在此次分享中，我們分享了金融科技在合規與風險管理中的重要性。 天匯合規獲邀參與“第三屆澳琴現代金融發展趨勢與金融科技座談會” 我們很榮幸受邀參加由澳門生產力暨科技轉移中心與澳門經濟民生聯盟合辦的“ 第三屆澳琴現代金融發展趨勢與金融科技座談會 ”。 “ 金融+科技 ”是推動現代金融產業實現高質量發展的關鍵。大灣區金融科技的創新必將引領現代金融產業未來發展的方向，為大灣區贏得獨特優勢和發展機遇，促進經濟多元化發展。 億東金融科技有限公司的聯合創始人王陶浚先生在會上就“ 引領金融合規與風險管理新紀元 ”主題，與大家分享了金融科技在合規與風險管理中的重要性。我們對所有與會者的積極參與和寶貴提問表示衷心感謝，並期待在不久的將來再次與大家相聚，交流有關金融科技與合規的最新見解！ We are honored to be invited to participate in the 3 rd Macau-Hengqin Modern Finance Development Trend and Financial Technology Seminar , co-organized by the Macao Productivity and Technology Transfer Center and the Macau Economic and Livelihood Alliance. ' Finance + Technology ' is key to promoting the high-quality development of the modern financial industry. The innovation of fintech in the Greater Bay Area will undoubtedly lead the future development direction of the modern financial industry, bringing unique advantages and development opportunities to the region and promoting diversified economic development. Mr. Tao Wong, Co-Founder of Edon Fintech Limited, shared insights on the importance of fintech in compliance and risk management, focusing on the theme ' Leading a New Era of Financial Compliance and Risk Management '. We would like to express our sincere gratitude to all attendees for their active participation and valuable questions and look forward to meeting you again in the near future to share the latest insights on fintech and compliance!

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

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Newsletter – November 2025 The topics discussed in this monthly newsletter are as follows: Regulatory Updates SFC urges licensed firms to detect and prevent potential layering activities in money laundering SFC issues new guidance for licensed virtual asset trading platform to tap global liquidity and diversify offerings SFC consults on the Chinese version of financial resources rule enhancements Market News SFC unveils enhancement to facilitate client interaction under Cross-boundary Wealth Management Connect SFC further streamlines measures for authorized EU-regulated retail funds to implement changes efficiently Enforcement News - Intermediary SFC Reprimands and Fines Tung Tai $900,000 for Failures to Safeguard Client Assets SFC Secures First Custodial Sentence Against Finfluencer for Provision of Paid Investment Advice on Social Media Chat Group Without Licence SFC Bans Cheung Ngai Yi for Life Following Criminal Conviction for Theft of Client Assets SFC Commences Prosecution in Securities Fraud Case Involving Illegal Short Selling SFC suspended Two Licensed Companies Linked to Prince Group (太子集團) Enforcement News - LISTCO Director of Hong Kong-based LISCO FSM Holdings (01721.HK) resigns amid Cambodian crime allegations Linked to the Prince Group (太子集團) SFC Seeks Court Orders to Disqualify Former Directors of China Longevity (1864.HK) for Financial Misstatements and Disclosure Failures Regulatory Updates 1. SFC urges licensed firms to detect and prevent potential layering activities in money laundering The SFC issued a circular [1] in NOV 2025 to urge the licensed corporations and virtual asset trading platforms (the “Licensed Firms”) to stay vigilant against suspicious fund flows showing signs of layering activities in money laundering. It is found that bad actors were exploiting Licensed Firms for layering activities by obscuring the sources and destination of their illicit proceeds. The SFC pointed out that: (i) a common red flag of layering is always with frequent and swift fund deposits in the client accounts, then followed by immediate withdrawals; (ii) Licensed Firms should have robust standards to detect and prevent layering activities. What have been/to be done so far? The SFC collaborated with the HK Police Force and the Joint Financial Intelligence Unit to address the risk of increasing exploitation of Licensed Firms; The SFC hosted webinar to provide Licensed Firms with updates on supervisory observations and regulatory responses in securities and virtual assets markets; Licensed Firms agreed to facilitate the Anti-Deception Coordination Centre ‘s (“ADCC”) 24/7 stop payment mechanism to expedite the interception of crime proceeds and recovery of the funds; Senior management of Licensed Firms should be acquainted with the importance to safeguard the integrity of their operations and the financial system in HK. [1] For implementation details of detection and prevention of layering activities, please refer to the Circular. SIGNIFICANCE: As Dr Eric Yip, the SFC’ s Executive Director of Intermediaries, said, “ Watchfulness is key to detecting layering activities, which could have been prevented through effective and robust AML/CFT controls. ” The SFC further reiterated that Licensed Firms should stay alert to red flags of suspicious transactions and keep aware of the robustness and effectiveness of their internal controls to fulfil the obligation in upholding AML/CFT standards ! 2. SFC issues new guidance for licensed virtual asset trading platform to tap global liquidity and diversify offerings The SFC set out its expected standards in two new circulars [1] for SFC-licensed VATP operators (“ Platform Operators ”) to take a significant step in tapping global liquidity and broadening the range of their product and service offerings. In one circular [2] , Platform Operators are allowed to combine their orders with those affiliated overseas VATPs (“OVATP”) in a shared book to attract global platforms, order flows and liquidity providers. Under the arrangement, orders from different platforms will be permitted to be combined into an aggregate shared liquidity pool, enabling order matching and execution across platforms (“ Shared Order Book ”). And the next step by the SFC is to assess the feasibility of allowing the licensed brokers to direct client orders to regulated overseas liquidity pools within the same group. A Snapshot of the Regulatory Requirements for Shared Liquidity Book (1) Eligible OVATPs and the clients A Shared Order Book should be managed jointly by the Platform Operator and an OVATP licensed in the relevant jurisdiction for conducting its activities. A relevant jurisdiction refers to one which is a member of the FATF or has effective regulatory regime aligned with the FATF recommendations as well as the IOSCO2 Policy recommendations for Crypto and Digital Asset Markets3 with respect to market abuse and client asset protection. (2) Trading and Settlement Risk Trading Operations The Shared Order Books should be operated according to a comprehensive set of rules which cover pre-funding, order placement, trade execution, settlement and default management; Automated pre-trade verification should be implemented to confirm the pre-funding, ensuring sufficient assets available for settlement. Settlement Controls A Platform Operator should: design its operational workflow to effectively mitigate unsettled trade exposure and related operational risks; settle all trades with the OVATP at least once a day, and all client virtual assets should be held in custody by the Platform Operator’s associated entity. Compensation Arrangement A Platform Operator should: maintain a reserve fund in Hong Kong held on trust and designated for client compensation; have a compensation arrangement to cover potential loss of client virtual assets under its custody. (3) Market Misconduct Risk A Platform Operator should: implement internal policies and controls for the proper surveillance of trading activities on the trading platform; designate at least one Responsible Officer or Manager-in Charge to oversee the joint market surveillance programme, ensure compliance with the SFC’s requirements; provide Shared Order Book data to the SFC promptly on request , including all order and trade data, order originator information. (4) Approval from SFC A Platform Operator should obtain prior written approval from the SFC, and to comply with the “Terms and Conditions for operating a Shared Order Book” after being licensed. In another circular [3] , the SFC put forward some facilitating measures to the VATPs: (1) Token admission requirements the SFC allows Platform