcement measures may follow. The restriction notice serves as an interim step to limit potential harm while the inquiry progresses. 8. SFC Revokes Mui Chok Wah’s Licence following Theft Conviction and Regulatory Breach for Non-disclosure SFC has taken significant disciplinary action against Mr. Mui Chok Wah, revoking his licence and banning him from the financial industry for two years, effective from 16 May 2025 to 15 May 2027. This decision follows Mui’s criminal conviction for theft and his failure to promptly notify the SFC of the criminal charge against him, which constitutes a breach of regulatory requirements. On 13 June 2024, Mui was arrested and charged by the Hong Kong Police Force for stealing a wallet left on an ATM machine. He was convicted of theft by the Eastern Magistrates’ Courts on 11 September 2024. Mui pleaded guilty and was sentenced to two months’ imprisonment, suspended for three years, and ordered to pay HKD 3,400 in restitution for the stolen items. SIGNIFICANCE: The SFC’s decision to revoke Mui Chok Wah’s licence and impose a two-year ban reflects its rigorous approach to enforcing regulatory standards. This case highlights the critical importance of transparency, timely reporting, and maintaining professional conduct in the financial industry. Licensed individuals and firms are encouraged to ensure compliance with all regulatory requirements to avoid similar disciplinary actions. 9. The Responsible Officer of Lion Futures Limited is Banned for breach of AML/CFT Regulations SFC has imposed a five-month ban on Mr. Ho Hin Hang, a former responsible officer (“ RO ”), manager-in-charge (“ MIC ”), and director of Lion Futures Limited (“ LFL ”). The ban, effective from 21 May 2025 to 20 October 2025, stems from compliance failures during his tenure at LFL between May 2017 and September 2018. This disciplinary action follows previous sanctions against LFL for breaches of anti-money laundering and counter-terrorist financing (“ AML/CFT ”) regulations and other regulatory requirements from May 2017 to July 2019. Key Findings SFC investigation found that LFL, under Mr. Ho’s oversight, failed to perform adequate due diligence on clients using client-supplied systems (“ CSSs ”) to place orders. These systems, linked to LFL’s broker-supplied system (“ BSS ”) via application programming interfaces, presented significant risks of money laundering and terrorist financing, which LFL did not properly address. Furthermore, the firm lacked an effective system for ongoing monitoring to identify and evaluate suspicious trading patterns in client accounts. The SFC holds Mr. Ho accountable for these lapses, citing his failure to fulfil his duties as an RO and senior manager. SIGNIFICANCE: In deciding the sanction, the SFC highlighted: The severity of the compliance failures, which jeopardized market integrity and public trust. The need to send a clear deterrent message to the financial industry. Mr. Ho’s clean disciplinary history, which was considered but did not outweigh the need for action. This case reinforces the SFC’s commitment to enforcing robust AML/CFT controls and diligent oversight within Hong Kong’s financial markets. 10. SFC Prosecutes a Finfluencer for Providing Securities Advice Publicly without a Licence SFC has launched legal action against Mr. CHAU Pak Yin, previously known as CHAU Kin Hei, a financial influencer (the “ Finfluencer ”) on social media. On 8 May 2025, the Eastern Magistrates’ Court scheduled a pre-trial review for 24 July 2025 after CHAU pleaded not guilty to charges of advising on securities without a license. Background Finfluencers are individuals who share investment-related content on social media platforms. The SFC alleges that between 16 April 2021 and 14 May 2021, CHAU hosted a Telegram chat group where he provided securities advice. This activity, conducted without an SFC license and without reasonable excuse, is claimed to violate sections 114(1)(a) and 114(8) of the SFO. SIGNIFICANCE: Under the SFO, "advising on securities" is the Type 4 Regulated Activity requiring a license from the SFC. The SFC’s enforcement efforts aim to protect investors and maintain market integrity by ensuring that only licensed individuals engage in regulated activities like securities advising. This case serves as a warning to finfluencers and others providing financial advice online. The SFC also urges investors to verify the licensing status of individuals and firms offering securities dealing services. This can be done easily through the SFC’s Public Register of Licensed Persons and Registered Institutions, accessible at www.sfc.hk . Engaging with unlicensed parties poses significant risks, including financial loss and fraud. 11. Court Convicts Brothers-in-Law of False Trading Conspiracy in Pa Shun Shares The Eastern Magistrates’ Courts today convicted Mr. LIN Tai Fung and his brother-in-law, Mr. OR Chun Nin, after they pleaded guilty to conspiracy to commit false trading in the shares of Pa Shun International Holdings Limited ( 00574.HK ) (“ Pa Shun ”) between 9 April 2017 and 7 March 2018. The prosecution was initiated by the SFC. Details of the Conviction False Trading Conspiracy : LIN and OR conspired to purchase Pa Shun shares to artificially maintain the closing share price at or above a certain level, misleading investors about the stock’s attractiveness. Failure to Disclose Interests : LIN also pleaded guilty to failing to notify the Stock Exchange of Hong Kong of changes in his shareholding in Pa Shun on eight occasions between 2 June 2017 and 14 March 2018, despite a legal obligation to do so. The case has been adjourned to 10 June 2025 for sentencing. Both individuals were granted bail with conditions of $20,000 cash bail and $50,000 surety. SIGNIFICANCE: SFC issued the notice due to doubts about Bloomyears’ fitness and properness to remain licensed, citing deficiencies in its reliability, integrity, and ability to operate competently, honestly, and fairly. The regulator views this action as necessary to protect the investing public and uphold public interest. SFC’s investigation into Bloomyears is ongoing, suggesting that additional findings or enforcement measures may follow. The restriction notice serves as an interim step to limit potential harm while the inquiry progresses. 12. SFC Disqualifies National Agricultural Executives for Multiple Financial Misconduct SFC has secured disqualification orders from the Court of First Instance against former directors and a senior executive of National Agricultural Holdings Limited ( 01236.HK ) (“ NAH ”), barring them from corporate management roles in Hong Kong for periods ranging from two to nine years. This follows an investigation revealing significant financial misconduct and breaches of duty. Key Findings The SFC uncovered multiple instances of misconduct: Unpaid Shares : NAH’s controlling shareholder, Parko (Hong Kong) Limited, failed to pay approximately HK$676 million for 212,194,500 shares allotted on 9 June 2015. Fund Misappropriation : Between January and June 2015, HK$384 million was transferred to another company under the pretext of establishing an investment fund for NAH, orchestrated by former chairman Mr. CHEN Li-Jun. The funds were diverted for unrelated purposes, including transfers to Parko. Suspicious Transfers : In August 2017, a refund of RMB1.85 billion from lapsed transactions was quickly moved out of NAH through dubious transactions for unknown purposes. Unauthorized Transfer : In 2015, CHEN transferred HK$50 million from NAH to a connected company without justification, disguising it as a loan to another entity. Roles, Breaches and Disqualification Details Name Roles and Breaches Disqualification Ms. LU Ying As financial manager, she coordinated the questionable payments and knew or should have known of the misconduct. Disqualified for nine years. Mr. REN Hai; and Mr. PENG Guojiang As executive directors and Parko directors, they allowed Chen to dominate NAH’s affairs for personal benefit, failing to investigate or address the misconduct. Each disqualified for seven years. Mr. TING Tit Cheung As an independent non-executive director and audit committee member, he neglected oversight duties, ignoring auditor concerns and failing to question suspicious transactions. Disqualified for two years. The above-mentioned individuals are prohibited from serving as directors, liquidators, receivers, or managers of any corporation in Hong Kong, including NAH and its affiliates, and from participating in corporate management. They were also ordered to cover the SFC’s legal costs. They all admitted to breaching their duties to NAH, leading to the court’s orders. SIGNIFICANCE: This action follows disqualification orders against three other NAH directors on 23 June 2023, signalling ongoing efforts to address governance failures at the company, whose shares were delisted from the Hong Kong Stock Exchange in November 2019. Orders reinforce the SFC’s commitment to upholding corporate governance standards, protecting investors, and maintaining Hong Kong’s financial market integrity. Stakeholders are encouraged to prioritize robust oversight in their organizations. Case Reference: HCMP 36/2021 [End of ComplianceOne Newsletter –May 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

Use of generative AI language models Compliance Impact Alert: Use of generative AI language models Dec 2024 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 Executive Summary On 12 November 2024, the Securities and Futures Commission (“SFC”) issued a circular addressing the risks associated with generative AI language models (“AI LMs”) for licensed corporations (“LCs”). The SFC mandates enhanced cybersecurity protocols and responsible use of AI LMs to mitigate risks such as output quality issues, data management vulnerabilities, and reliance on external providers. LCs must implement robust policies, conduct thorough testing, and ensure compliance with regulatory standards. Actions and Recommendations Review Existing AI Implementations Assess current AI systems for compliance gaps and plan corrective actions. Develop AI Risk Assessment Frameworks Create frameworks to identify high-risk applications and mitigation strategies. Implement Enhanced Monitoring and Validation Regularly evaluate AI model performance and check for biases or inaccuracies. Staff Training Educate employees on new AI governance requirements and ethical AI use. Update Third-Party AI Provider Agreements Ensure agreements meet regulatory expectations, focusing on data handling and compliance. 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. 1. Continuous Support: Stay ahead of regulatory changes with our continuous monitoring and updates, ensuring that you are always in compliance. 2. Gap Analysis: Identify gaps between regulatory expectations and your current policies. 3. Develop Tailored Solutions: Create solutions to meet specific needs and close material gaps. 4. Ensure Adherence: Maintain compliance with regulatory standards and enhance overall compliance practices. For any inquiries, please refer to our Ongoing Compliance Support Service or feel free to Contact us .