Operators to offer trading in virtual assets without a 12-month track record for professional investors and for Hong Kong Monetary Authority-licensed stablecoins. (2) Distribution of digital asset-related products and tokenized securities by VATPs In order to provide a broader range of services and products, the SFC proposes to amend the standard set of licensing conditions [4] to permit the VATPs to: (i) distribute digital asset-related products and tokenized securities in accordance with existing laws, codes, guidelines and regulations; (ii) open a trust account or client account by the VATP with the custodian of the digital asset-related product or tokenized security in the VATP’s name for holding assets on behalf of the clients. (3) Custody of tokens not traded on VATPs VATPs with intention to provide such services can apply for modification of the relevant licensing conditions. [1] The two circulars are: (1) Circular on shared liquidity by virtual asset trading platforms; (2) Circular on expansion of products and services of virtual asset trading platforms [2] Circular on shared liquidity by virtual asset trading platforms (2025.11.03) [3] Circular on expansion of products and services of virtual asset trading platforms (2025.11.03) [4] The revised licensing conditions are stated in the Appendices II and III of the Circular SIGNIFICANCE: It is a gradual realization of the ASPIRe roadmap, making a first step under Pillar A (Access) to reach out with global platforms. As Ms Julia Leung, the SFC’ s Chief Executive Officer, has said: “ Today, we take a significant step to connect with global liquidity , underscoring our commitment to striking a right balance in fostering market innovation and vitality while upholding high standards for investor protection and market integrity .” 3. SFC consults on the Chinese version of financial resources rule enhancements The SFC launched a public consultation on the Chinese version of the draft amendments to the Securities and Futures (Financial Resources) Rules (FRR). On 14 July 2025, the SFC published the English version of the draft FRR amendments for public consultation and the Chinese draft FRR amendments for public consultation was posted on 7 Nov 2025. SIGNIFICANCE: This is absolutely an unprecedented step by the SFC since the rules and guidelines in the FRR are not comprehensible to general readers particularly with the complex nature of calculation and classifications; a provision of Chinese version facilitates the relevant personnel with enhanced readability and comprehensibility of the FRR references. Market News 4. SFC unveils enhancement to facilitate client interaction under Cross-boundary Wealth Management Connect The SFC announced new enhancements to Cross-boundary Wealth Management Connect Pilot Scheme (“ Cross-boundary WMC ”) to develop closer communication between participating licensed corporations (“ Participating LCs ”) and their clients under the scheme which was published on 24 Jan 2024. For purpose of the new enhancements, the SFC set out anther circular on 13 Nov 2025 with the implementation details for client interaction, the key arrangements are : A Participating LC can now obtain one-off written consen t (valid for a year) from Southbound Scheme clients (“ SSC ”) who are not physically present in Hong Kong, thus the LC can explain the product information aligned with each client’ s needs and selected product categories; (noted: SSCs refers to Mainland investors who have open dedicated investment accounts with that LC and also have opened personal fund accounts with eligible Mainland brokers as remittance accounts under the scheme); Upon the request of the SSCs, a Mainland partner broker (i.e. a Mainland broker that has been confirmed by the relevant Mainland regulatory authorities as eligible to provide Cross-boundary WMC services) within the same corporate groups as the Participating LCs (“ Partner Brokers ”) can arrange online three-party dialogues with the Participating LCs at their respective places of business, where the Participating LCs can explain product information to their clients; With a one-off written consent as mentioned above from SSCs, Participating LCs can provide their clients with research reports on individual investment products prepared by their Partner Brokers; The enhanced arrangements above are also applicable to the Northbound Scheme. SIGNIFICANCE: As Ms Julia Leung, the SFC’s Chief Executive Officer, said, “ With enhanced communication and improved access to information, investors can be better informed when making investment decisions which would support the continuous and sustainable development of the Cross-boundary WMC. ” 5. SFC further streamlines measures for authorized EU-regulated retail funds to implement changes efficiently The SFC announced a series of streamlined post-authorisation measures for UCITS funds. UCITS funds means (i) Undertakings for Collective Investment in Transferable Securities (UCITS) domiciled in France, Luxembourg, Ireland and the Netherlands, and (ii) collective investment schemes domiciled in the United Kingdom authorised as UK UCITS. In a circular to facilitate their implementation of change s that are in compliance with their home jurisdiction regulation. Recognising that UCITS funds offer robust investor protection commensurate with the standards of Hong Kong, the SFC considers further streamlining procedures can be adopted for facilitating UCITS funds in implementing changes that are subject to their home regulator’s supervision with immediate effect from 28 Nov 2025. KEY streamlined measures for UCITS funds covering the following post-authorization matters: (a) Change of key operators Prior approval from SFC is removed for changes of depository and investment delegates supervised under the fund’s home regulators; (b) Material changes in investment objectives, policies and restrictions Prior approval from SFC is removed for material changes in investment objectives, policies and restrictions which comply with the fund’s home jurisdiction requirements; (c) Post-authorization notifications To align the SFC’s notification requirements with the fund’s home jurisdiction requirements. For understanding of the latest measures in more details, the FAQs on SFC Authorization of UCITS Funds is available on SFC’s website. SIGNIFICANCE: As Ms Alexandra Yeong, the SFC’ s Interim Head of Investment Products, said, “ These enhancements are integral to the SFC’ s ongoing efforts to strengthen Hong Kong’ s competitiveness as a leading global asset management centre, enabling UCITS funds to operate efficiently in our dynamic market. ” Enforcement News - Intermediary 6. SFC Reprimands and Fines Tung Tai $900,000 for Failures to Safeguard Client Assets On 13 November 2025, the SFC reprimanded and fined Tung Tai Securities Company Limited (東泰證券有限公司) (“ Tung Tai ”) for regulatory breaches related to unauthorized sales of client securities and transfers of client funds. Case Details The SFC's investigation revealed that Tung Tai failed to adequately safeguard client assets after acting on instructions from a bogus email address impersonating an overseas limited partnership company client (the “ Client ”). Period Case Detail 13 February 2019 Authorised Person of the Client email directly to the accounting department of Tung Tai with instructions. Tung Tai executed the instruction without noticing the ROs. 6 September 2019 Two banks in Mexico and Canada rejected several telegraphic transfers processed by Tung Tai based on instructions from the bogus email address, serving as early red flags of potential irregularities. However, the ROs of Tung Tai executed the trades and approved telegraphic transfers to the * False Bank Account. *false bank account held by authorised person of the client, but not designated in the clients’ account opening form 6 September 2019 Tung Tai sold shares in the client's account and transferred the sale proceeds (US$3,301,740) via four telegraphic transfers to three false bank accounts in the United States, despite discrepancies in beneficiary addresses compared to account opening documents. Tung Tai did not