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – August 2025 The topics discussed in this monthly newsletter are as follows: REGULATORY UPDATES IA Caps Referral Fees at 50% for Participating Policies, Effective 1 Oct 2025 Insurers Must Publicly Disclose Audited Financials Under RBC Regime to Boost Market Transparency Under The New Requirement MARKET NEWS Insurance Authority Encourages Relocation of Investment Decision Functions for Life Insurers to Hong Kong ENFORCEMENT NEWS Tahoe Life was fined $10 million for unauthorized transactions IA Secures Conviction Against YAN Zhiyu for Non-Compliance with Investigation Regulatory News 1. IA Caps Referral Fees at 50% for Participating Policies, Effective 1 Oct 2025 The IA issued a circular on 1 September 2025, outlining regulatory expectations for referral fees paid by licensed insurance broker companies in relation to participating policies. This guidance applies to authorized insurers and licensed insurance intermediaries dealing with long-term business. It builds on prior communications, including the 22 May 2024 circular on referral business models and the 30 July 2025 Practice Note on remuneration structures. Key Requirement: Referral Fees Ratio Cap : Insurance broker companies shall not pay referral fees to any referrers above a Benchmark* , which is calibrated as 50% of the total commission receivable by the broker companies from an authorised insurer for introducing, arranging and servicing a participating policy Scope of Circular : The new regulatory expectation will not be applied to the business lines which regulators are SFC and MPFA Effective Date : All licensed insurance broker companies and authorized insurers should comply with this circular by 1 October 2025 . * As stated in the circular on 1 September 2025, the Benchmark is calibrated as 50% of the total commission receivable by a licensed insurance broker company from an authorized insurer for introducing, arranging and servicing a participating policy. SIGNIFICANCE: This circular address concerns over business models that may incentivize misconduct, such as shifting regulated activities to unlicensed referrers or offering indirect rebates. By establishing a clear benchmark and requiring justifications for deviations, the IA aims to promote fair treatment of customers, enhance market integrity, and sustain the long-term health of Hong Kong's insurance sector amid evolving distribution practices. 2. Insurers Must Publicly Disclose Audited Financials Under RBC Regime to Boost Market Transparency Under The New Requirement On 8 August 2025, the IA issued a circular to the Chief Executives of all authorized insurers ( excluding intermediaries ), detailing public disclosure requirements under IO for the first financial year adopting the Risk-based Capital (“ RBC ”) regime (financial years commencing on or after 1 January 2024). This initiative aims to enhance market transparency ahead of the full enactment of the Insurance (Public Disclosure) Rules in 2026. The IA conducted a public consultation on the draft Insurance (Public Disclosure) Rules on 14 March 2025 , with conclusions issued on 8 August 2025 . While the full Disclosure Rules are planned for introduction to the Legislative Council and effective in 2026, insurers are required to disclose quantitative information for the transitional year. Audited Financial Statements All authorized insurers, excluding those with approved transitional arrangements under rule 88 of the Insurance (Valuation and Capital) Rules, marine insurers, captive insurers, or special purpose insurers (collectively "exempted insurers"), must publish their audited financial statements. These are the statements submitted to the IA under rule 3 of the Insurance (Submission of Statements, Reports and Information) Rules, disclosed in their original language without translation. Disclosure Statement All authorized insurers except exempted insurers and Lloyd’s must publish a disclosure statement using the standard templates in Annex 1 (English) and Annex 2 (Chinese). The statement must be provided in English with a Chinese translation or vice versa. Focus on quantitative information; qualitative information is optional if deemed necessary. Disclosures must conform to the valuation and capital requirements under the Insurance (Valuation and Capital) Rules, or any variations/relaxations under sections 10(3) or 130(1) of the IO. Include a statement (referring to section 5 of the disclosure statement) made by a controller (as defined in section 13A(12) of the IO) or a director, on either the English or Chinese version. SIGNIFICANCE: This circular promotes early transparency in the insurance sector under the new RBC regime, enabling stakeholders to assess insurers' financial positions. By mandating public disclosures, the IA fosters greater market integrity, accountability, and confidence in Hong Kong's insurance industry as it transitions to risk-based supervision. Market News 3. Insurance Authority Encourages Relocation of Investment Decision Functions for Life Insurers to Hong Kong According to reports from Bloomberg dated 5 August 2025, the IA has been actively encouraging major life insurance companies, such as AIA Group Limited (1299.HK) (友邦保險控股有限公司), to relocate their investment decision-making functions from Singapore back to Hong Kong. This initiative, which reportedly began in early 2024, aims to address emerging challenges in the competitive landscape between the two financial hubs. Regulatory Oversight Under the IA's Guideline on Outsourcing (GL14) , the IA can monitor outsourcing arrangements, including detailed agreements with delegated investment managers, such as amounts and locations involved. In at least one instance, the IA has scrutinized whether Hong Kong-based teams retain final decision-making authority over delegated mandates. Objectives The push is intended to foster greater employment opportunities in Hong Kong across insurers, fund managers, and legal firms, while ensuring prudent asset management to mitigate excessive concentrations in risk types, counterparties, and investment tools. The launch event featured engaging discussions among executives from regulators, tech giants, and telecom providers on emerging scam trends and joint strategies to protect the public. SIGNIFICANCE: An IA spokesperson commented: “Currently, there is no statutory requirement for life insurers to maintain assets or make investment decisions in Hong Kong. However, all authorized insurers should prudently manage their assets to avoid excessive concentration in risk types, counterparties, and investment instruments. This is crucial to ensure that insurers can promptly meet claims and fulfill contractual obligations, thereby protecting policyholders’ interests. Additionally, in line with international best practices, the IA will appropriately consider potential legal and operational restrictions on capital transfers between jurisdictions when conducting resolution and recovery planning for individual authorized insurers.” This development highlights the IA’s commitment to enhancing Hong Kong’s position as a leading financial center by promoting local decision-making and job creation in the insurance sector. By encouraging the repatriation of key functions, the IA seeks to bolster market resilience, reduce dependency on external jurisdictions, and align with global regulatory standards for risk management and policyholder protection. Enforcement News 4. Tahoe Life was fined $10 million for unauthorized transactions On 2 September 2025, the IA issued a public reprimand to Tahoe Life Insurance Company Limited (泰禾人壽保險有限公司 ) (“ Tahoe Life ”) and imposed a fine of $10 million, to be borne by its shareholders’ fund. Key Details: Background of Tahoe Group The Tahoe Group was a high-profile, Fujian-based real estate conglomerate founded by Mr. Huang Qisen (黄其森先生) (also the former director of Tahoe Life). It specialized in developing luxury residential properties, often with a traditional Chinese architectural theme, known as "Courtyard" series. The company's downfall began around 2017-2018 as the Chinese government implemented stricter policies to curb corporate debt and speculation in the property sector ("Three Red Lines" policy). This made refinancing existing debt extremely difficult. Current Tahoe Life Tahoe Life is currently under the direct control of government-appointed Managers due to a severe failure in corporate governance and regulatory compliance. Disciplinary Actions The IA's actions stem from related party transactions conducted by Tahoe Life between July 2019 and April 2020 without prior IA consent. These transactions involved Tahoe Group Global (Co.) Limited. The IA determined that Mr. Huang Qisen and Mr. Ge Yong (葛勇先生), directors of Tahoe Life at the time, are no longer considered fit and proper persons. Both individuals have since stepped down from their key management roles. Appointment of Managers On 26 July 2024, the IA invoked Section 35(2)(b) of the Insurance Ordinance (Cap. 41) to appoint Mr. Derek Lai, Mr. Forrest Kam of Deloitte Touche Tohmatsu, and Mr. Oliver Cheng of Deloitte Advisory (Hong Kong) Ltd as Joint and Several Managers to take full control of Tahoe Life’s affairs, business, and property. This followed the appointment of Advisors in August 2023 under Section 35(2)(a) to provide recommendations, which Tahoe Life failed to act upon, including not submitting audited financial statements for 2022 and 2023, failing to secure new strategic investors, and not improving corporate governance. For more details, please refer to press release issued by the IA on 16 August 2023 . Supervisory Measures To protect policyholders, the IA has implemented several measures, including: Asset ring-fencing Strengthened internal controls Investment restrictions These measures, combined with the appointment of Managers, aim to ascertain Tahoe Life’s financial and solvency position, preserve capital resources, and identify recovery solutions in the best interest of policyholders. Impact on Policyholders The IA assures that all policies issued by Tahoe Life remain unaffected. The Managers are responsible for maintaining full business operations, including customer service, premium payments, and claims settlement. Policyholders are advised to carefully assess their circumstances and avoid hasty decisions, as life insurance products are designed for long-term maturity. SIGNIFICANCE: The IA’s actions underscore its commitment to ensuring robust governance and compliance within the insurance industry. By addressing unauthorized related party transactions and enforcing stringent supervisory measures, the IA aims to safeguard policyholder interests, uphold market integrity, and reinforce trust in Hong Kong’s insurance sector. 5. IA Secures Conviction Against YAN Zhiyu for Non-Compliance with Investigation On 3 September 2025, the Eastern Magistrates' Courts convicted Mr. YAN Zhiyu (顏志裕先生) and imposed a fine of $10,000 for failing to attend an investigation interview without reasonable excuse. This interview was related to an investigation into the suspected misappropriation of premium payments belonging to two policyholders, constituting a breach of section 64ZZL(1) of the Insurance Ordinance (Cap. 41) (“ IO ”). Conviction and Penalty Mr. YAN Zhiyu was found guilty of non-compliance with the requirement to attend an interview as part of the IA’s investigation. The court imposed a fine of $10,000 for this violation. Legal Obligations Under section 64ZZL(1) of the IO, individuals may be required to attend interviews or provide assistance to support the IA’s regulatory oversight of insurance intermediaries. Failure to comply without reasonable excuse can lead to severe penalties: · On indictment: A fine of up to $200,000 and imprisonment for up to 1 year. · On summary conviction: A fine of up to $50,000 (level 5) and imprisonment for up to 6 months. SIGNIFICANCE: This conviction underscores the IA’s commitment to enforcing compliance with its regulatory processes. By holding individuals accountable for failing to cooperate with investigations, the IA aims to protect policyholders, ensure the integrity of insurance intermediaries, and maintain trust in Hong Kong’s insurance sector. The case highlights the importance of adhering to statutory obligations to facilitate effective regulation