respond to red flags, such as telegraphic transfer rejections by banks and discrepancies in beneficiary addresses, leading to the unauthorized transfer of sale proceeds to three overseas bank accounts not designated by the client. Additionally, Tung Tai lacked effective internal control procedures to prevent theft, fraud, or misappropriation of client assets. Enforcement Act The SFC reprimanded and fined Tung Tai HK$900,000 for regulatory breaches related to unauthorized sales of client securities and transfers of client funds. In determining the sanctions, the SFC considered the seriousness of the failures, Tung Tai's remedial actions, compensation to the client, cooperation with the investigation, and its clean prior disciplinary record. Tung Tai compensated the affected client, engaged independent reviewers to assess internal controls, and implemented remedial measures to enhance order placing and trading execution procedures. For more details of the case, please refer to STATEMENT OF DISCIPLINARY ACTION SIGNIFICANCE: This disciplinary action emphasizes the critical importance of robust internal controls and vigilance against fraud in safeguarding client assets within Hong Kong's securities industry. It serves as a reminder for all licensed corporations, including those with overlapping financial services, to implement effective procedures to detect and prevent unauthorized activities, thereby protecting investors and maintaining market integrity. 7. SFC Secures First Custodial Sentence Against Finfluencer for Provision of Paid Investment Advice on Social Media Chat Group Without Licence On 7 November 2025, the SFC secured a conviction against Mr CHAU Pak Yin (周柏賢) (“ CHAU ”), a finfluencer previously known as CHAU Kin Hei (前名周建希), in a criminal prosecution at the Eastern Magistrates’ Court. Case Details CHAU was found guilty of providing unlicensed investment advice through a subscription-based Telegram chat group he hosted, named “ Futu真。財自Private Group ” under his username “ Futu大股東 ”. During the relevant period, CHAU circulated commentaries, recommendations, and target prices on various securities, including responses to subscriber questions about Nasdaq-listed securities' performance. He charged a monthly subscription fee of US$200 or HK$1,560, earning a total of HK$43,680 from the group, which was open to public paid subscribers. Court Order This activity constituted "Type 4: advising on securities", a regulated activity under Schedule 5 of the SFO, and CHAU was charged under sections 114(1)(a) and 114(8) of the SFO for operating without an SFC licence. CHAU was sentenced to six weeks imprisonment and ordered to pay the SFC investigation costs. He was remanded in custody after his bail application was rejected, pending an appeal against the conviction and sentence. SFC Effort to Curb Activities of Unauthorised Finfluencers On 6 June 2025, the SFC issued a Press Release announcing its accession International Organization of Securities Commissions (“ IOSCO ”) efforts to combat unauthorized activities by financial influencers through a multi-pronged approach including supervisory actions, enforcement, and investor education. SIGNIFICANCE: Mr Michael Duignan, SFC’s Executive Director of Enforcement, emphasized the SFC’s commitment to tackling unlawful finfluencer activities and holding them accountable for unlicensed regulated activities. He warned that unlicensed finfluencers may not meet SFC standards, exposing investors to risks, and advised the public to verify licences via the SFC’s Public Register of Licensed Persons and Registered Institutions. This landmark case marks the SFC’s first custodial sentence against a finfluencer for unlicensed investment advice, highlighting the regulator’s intensified focus on social media and online platforms where such activities can proliferate. It serves as a strong deterrent to unlicensed individuals providing paid financial advice, reinforcing the need for proper licensing to ensure investor protection, accountability, and compliance with SFO standards. 8.SFC Bans Cheung Ngai Yi for Life Following Criminal Conviction for Theft of Client Assets On 5 November 2025, the SFC issued a lifetime ban on Mr. CHEUNG Ngai Yi (張藝議) (“ CHEUNG ”), a former relevant individual of Hang Seng Bank Limited (恒生銀行有限公司) (“ HSB ”), prohibiting him from re-entering the securities industry. Case Details The action follows CHEUNG's criminal conviction for theft, where he was found guilty of misappropriating client funds. The court established that CHEUNG misappropriated a total of HK$1,530,500 from a client's bank account through 88 unauthorized ATM withdrawals. This misconduct occurred over a period of approximately nine months, highlighting a pattern of repeated breaches of trust in handling client assets. Enforcement Act and Court Order In result, CHEUNG had been sentenced by the District Court to 30 months' imprisonment on 31 March 2025. Case No.: DCCC 425/2022 The SFC's investigation and subsequent ban were based on the determination that CHEUNG is not a fit and proper person to be registered or licensed due to his conviction, which involved dishonest conduct directly related to his regulated activities. SIGNIFICANCE: In imposing the ban, the SFC emphasized that CHEUNG's actions demonstrated a severe lack of integrity, which is fundamental to maintaining public confidence in the financial markets. This enforcement action reinforces the SFC's zero-tolerance policy toward misconduct involving client asset misappropriation, serving as a stark reminder to all licensed individuals and firms of the severe consequences for breaching ethical and regulatory standards. It underscores the importance of robust internal controls and ongoing vigilance in financial institutions to prevent theft and protect client interests, while deterring similar dishonest behaviour that could undermine the integrity of Hong Kong's securities industry. 9. SFC Commences Prosecution in Securities Fraud Case Involving Illegal Short Selling On 6 November 2025, the SFC commenced a prosecution in a securities fraud case involving illegal short selling. The SFC has initiated criminal proceedings against: Mr. CHAN Hoi Shing (陳海城) (“ CHAN ”); and Mr. LI Po Ching (李寶程) (“ LI ”) engaged in unauthorized short selling activities in the shares of certain companies, resulting in potential market distortions and illicit gains. Case Details CHEN and LI falsely claimed that CHEN held a sufficient number of shares in the 28 companies to support sell orders placed through CHEN's securities account at Black Marble Securities Limited (貝格隆証券有限公司), but this was not the fact. Consequently, the two were able to conduct illegal short selling transactions on the shares of the relevant companies and profit approximately HK$11 million. Adjourned Process The defendants did not enter a plea hearing on 6 November 2025, and the case was adjourned to 6 February 2026, for a further hearing. At that time, the prosecution will apply to transfer the case to the District Court. CHEN and LI were granted bail pending the next hearing. SIGNIFICANCE: This action demonstrates the SFC's ongoing vigilance in combating securities fraud and enforcing short selling rules to protect market integrity and investor interests in Hong Kong. It serves as a reminder for market participants to adhere strictly to regulatory requirements on short selling, as violations can lead to criminal charges, fines, and reputational damage. 