and safeguard consumer interests. [End of ComplianceOne Insurance Newsletter – August 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – December 2022 ComplianceOne Newsletter – December 2022 The topics discussed in this monthly newsletter are as follows: 1. Asia's First Crypto Asset ETFs were launched on HKEX 2. SFC reminds the Risks associated with Unregulated Virtual Asset Platform 3. SFC revises Business and Risk Management Questionnaire (BRMQ) 4. SFC to launch investor identification regime (HKIDR) in March 2023 5. MSCI's Report to reveal trends in ESG & Climate for 2023 6. SFC suspends Wang Pei Yi for 10 months for making false declarations 7. SFC fines and suspends Chung Tung Sau for seven months for breach of conflicts of interest 8. SFC bans Sun Yiding eight months for circumvention of personal dealings without approval from employer 9. SFC reprimands and fines Guosen Securities (HK) Brokerage Company, Limited $2.8 million over regulatory breaches MARKET NEWS 1. Asia's First Crypto Asset ETFs were launched on HKEX CSOP Asset Management Limited (“CSOP”) launched the CSOP Bitcoin Futures ETF ( 3066.HK ) and CSOP Ether Futures ETF ( 3036.HK ) on 16 December 2022 which were then traded on the HKEX; the strategy of which was to capture the performance of the actively traded Bitcoin and Ether futures in CME which amount up to 39% and 17% of the total market cap respectively. SIGNIFICANCE: The launch of the two ETFs was marking the first time Asian retail investors can have access to this type of virtual assets with a minimum investment of USD100 traded through the traditional brokerage accounts. The approval from the SFC and the HKEX of two new ETFs based on the CME Bitcoin and Ether futures was an importance benchmark in the development of digital asset trading and an unprecedented step forward to accommodate the robust growth and vehement client demand for exposure to Bitcoins and Ethers, yet traded under highly regulated exchanges like CME where protection of investors can be assured. 2. SFC reminds the Risks associated with Unregulated Virtual Asset Platform The SFC wishes to remind investors of the risks associated with virtual asset (VA) platforms offering VA “ deposits ”, “ savings ”, “ earnings ” or “ staking ” services (VA Arrangements) to investors in Hong Kong in light of their continued prevalence. The SFC has observed that some of these platforms may offer a high “interest rate” on VA “deposits” or a daily generation of additional VA at a guaranteed or fixed rate to investors, and there are significant risks associated with investing in these types of VA Arrangements. Investors may suffer significant or even total loss, especially in the event of fraud or collapse of a VA platform. The SFC has figured out some key features investors have to be aware of: (i) Some VA Arrangements are commonly labelled as “deposits” or “savings” products, while they are NOT regulated and are not the same as ordinary bank deposits; and investors are not ensured with any protection; (ii) A vast majority of VA platforms offering VA Arrangements are unregulated; (iii) VA is exposed to heightened risks like insufficient liquidity, high price volatility or fraud, which may lose the entire value; (iv) Some VA Arrangements could amount to a collective investment scheme (CIS) as defined under the SFO, yet they are not authorized CIS per se and may be highly risky to investors. SIGNIFICANCE: On one hand, the HKSAR Government is keen on developing HK as an international financial hub for virtual asset trading; while on the other hand, the governing regime is still on the stage of coping and catch up with the inherent ever-changing and volatile market scenarios of the trading platforms or channels of these VA products. Currently, most of the VA or VA platforms are not yet regulated to ensure sufficient protection to investors at large which can justify the external potential regulatory risks incurred. The HKSAR Government should endeavour to maintain a balance in launching its financial policies. 3. SFC revises the Business and Risk Management Questionnaire (BRMQ) The SFC published a revised Business and Risk Management Questionnaire (BRMQ) on 23 Dec 2022 for licensed corporations (LCs) and associated entities (AEs). The BRMQ is a supervisory tool adopted by the SFC to collect additional data and information on a variety of functions and business activities to enhance the effectiveness of its risk-based supervision amid the rapidly changing operation and business environment. It is noted that many new questions are incorporated to collect more granular clients and transaction data with focus on analyzing the issues on money laundering and internal risk controls. SIGNIFICANCE: This Circular is published with an aim to allow sufficient preparation time for LCs and AEs, thus the revised BRMQ would be used for financial years ending on or after 30 November 2023. LCs and AEs are urged to review and familiarise themselves with the revised questionnaires, and start gathering, compiling the required information and implementing the system enhancement whatever deemed necessary. One crucial implication of the BRMQ is used as an indicative checklist, though not exhaustive, of the required standards expected by the SFC. It serves as an operational guideline with step by step for the LCs to prepare themselves the details of how the requirements in the guidelines are implemented in real operational routines. 4. SFC to launch investor identification regime (HKIDR) in March 2023 The SFC announced on 12 Dec 2022 that the investor identification regime (HKIDR) for the securities market in Hong Kong will finally be launched on 20 March 2023. Ever since the consultation in 2021, the SFC has been closely monitoring the readiness of the licensed corporations (“LC”) in implementing the HKIDR. The survey and recent rehearsals indicate that some intermediaries may need more time to obtain the client consent which is a prerequisite for the HKIDR to authorize the LC to collect, store and process the personal data of the underlying clients. Investors are also reminded to respond to their relevant brokers in order to facilitate the process. As Mr Ashley Alder, former CEO of the SFC, has said: “The launch of the investor identification regime will be a significant milestone in Hong Kong’s securities market ”. The HKIDR enables more effective market surveillance, reinforce market integrity and promote confidence of the investors, which are the indispensable pillar for Hong Kong as an international financial centre. 