10. SFC suspended Two Licensed Companies Linked to Prince Group (太子集團) The Prince Group (太子集團) founded by Chen Zhi (陳志), has been implicated in operating telecom fraud parks in Cambodia, with Chen Zhi facing US prosecution and sanctions, including the freezing of approximately HK$120 billion in Bitcoin assets. Suspended Licensed Companies According to the SFC website, two license companies Mighty Divine Investment Management Limited and Mighty Divine Securities Limited - entities linked to Prince Group, have had their licenses temporarily revoked. See below table for details: Last updated: 03 Nov 2025 These companies are noted as having " Licence suspended " and “Ceased business of regulated activities”, reflecting heightened regulatory measures in response to the ongoing investigations. Enforcement News - LISTCO 11. Director of Hong Kong-based LISCO FSM Holdings (01721.HK) resigns amid Cambodian crime allegations Linked to the Prince Group (太子集團) The Prince Group (太子集團) founded by Chen Zhi (陳志), has been implicated in operating telecom fraud parks in Cambodia, with Chen Zhi facing US prosecution and sanctions, including the freezing of approximately HK$120 billion in Bitcoin assets. Update news of Hong Kong-Listed Companies related to Chen Zhi Movements in two Hong Kong-listed companies controlled by Chen Zhi: · Geotech Holdings Ltd. (致浩達控股) ( 01707.HK ); and · Khoon Group Ltd. (坤集團) ( 00924.HK ); have attracted significant market attention following the exposure of the fraud allegations. LI Thet (李添), chairman of FSM Holdings ( 01721.HK ), has resigned after being connected to Chen Zhi. Li Thet, Prince Group's CFO, was also sanctioned, accused of overseeing Prince Group's money laundering, and large-scale cash smuggling. U.S. relevant documents did not list out any connection between LI Thet and Hong Kong List-CO, until FSM Holdings issued a statement announcing LI Thet's resignation as chairman and executive director, revealing a third listed company. ( See Sanction and Registration of Executive Directors: 2025-10-21 ) 12. SFC Seeks Court Orders to Disqualify Former Directors of China Longevity (1864.HK) for Financial Misstatements and Disclosure Failures On 31 October 2025, the SFC initiated proceedings to seek disqualification orders against three former executive directors of China Longevity Group Company Limited, formerly known as Sijia Group Company Limited (中國龍天集團有限公司, 前稱思嘉集團有限公司) (* 1864.HK ) (“ China Longevity ”). *trading in shares of China Longevity has been suspended since 4 December 2014 The three former directors of China Longevity named in the proceedings are: Mr Lin Shengxiong (林生雄) former Chairman and Executive Director Mr Zhang Hongwang (張宏旺) Executive Directors. Mr Huang Wanneng (黃萬能) Executive Directors. Case Details The action stems from the SFC's investigation, which uncovered material overstatements in the China Longevity's cash and cash equivalents, leading to misrepresentations in key financial reports. Specifically: As of 31 December 2011, China Longevity materially overstated cash and cash equivalents by RMB198.9 million, representing 13.6% of net assets. As of 30 June 2012, China Longevity materially overstated cash and cash equivalents by RMB302.4 million, representing 19.9% of net assets. These inaccuracies resulted in material misrepresentations in the China Longevity's 2011 annual report, 2012 annual report, and 2012 interim report. Additionally, the directors failed to ensure timely disclosure of the overstatements and related audit irregularities identified by the China Longevity's auditors, exacerbating the misconduct. Petition Filing and Service Proceedings The SFC filed the Petition on 25 November 2022 against the three former directors (all located in PRC) and obtained leave from the Court of First Instance to serve the Petition on them out of the jurisdiction on 28 April 2023. Judicial assistance was sought in the Mainland to effect service of the Petition on the former directors. The first direction hearing was held on 30 October 2025 and the next case management conference is scheduled for 25 February 2026. SIGNIFICANCE: This enforcement action underscores the SFC's commitment to holding corporate directors accountable for financial reporting integrity and timely disclosures, which are essential for maintaining investor confidence in Hong Kong's capital markets. It highlights the risks of disqualification for executives involved in such breaches, serving as a deterrent against similar misconduct in listed companies and reinforcing regulatory oversight in the financial sector. [End of ComplianceOne Newsletter – November 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

Thematic Cybersecurity Review of Licensed Corporations Compliance Impact Alert: Thematic Cybersecurity Review of Licensed Corporations Feb 2025 Disclaimer: Contents contained in this document including should not be regarded as a substitute legal and / or compliance advice in any circumstances and shall not be reproduced (in whole or in part), distributed or otherwise passed on to any other person without our prior written consent. Language: English version only Overview The Securities and Futures Commission (“SFC”) completed a thematic review of cybersecurity practices among 50 licensed corporations (“LCs”) in Hong Kong engaging in internet trading. The review assessed compliance with Cybersecurity Guidelines and the Code of Conduct, focusing on phishing, end-of-life (“EOL”) software, and third-party provider management. On-site inspections were conducted at 7 internet brokers, and deep-dive discussions were held with 6 globally operating LCs. The review identified eight significant breaches between 2021 and 2024, linked to issues like weak two-factor authentication (“2FA”), poor security configurations, delayed security patches, inadequate encryption, and unauthorized access to admin accounts. The SFC highlighted insufficient senior management oversight and weak cybersecurity measures as key contributors. To address rising threats, the SFC issued guidelines on phishing prevention, software management, and cloud security. **For more details, please refer to 2023/24 Thematic Cybersecurity review of LCs ** Findings of Cybersecurity Incidents and Expectations The SFC surveyed 50 LCs to assess cybersecurity practices. Key findings, impacts and expectations are summarized below: Findings Impact Expections 1. Ransomware Attacks One LC's systems and data were encrypted, requiring a full rebuild to resume trading. Deploy anti-malware, avoid embedded hyperlinks, conduct training, and establish incident handling. 2. Phishing Vulnerabilities A ransomware attack traced to a phishing email encrypted an LC’s systems, necessitating a rebuild. Conduct simulations and ensure effective reporting procedures. 3. EOL Software Management EOL software increased risks of unauthorized access to critical systems. Maintain IT asset inventories, monitor software validity, and cease using EOL systems. 4. Vulnerability to Unauthorized Access Cybercriminals exploited unpatched VPNs and unsecured ports to access internal networks. Enforce least-privilege access, 2FA, VPNs, session timeouts, and monitor third-party access. 5. Third-Party Provider Management A cyber-attack on a provider disrupted clearing services; some LCs had non-compliant trading systems. Conduct due diligence, establish SLAs, monitor performance, and include providers in contingency plans. 6. Cloud Security Weak network policies increased data leakage risks. Secure infrastructure, enforce access controls, manage API keys, and back up data securely. Actions and Recommendations LCs must ensure senior management (e.g. MIC-IT) addresses cybersecurity risks by: 1. Appointing qualified staff and allocating resources. 2. Reviewing and approving risk management policies. 3. Conducting regular cybersecurity reviews and addressing vulnerabilities. 4. Restricting access to sensitive systems and enforcing secure remote access. 5. Maintaining and testing contingency plans. Requirements are effective immediately, but the SFC will adopt a practical approach for LCs needing time to upgrade systems. Future plans include a comprehensive review of cybersecurity requirements to develop a broader framework for all LCs. How We Can Help Our team comprises experienced professionals with deep expertise in compliance, risk management, and policy review and development in identifying gaps between the regulatory expectations in the circular and your current policies and procedures. We understand the complexities of regulatory requirements and provide tailored solutions to meet your specific needs and close any material gaps. Our expertise ensures adherence to regulatory standards and enhances overall compliance practices. If you have any questions, please feel free to Contact Us .