5. MSCI's Report to reveal trends in ESG & Climate for 2023 In the MSCI ‘s 11th annual ESG & Climate Trends to Watch Report , it is stated that listed companies will deplete their share of the global emissions budget for limiting temperature rise to 1.5°C by December 2026. Researchers explained in the ESG & Climate Trends to Watch Report that the ongoing war in Ukraine and record levels of inflation globally may limit near-term pressure to reduce global greenhouse-gas emissions as governments around the world are prioritizing energy security and affordability on their to-do-list. However, MSCI ESG data also reveals that major power companies are keeping their eyes on longer-term decarbonization trends and expanding deployment of renewables. Amid the above changes, investors continue to evaluate how the climate crisis will impact their portfolio in 2023. As Meggin Thwing Eastman, Managing Director and Global ESG Editorial Director at MSCI, has said: “ ESG risk is financial risk , and the ESG and climate research showcased in today’s report was conducted to support investor needs to synthesize previously unseen risks and incentivize companies to better manage both emerging issues and the longstanding, expansive threat of the climate crisis. ” SIGNIFICANCE: It is expected that ESG and climate-related risks remain and continue to remain as dominant factors of consideration for investors in constructing their portfolios. Apart from diverting resources to comply with the EGS standards which definitely incurs additional costs, it is still of paramount importance for companies to explore business opportunities upon this decarbonization transition; or otherwise, they will not be able to weather the storm in this global trend. ENFORCEMENT NEWS 6. SFC suspends Wang Pei Yi for 10 months for making false declarations The SFC has suspended Ms Wang Pei Yi, a former licensed representative of SinoPac Securities (Asia) Limited (SinoPac), for 10 months for making false declaration in the account opening forms of three corporate clients between June 2015 and April 2017. Wang had falsely declared that she had met and witnessed the signing of forms of the clients; and provided them with relevant risk disclosure statements. Her failure to take all reasonable steps to establish the true and full identity of the clients definitely violated the principles to act honestly, with care and diligence, and best interest of the clients themselves. 7. SFC fines and suspends Chung Tung Sau for seven months for breach of conflicts of interest The SFC has suspended Mr Chung Tung Sau, a former licensed representative of Quam Securities Company Limited (Quam), for seven months from 15 and fined him $60,000. It was found that between 1 and 11 August 2017 Chung had traded in the shares of a listed company (Company A) for himself while executing a client’s good-till-cancel buy order for the same shares (GTC Order). Chung deliberately arranged matched trades between the GTC orders of the client and his own selling orders, resulting in a profit of approximately $60,000 from these transactions. The SFC considers Chung’s conduct has called into questions his fitness and properness as a licensed person, in particular, his failure to: (i) take reasonable step to avoid the conflicts of interests between himself and the client; (ii) comply with the staff dealing policy of Quam; (iii) execute the GTC Order in best available price for the client. 8. SFC bans Sun Yiding eight months for circumvention of personal dealings without approval from employer The SFC has prohibited Ms Sun Yiding from re-entering the industry for eight months from 15 December 2022 to 14 August 2023. It was found in an investigation that between July 2019 and July 2020, Sun failed to obtain her then employer’s approval to open a securities trading account with an external brokerage firm and conducted 829 personal trades in the account unbeknownst to it. She also traded in three stocks on her then employer’s restricted list and sold certain stocks within 30 days of purchase without its pre-approval. SIGNIFICANCE: The same scenario as the case before, the SFC has demonstrated to the licensed persons that "fitness and properness" remain as crucial elements in assessing the integrity of a licensed person; and bear the same material weight as any breach of other market misconducts. 9. SFC reprimands and fines Guosen Securities (HK) Brokerage Company, Limited $2.8 million over regulatory breaches The SFC has reprimanded and fined Guosen Securities (HK) Brokerage Company, Limited (Guosen) $2.8 million for regulatory breaches in relation to the handling of client assets and the provision of client account statements. The SFC’s investigation found that: (i) between 1 January 2021 and 7 March 2021, Guosen relied on expired standing authority of 1,009 clients to obtain financial accommodation by repledging their securities collateral with a bank as collateral; (ii) from May 2020 to November 2020, Guosen had provided monthly statements with incomplete and incorrect information to 930 clients. Guosen’s failures constitute breaches of the Securities and Futures (Client Securities) Rules (CSR), the Securities and Futures (Contract Notes, Statement of Account and Receipts) Rules (CNR) and the Code of Conduct. SIGNIFICANCE The case is an excellent example of lack of internal controls and operation deficiency in fulfilling the annual routines in a timely manner. It also reveals the facts that some staff may be incompetent in fulfilling their obligations for providing statements which should be precisely reconciled. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or call us at (852) 39550277 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk To unsubscribe, please simply reply with “ I don’t like to know more about Compliance ”.