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter – January 2023 ComplianceOne Newsletter – January 2023 The topics discussed in this monthly newsletter are as follows: 1. FUTU and TIGER were ordered by the China Securities Regulatory Commission (CSRC) to rectify their cross-border "illegal operations”; 2. "AML-CTF (Amendment) Ordinance 2022" will take effect on 1 June 2023; 3. HKEX Publishes "Review of Issuers’ Annual Reports - 2022"; 4. HKIDR will be launched shortly on 20 March 2023; and 5. SFAT affirms SFC decision to fine Cardinalasia Consulting Limited $1.5 million for failures in managing private fund. MARKET NEWS 1. FUTU and TIGER were ordered by the China Securities Regulatory Commission (CSRC) to rectify their cross-border "illegal operations" At the end of 2022, the CSRC made an announcement making it explicit that the activities conducted by the two firms, namely Futu Securities International (Hong Kong) Limited (“FUTU”) and Tiger Brokers (HK) Global Limited (“TIGER”), have been construed as engaging in illegal securities business without proper license in China. Though licensed in Hong Kong under the SFC, FUTU and TIGER are considered as conducting regulated activities in securities across the border in China (i.e. cross-border online brokerage) without acquiring approval from the CSRC. Both FUTU and TIGER had been reprimanded by the CSRC as having involved some sort of "cross-border regulatory arbitrage (跨境監管套利)", which means taking advantage of the great difference in political and regulatory systems between two regions by engaging in a less stringent regulatory regime and thus circumventing the onerous documentation process in the stringent regime in another region. SIGNIFICANCE: The regulatory measures taken by the CSRC seems like playing an art of reconciliation by deploying a “ 有效遏制增量，有序化解存量” towards FUTU and TIGER ; instead of an “once-off ban for all ”, a more pragmatic approach, has been adopted. In essence, it means the follow ings: (1) The two firms are not allowed to accept new customers and new accounts as these activities have been construed as conducting unlicensed regulated activities; (2) Both FUTU and TIGER can continue to serve the existing accounts on condition that no additional funds can be accepted which may constitute a breach of the foreign exchange restriction, which is implemented to prevent an outflow of funds from the country, imposed by the Chinese Government. 2. "AML-CTF (Amendment) Ordinance 2022" will take effect on 1 June 2023 The Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance 2022 (the Amendment Ordinance) will take effect on 1 June 2023. Apart from the introduction of new licensing regime, namely the Virtual Asset Service Providers (VASP), which deserves attention to brokers who are currently involved in virtual assets trading; there are other AML-CFT amendments which cannot be missed out as well. The key takeaways are as follows: (1) Under the Amendment Ordinance, Politically exposed person (PEP) is re-defined as " an individual who is or has been entrusted with a prominent public function in a place outside the People’s Republic of China Hong Kong ”. (2) Former politically exposed person (former PEP) , which means “ an individual who, being a politically exposed person, has been but is not currently entrusted with a prominent public function in a place outside Hong Kong ”, is introduced. With such amendment in place, the licensed corporations can be exempted from taking special requirements or additional measures in relation to a former PEP who happens to be a client onboarded. Instead, a risk-based approach can be adopted. (3) The use of a recognized digital identification system (“RDIS”) is allowed in situations where a customer is not physically present for identification purposes (i.e., non-face-to-face). If the Customer Due Diligence (CDD) requirements are met using reliable and independent digital identification systems, the Enhanced Due Diligence (CDD) requirements can be exempted. SIGNIFICANCE: With the amendment of definition of PEP , the special requirements apply not only to a PEP from a place outside “the People’s Republic of China” but also a PEP from a place “outside Hong Kong”. And with the new definition of former PEP , there is no longer a “once a PEP, always a PEP” scenario. Licensed corporations have the flexibilities to adopt a risk-based approach provided that there is sufficient assessment to justify that the former PEP no longer poses a high AML risk as before. The Amendment merely defines RDIS as " a digital identification system that is a reliable and independent source that is recognized by the relevant authority ”. However, no specific example or further detail has been provided in the Amendment. 3. HKEX Publishes Results of Review of Issures’ 2021 Annual Reports On 20th January 2023, the Hong Kong Exchanges and Clearing Limited (HKEX) published a report on the findings and recommendations in its Review of Issuers’ Annual Reports – 2022 (the “Report”). The Listing Division of the Exchange undertakes an on-going programme to review issuers’ annual reports as part of its monitoring activities. In the review, HKEX considered the actions taken by the issuers and their directors to safeguard company’s assets, and whether material information was disclosed to allow shareholders to properly assess the relevant matters reported on. HKEX also assessed issuers’ compliance with the Listing Rules and specific accounting standards in financial statements. In addition, HKEX also reviewed issuers’ compliance with annual report disclosure requirements under the Listing Rules. According to the Report, most issuers continued to achieve a high rate of compliance with annual report disclosure requirements with only a few issuers did not adequately substantiate the fairness of asset reported values (including loan receivables) due to deficiencies in their financial reporting, risk management and internal controls. HKEX also identified areas of improvement in some issuers’ disclosure of their material loan receivables and has made the following recommendations to issuers: (1) Financial reporting and related controls – deploy adequate resources to maintain risk management and internal controls, with special regard to the accounting estimates and the reasonableness of the assumptions behind. (2) Material lending transactions – critically assess the commercial rationale, whether their terms are fair and reasonable, and whether the use of funds is in the interests of the issuer and its shareholders. (3) Financial statement disclosure under accounting standards – maintain good communications with auditors on emerging issues identified during the audit, and take prompt actions to address auditors’ concerns. 