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - July 2023 The topics discussed in this monthly newsletter are as follows: SFC launched Type 13 regulated activity for applications from depositaries of public funds Ensuring compliance when Streamlined Approach (“SLA”) is applied to Sophisticated Professional Investors (“SPIs”) SFC welcomes IOSCO endorsement of new sustainability disclosure standards HashKey partnered with Longbridge Whales and Quam Securities to launch First VA Online Trading Solution SFC and AFRC joined forces to combat misconduct by listed issuers Court convicted and fined cases for unlicensed activity SFC banned RaffAello Capital Limited’s former responsible officer over IPO sponsor failures SFC fined Changjiang Asset Management (HK) Limited $3.4 million for internal control failures MARKET NEWS 1. SFC launched Type 13 regulated activity for applications from depositaries of public funds The SFC started accepting applications for carrying on Type 13 regulated activity (RA 13) under a new regime on 27 July 2023 which will bring depositaries of SFC-authorised collective investment schemes under the SFC’s direct supervision. The new regime will take effect on 2 October 2024. Depositaries operating in Hong Kong need to submit RA 13 applications through WINGS, the SFC’s online submission platform, on or before 30 November 2023 . SIGNIFICANCE: For reason that starting from 2 October 2024, trustees and custodians (i.e., depositaries) of SFC-authorised collective investment schemes (CISs), unless exempted, will be required to be licensed by or registered with the SFC for Type 13 regulated activity (RA 13) under the SFO. Existing market practitioners are advised to seek guidelines from another Circular posted the same date for details of “ who needs to be licensed or registered ?” 2. Ensuring compliance when Streamlined Approach is applied to sophisticated professional investors A joint circular was published on 28 July 2023 by the HKMA and the SFC concerning the introduction of a new category of sophisticated professional investors (“SPI”) who possess higher levels of net worth and knowledge or experience, particularly in relation to the suitability assessment and product disclosure processes applied. Suitability assessment is a risk-based process that involves intermediaries matching of investment products with the personal circumstances and risk tolerance of their clients. Bearing in mind to clarify the expected standards on how the suitability assessment could be conducted and how product information could be explained and disclosed, intermediaries could tailor point-of-sale procedures to the personal circumstances of SPIs. Detailed guidelines are available from the Annex 1 and Annex 2 of the Circular to facilitate the application of a Streamlined Approach (“SLA”) . In essence, under the Streamlined Approach, the intermediary is not required at a transaction level to match the SPI’s risk tolerance level, investment objectives and investment horizon, or to assess the SPI’s knowledge, experience and concentration risk. Despite of this, intermediaries can also provide any explanation of product characteristics, nature and extent of risks to the SPI beforehand. SIGNIFICANCE: Under the new SPI regime with the application of Streamlined Approach, the intermediaries have to ensure the followings are in place with the SPI as a matter of compliance : (1) The SPI has to specifiy the Product Category within which investment transactions can be executed under the SLA, namely, the Eligible Investment Transactions ; (2) Product Category Information Statement : made available to the SPI explaining the terms and features, characteristics, nature and extent of risks of investment products within the Product Category as defined above; (3) Streamlined Threshold : the SPI has to specify a maximum threshold of investment, as an absolute amount or a percentage relative to the SPI’s assets under management (“AUM”) with the intermediary; (4) The intermediaries have to devise designated accounts (or sub-accounts) to consolidate Eligible Investment Transactions of the SPI executed under the SLA, and ensure that the Streamlined Thresholds are strictly observed. 3. SFC welcomes IOSCO endorsement of new sustainability disclosure standards SFC greeted the endorsement by the International Organization of Securities Commissions (IOSCO) of the IFRS Sustainability Disclosure Standards published by the International Sustainability Standards Board (ISSB). The SFC will work with relevant government bureaux, other financial regulators and the SEHK to develop a comprehensive roadmap for adoption of the ISSB standards in Hong Kong. SEHK has a proposed disclosure requirements for listed companies, making reference to the ISSB’s draft for climate-related disclosures. The final SEHK requirements will take account of the consultation responses and the final ISSB standards. SIGNIFICANCE: These deliberate arrangements are actually in line with what the SFC has been working on the climate-related risk disclosure requirement applicable to the licensed corporations since November last year. 4. HashKey partnered with Longbridge Whales and Quam Securities to launch First VA Online Trading Solution HashKey Group’s SFC-licensed subsidiary, Hash Blockchain Limited, has announced its strategic partnership agreement with Quam Securities and Longbridge Whale to provide virtual asset online trading services to securities firms and their clients through omnibus account and FIX API connection with HashKey’s exchange business HashKey PRO. Brokers and the clients can then seamlessly connect to this liquidity pool and market data to trade VAs anytime and anywhere around the clock! SIGNIFICANCE: At the "Far Beyond" Longbridge Whale new product launch event in Hong Kong, the first virtual asset online trade