4. HKIDR will be launched shortly on 20 March 2023 With reference to the Circular dated 12 December 2022, Relevant Regulated Intermediaries ( RRIs ) have to get themselves ready for launch of the HKIDR on 20 March 2023. RRIs are reminded to submit the BCAN-CID Mapping File that contains Broker-to-Client Assigned Number ( BCAN ) and client identification data ( CID ) of their clients to the SEHK effective 19 December 2022. RRIs are strongly advised now to ensure that they can login via the SEHK’s Electronic Communication Platform ( ECP ) web interface and / or the ECP ( SFTP ) interface, and submit the BCAN-CID Mapping Files as soon as possible so as to allow the SEHK with sufficient time to verify the data and rectify any error discovered during the file submission process For compliance with the applicable data privacy ordinance, RRIs should have obtained the necessary consent from the individual clients before submitting their BCAN and CID to SEHK. SIGNIFICANCE: Once again, the prioritized aim of the introduction of BCAN and HKIDR is to enhance the effectiveness of market surveillance by improving the transparency of the identity behind who initiates an order to the market, and reduce the investigation and execution costs of regulatory institutions. ENFORCEMENT NEWS 5. SFAT affirms SFC decision to fine Cardinalasia $1.5 million for failures in managing private funds The Securities and Futures Commission (SFC) has reprimanded and fined Cardinalasia Consulting Limited (CCL) $1.5 million over its failures in acting as a principal investment adviser to five private funds between August 2014 and October 2017. The licence of CCL’s responsible officer, Mr Edward Lee Shiu Lun, has also been suspended for nine months. The Securities and Futures Appeals Tribunal (SFAT) imposed a heavier penalty than proposed by the SFC, as the SFAT’s chairman the Hon Justice Hartmann said: “ The clear importance of an investment adviser in protecting the interests of investors lies in the simple, single fact that the person so appointed acts in an independent way ”, even the advice is contrary to that of the investment managers. Also, the SFC’s Executive Director of Enforcement, Mr Christopher Wilson, has said: “ This case serves as a timely reminder to fund managers and advisers of the high standards of conduct the SFC expects of them ”; and “ the SFC is determined to crack down on asset management misconduct and will impose harsher penalties going forward to deter such misconduct .” SIGNIFICANCE: The message delivered from the regulator is explicit that “ the role of an investment adviser is a role of real substance ” which seems to be perceived as a lesser role in conventional practice. The investment advisor should always uphold its independent role in giving advice even that advice is not in line with those higher in the delegated chain of management. 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 ”.

Considering the amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Chapter 615), a new registration regime for Dealers in Precious Metals and Stones (“DPMS”) on 1 April 2023. Online Training Program for - Dealers in Precious Metals and Stones (DPMS) 貴金屬及寶石交易商 (DPMS) - 線上持續培訓課程 Considering the amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Chapter 615), a new registration regime for Dealers in Precious Metals and Stones (“DPMS”) on 1 April 2023. The Hong Kong Customs and Excise Department (the “Customs”) is responsible for implementing this system and supervising the compliance of registered dealers with anti-money laundering and counter-terrorist financing (“AML-CFT”) regulations. To help regulated cooperate (including DPMS) stay updated on the latest regulatory requirements, we have launched a series of online courses. These courses are designed to ensure that dealers can grasp and adhere to the latest compliance standards, with content that is continuously updated and revised. Click Thinkific platform link - About the Precious Metals and Stones Dealers Training 根據《打擊洗錢及恐怖分子資金籌集條例》（第615章）的修訂，香港於2023年4月1日引入了貴金屬及寶石交易商（DPMS）的註冊制度。香港海關負責該制度的執行，並監管註冊交易商在打擊洗錢及恐怖分子資金籌集方面的合規性。 為了幫助貴金屬及寶石交易商持續了解最新的法規要求，我們特別開設了一系列在線課程。這些課程旨在確保交易商能夠掌握並遵守最新的合規標準，並會持續更新及修訂内容。 點擊Thinkific平台連結 - 關於貴金屬及寶石交易商培訓課程 Training Program Each session lasts 1 hour and is conducted through the Thinkific platform. After completing the training and passing a short quiz, participants will receive a certificate of participation. You can also log in to Thinkific at any time to review your training records. Intended Audience: Dealers in precious metals and stones Management personnel Compliance officers Money laundering reporting officers Frontline staff Back-office staff New employees Training Topics Include: Registration Guide for DPMS Overview of the registration background for DPMS Obligations and responsibilities AML-CFT requirement Duties for senior management Joint Financial Intelligence Unit - Reporting Suspicious Transactions How to identify suspicious transactions Reporting process and requirements Protective measures and legal responsibilities Case studies and practical applications Conduct and Ethical Definition and importance of business ethics Conduct and integrity Compliance and ethical decision-making Case discussions and industry best practices 關於培訓課程 每節課程為1小時，透過Thinkific平台參與課堂。培訓結束後，只要通過簡短的測驗，即可獲發參與證書。你亦可隨時登錄Thinkific檢閱培訓記錄。 適用人士 : 貴金屬及寶石交易商 管理人員 合規主任 洗錢報告主任 前線職員 後勤職員 新入職人員 課程的題材範圍包括: 貴金屬及寶石交易商註冊指引 金屬及寶石註冊制度的背景簡介 註冊人的責任 相關法例和法定責任 反洗錢系統/制度/核心要求 各職位的責任 聯合財富情報組 - 舉報可疑交易 如何識別可疑交易 舉報流程及要求 保護措施及法律責任 案例分析與實務操作 商業行為和道德標準 商業道德的定義與重要性 職業操守與誠信 法規遵循與道德決策 實例討論與行業最佳實踐 Why ComplianceOne? Professional : Our courses are specifically designed for DPMS to ensure your acknowledgement of the latest compliance knowledge and skills. Flexible: You can log in to Thinkific platform to start or review your training records, anytime, anywhere. Easy access: The Platform supports multiple devices, no installation needed, all you need is a browser. Certification : After finished the training, certificate will be provided for enhancing your professional credentials and credibility. Payment Method: Convenient payment methods by using Visa credit card or PayPal. Courses are valid for 365 days after purchase. During this period, you can log in to Thinkific platform to take course or print certificates at any time. 為什麼選擇天匯合規的網上持續培訓平台？ 專業培訓 ：我們的課程專為貴金屬及寶石交易商設計，確保您獲得最新的合規知識和技能。 靈活學習 ：您可以根據自己的時間安排進行學習，並隨時登入平台檢閱培訓記錄。 簡單易用 ：網上持續培訓平台支援多種裝置，無需安裝，操作簡單。 獲得認證 ：通過簡短測驗後即可獲得參與證書，提升您的專業認證和可信度。 支付方式 ：接受 Visa信用卡或PayPal方式支付，方便快捷。 課程在購買後365天內有效。在此期間，您可以隨時登入Thinkific平台參加課程或列印證書。

主題：《跨境投融資實務操作-系列一：香港金融牌照實務解析》香港作為中資企業出海的橋樑和亞洲金融中心，不論監管架構的成熟度、公開交易 跨境投融資實務操作-系列一：香港金融牌照實務解析 主題：《跨境投融資實務操作-系列一：香港金融牌照實務解析》 香港作為中資企業出海的橋樑和亞洲金融中心，不論監管架構的成熟度、公開交易市場的完善性、及金融產品的豐富性都處於國際金融市場的前列。 作為天匯合規顧問有限公司的合夥人，本人非常榮幸得到匯智集團和財視中國的邀請，擔任《跨境投融資實務操作-系列一：香港金融牌照實務解析》的線上直播講座的主講嘉賓，為大家講解申請香港金融牌照的注意事項，希望能為大家解決難題，以助中資企業發展跨境投融資業務。 線上直播講座詳情： 主題：《跨境投融資實務操作-系列一：香港金融牌照實務解析》 日期：10-5-2022 (星期二) 時間：2:00PM-3:00PM 如您有興趣參加的話，請您掃碼參與，本人期待跟大家在線上見面，謝謝！

The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Newsletter – December 2025 The topics discussed in this monthly newsletter are as follows: Regulatory Updates FSTB and SFC conclude consultations on virtual asset dealer and custodian regimes Market News A quarter of connecting, innovating and diversifying Hong Kong markets: SFC Report Enforcement News - Intermediary SFC Suspends Loretta LEE Si Kar for Three Months and Two Weeks Over Neglect of Duties in Safeguarding Client Assets at Tung Tai Securities SFC Reprimands and Fines EFG Bank AG $10.85 Million for Regulatory Breaches and Internal Control Failures Enforcement News - LISTCO SFC Convicts and Sentences Former Vice President of Computershare to Imprisonment and Fine for Insider Dealing SFC Obtains Order to Freeze $101 Million Belonging to Suspected Shadow Director in Corporate Misconduct Case Involving Teamway (1239.HK) SFC Secures Conviction and Eight-Month Prison Sentence in False Trading Prosecution Involving China All Access Shares SFC Suspends Dealings in Dashan Education (9986.HK) Shares over Significant Overstatement of Corporate Bank Balances Regulatory Updates 1. FSTB and SFC conclude consultations on virtual asset dealer and custodian regimes The Financial Services and the Treasury Bureau (“ FSTB ”) and the SFC published two consultation conclusions on legislative proposals to regulate virtual asset (VA) dealing and custodian service providers in Hong Kong; and also proceed for further consultation on new regimes to cover VA advisory and management services providers adopting the familiar philosophy of “same business, same risks, same rules” principle, these new regimes are formulated on the model base of similarities with the securities market. For VA dealers , the regime will be aligned closely with that for Type 1 (dealing in securities) regulated activity, some key takeaways from the consultation conclusions are as follows: Scope and Coverage : still adhering to the principle of“same business, same risks, same rules”; Regulatory Requirement : SFC-licensed VATPs are permitted to integrate with intra-group liquidity via a shared order book while still upholding an appropriate balance between investor protection and market development; Transitional Period : no plan for any deeming arrangement to existing VA dealing service providers; Expedited Licensing Process : SFC-licensed VATPs and licensed corporations currently providing VA dealing services will be subject to an expedited approval process; Prohibition : any person is prohibited from actively marketing its VA dealing services, whether in Hong Kong or elsewhere, to the public of Hong Kong, unless that person is licensed by with the SFC; Powers of Regulatory Authorities : the SFC and the HKMA would be provided with the proposed powers. For VA custodians , the new regime will focus on managing risks related to safekeeping private keys of client VAs in Hong Kong, to secure client assets and protect investors. Key takeaways from the consultation conclusions are as follows: Scope and Coverage : target entities safekeeping private keys which represent the core risk area in VA custody; Activities Allowed : safekeeping of VAs and provision of staking services; Financial Resource Requirements: subject to the similar financial requirements as an LC carrying on Type 13 regulated activity of providing depositary services; Transitional Arrangement : no plan for any deeming arrangement to existing VA custodian service providers; Prohibition : any person is prohibited from actively marketing VA custodian services, whether in Hong Kong or elsewhere, to the public of Hong Kong, unless the person is licensed by with the SFC; Powers of the Regulatory Authorities : the SFC and the HKMA would be provided with the proposed powers. SIGNIFICANCE: As Julia Leung, CEO of the SFC, said: “ The significant progress in our VA regulatory framework ensures Hong Kong remains at the global forefront of digital asset market developments by fostering a trusted, competitive and sustainable ecosystem .” Meanwhile, Mr. Christopher Hui, the Secretary for Financial Services and the Treasury, said: “ The proposed licensing regimes strike a prudent balance among fostering market development, managing risks and protecting investors. ” Market News 2. A quarter of connecting, innovating and diversifying Hong Kong markets: SFC Report In the Jul-Sep 2025 Quarterly Report, it showed Hong Kong’s capital markets continued to deepen connectivity with Mainland and overseas markets, while driving advanced financial innovation and diversification. Some key takeaways of the Report on the financial areas are as follows: The SFC signed six MOUs in 2025 (three in the quarter) with overseas and Mainland markets to strengthen global asset management ties and reinforce Hong Kong’s super‑connector role. Swap Connect, with its product expansion, recorded a 56% year-on-year (“ YoY ”) increase in trading volume as of November 2025, with aggregate transactions exceeding RMB9.3 trillion since its 2023 launch. The SFC collaborating with the HKSAR Government to finalize two new virtual asset (“ VA ”) regulatory regimes, namely , in dealing and custodian areas. VA spot ETFs authorized by the SFC reached $5.47 billion in market cap (+33% YoY) increasing to 11 ETFs as of end‑November; tokenized retail money market fund hit $5.48 billion AUM (+557% since the first launch this year) with eight funds in total. To support Hong Kong as an offshore renminbi and fixed‑income hub, the SFC and HKMA issued a RMB fixed income and currency roadmap in September and are preparing a detailed workplan for implementing the roadmap initiatives. The 24 IPOs in the quarter raised over $70 billion, more than 70% higher YoY, keeping Hong Kong among global leaders by IPO funds raised. Hong Kong‑domiciled funds recorded net inflows of $46.9 billion; their AUM grew 35.9% YoY to $2.27 trillion as of September, while SFC‑authorized ETFs’ market capitalization rose 31.8% YoY to $653.5 billion, accounting for 13% of daily turnover. 