for securities firms had been successfully demonstrated and completed at the event, marking a new chapter for the adoption of virtual assets by local and global brokers. Long Bridge Whale is the first broker which serves as a BSS Vendor for VA dealing, and Quan Securities is the first client broker which provides VA brokerage, the new partnership of the three marks the benchmark for commencement of a new VA dealing environment more accessible to the general public. Leveraged up with collaboration from the private sector, the momentum to evolve as a virtual asset financial hub as advocated by the HKSAR government has got started off! 5. SFC and AFRC joined forces to combat misconduct by listed issuers The SFC and the Accounting and Financial Reporting Council (AFRC) issued the first joint statement on 13 July 2023 as part of their enhanced collaboration in the regulation of the securities and futures markets in Hong Kong. The joint statement addressed the observable increase in cases of listed issuers channelling a company’s funds to third parties in dubious circumstances under the pretext of loans which were granted without sufficient commercial rationale, and in some cases without adequate risk assessment or due diligence. The listed issuers suffered significant losses when loans were not repaid. In the light of thes findings, the joint statement set out the conduct standards and practices that listed issuers, their directors, audit committees and auditors should adhere to in relation to loans and similar arrangements. SIGNIFICANCE: As Ms Julia Leung, Chief Executive Officer of the SFC had said, “ The joint statement demonstrates the commitment of the SFC and the AFRC to promoting good corporate governance and maintaining the integrity of the capital market, as well as underscores our collective efforts to establish a more effective regulatory framework to uphold Hong Kong’s reputation as an international financial centre .” ENFORCEMENT NEWS 6. Court convicted and fined cases for unlicensed activity The Eastern Magistrates’ Court had convicted Mr Ben Ngai Ping Kuen (on 5 July 2023) and Mr Cheung Wing Hung (on 27 July 2023) separately for holding themselve out as performing a regulated function in relation to dealing in securities as an agent of entities not licensed by the SFC. It was found that between April 2016 and June 2017, both Ngai and Cheung had enticed three retail investors to invest in so-called “US-listed” shares issued by First Asia Holdings Limited (FAH) and/or First Asia Capital Limited (FAC), and to finance FAH and/or FAC in their preparation for the purported secondary listing of FAH shares in Hong Kong. The investors were mistakenly represented that if the the secondary listing in Hong Kong was successful, the value of their investment in FAH shares would increase by 100% and that if they intended to realise their investment return, they would have to swap their FAH shares for the shares in a Hong Kong-listed corporation, namely PF Group Holdings Limited (PF). By the time the investors received their PF shares, the price of the PF shares had fallen substantially. Both of Ngai and Cheung pleaded guilty to the offence and each of them were fined HKD6,000, and paid the SFC for the investigation costs. 7. SFC banned RaffAello Capital Limited’s former responsible officer over IPO sponsor failures It was published on 11 July 2023 by the SFC that Mr Tsang Kwong Fai, a former responsible officer (RO) and sponsor principal of RaffAello Capital Limited (RaffAello), was prohibited from re-entering the industry for two years from 11 July 2023 to 10 July 2025 for breaching the SFC’s Code of Conduct. The SFC had found that Tsang failed to discharge his duties as a sponsor principal, RO and member of the senior management of RaffAello to exercise due diligence in handling the listing applications, to supervise his subordinates in carrying out the sponsor work, and ensure appropriate standards of conduct were maintained. SIGNIFICANCE: Taking a look of the enforcement news published, it is not hard to find repeated cases of the SFC imposing severe pecuniary penalties on licensed corporations acting as sponsors on their failure to discharge their obligatory and regulatory duties in due course as expected of the SFC. The reason is pretty obvious that IPO is a concern of the investing public at large, protection of investors and maintenance of integrity of the market are of top priority to the SFC. 8. SFC fined Changjiang Asset Management (HK) Limited $3.4 million for internal control failures On 13 July 2023, the SFC had reprimanded and fined Changjiang Asset Management (HK) Limited (CJAM) $3.4 million for regulatory breaches and internal control failings in relation to segregation of client money and provision of statements of accounts to clients. The SFC found that between May 2015 and August 2017, CJAM had: (1) under-segregated client money to the extent of $300 to $1.05 million on multiple occasions; (2) failed to segregate client money it had received in amounts ranging from $651,518 to $8.5 million within the prescribed time limit on three occasions; and; (3) failed to immediately notify the SFC after it became aware of its under-segregation of client money. Furthermore, it was also found that CJAM had breached the Securities and Futures (Contract Notes, Statements of Account and Receipts) Rules and the Code of Conduct in issuing inaccurate statements of accounts as well as failing to provide statements of accounts to four clients. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or call us at (852) 39550277 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk To unsubscribe, please simply reply with “ I don’t like to know more about Compliance ”.

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter –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