2,799 new SFO license applications were filed in the period (+12% YoY); SFC‑licensed corporations and individuals increased to 3,379 and 46,457 respectively (+2.7% and +3.6% YoY). The SFC and HKMA issued a joint statement highlighting the development of the stablecoin regime. On the regulatory landscape, we can take a look at the table below relating breaches noted during the SFC on-site inspections. Quarter ended 30.9.2025 Six months ended 30.9.2025 Six months ended 30.9.2024 YoY change (%) Breach of the Code 72 180 193 -6.7 Breach of FMCC 40 99 56 +76.8 Non-compliance with AML guidelines 55 113 142 -20.4 Internal control weakness 176 341 472 -27.8 It is obvious that there was an increasing trend in deficiencies found in asset management regulatory regime in 2025 as contrast to the other categories where the figures were decreasing. SIGNIFICANCE: As Julia Leung, CEO of the SFC, said: “ Our capital markets delivered another quarter of steady and diversified growth despite global headwinds and volatility. ” On the regulatory side, the acute increase in breaches of FMCC signalled the need to have more comprehensive guidelines and implementable measures to safeguard compliance from market participants. Enforcement News - Intermediary 3. SFC Suspends Loretta LEE Si Kar for Three Months and Two Weeks Over Neglect of Duties in Safeguarding Client Assets at Tung Tai Securities On 3 December 2025, the SFC announced the suspension of Ms Loretta LEE Si Kar (“ LEE ”), a responsible officer (“ RO ”), manager-in-charge (“ MIC ”), and director of Tung Tai Securities Company Limited (“ Tung Tai ”), for three months and two weeks, effective from 1 December 2025 to 14 March 2026 (see Statement of Disciplinary Action ) Case Details This action stems from LEE's neglect of her supervisory duties, which contributed to Tung Tai's failures in handling unauthorized instructions from a bogus email, leading to the sale of client securities and improper transfers totaling US$3,301,740 to undesignated overseas accounts. Despite red flags such as rejected telegraphic transfers (“ TTs ”) and inconsistent beneficiary details, Tung Tai processed the transactions without client verification, breaching requirements to safeguard assets and maintain effective internal controls against theft or fraud. Enforcement Act Following the incident, Tung Tai compensated the affected client, implemented remedial measures, and engaged independent reviewers to strengthen procedures. The SFC factored in LEE's cooperation, clean record, and the seriousness of the lapses when determining the sanction, after previously reprimanding and fining Tung Tai HK$900,000 for related violations (see the SFC’s press release dated 13 November 2025 ). For more details of the background, please refer to ComplianceOne Newsletter (Nov) - Topic 6 SIGNIFICANCE: This disciplinary measure reinforces the SFC's emphasis on senior management's responsibility to uphold robust internal controls and vigilance against fraud in securities firms. It serves as a reminder for financial intermediaries, including those in related sectors, to prioritize client asset protection through proactive verification and risk management, as lapses can result in significant financial losses, regulatory penalties, and reputational harm. The case may prompt firms to review email authentication protocols and TT processes to mitigate similar cyber-enabled threats. 4. SFC Reprimands and Fines EFG Bank AG $10.85 Million for Regulatory Breaches and Internal Control Failures On 11 December 2025, the SFC reprimanded and fined EFG Bank AG (“ EFG ”) $10.85 million for failures in product due diligence, record-keeping, and late reporting during the period from January 2015 to December 2020 (the “ Relevant Period ”). The SFC’s action followed an investigation triggered by a self-report from EFG and findings referred by the Hong Kong Monetary Authority (“ HKMA ”). Case Details EFG, registered to conduct regulated activities including dealing in securities, advising on securities, and asset management under the Securities and Futures Ordinance, failed to adequately assess special features of 322 bonds during product due diligence. It also neglected to update internal policies promptly in line with regulatory changes and did not provide customers with sufficient information or warning statements for certain complex products prior to transactions. Additionally, EFG did not maintain product due diligence records for 141 bonds and delayed reporting its suspected failures to the SFC, despite identifying them in July 2020. These breaches contravened the Code of Conduct for Persons Licensed by or Registered with the SFC and the Management, Supervision and Internal Control Guidelines for Persons Licensed by or Registered with the SFC. Enforcement Act In determining the sanctions, the SFC considered EFG’s remedial actions to strengthen its product due diligence framework, its cooperation with the HKMA and SFC investigations, and its commitment to implement Enhanced Complaint Handling Procedures (“ ECHP ”). Under the ECHP, EFG will review complaints from customers who acquired any of the 351 affected products during the Relevant Period, ensuring fair resolution. An impact assessment by EFG indicated potential failures in considering special features for these 351 products. For more details of the background, please refer to Statement of Disciplinary Action (appended with a list of the 351 products) SIGNIFICANCE: This enforcement action highlights the SFC’s emphasis on robust internal controls, timely compliance with evolving regulations, and proactive self-reporting in the financial sector. For institutions like EFG, which intersect with banking, securities, and potentially insurance-linked activities, such failures can erode investor trust and expose clients to undue risks. The case serves as a reminder for all regulated entities to prioritize comprehensive due diligence, accurate record-keeping, and swift disclosure of issues to maintain market integrity and avoid severe penalties. The implementation of ECHP demonstrates a balanced approach, allowing for remediation while reinforcing accountability. Enforcement News - LISTCO 5. SFC Convicts and Sentences Former Vice President of Computershare to Imprisonment and Fine for Insider Dealing SFC’s press release dated 4 December 2025 & 18 December 2025 . The SFC prosecuted Mr. CHOI Chun Wai (“ CHOI ”), former Vice President of Computershare Hong Kong Investor Services Limited (“ Computershare ”), a global provider of share registration and investor services, for insider dealing in the shares of ENM Holdings Limited (“ ENM ”) ( 128.HK ), listed on the Main Board of the Stock Exchange of Hong Kong Limited since 1972. Computershare was engaged by ENM to despatch and collect proxy forms, and to act as the scrutineer for the voting process at a court meeting related to ENM's proposed privatisation. CHOI, while employed as a vice president of Corporate Services, was involved in coordinating and monitoring the voting process. He accessed inside information indicating the privatisation would fail and sold his shares ahead of the public announcement, avoiding a significant financial loss. Case Details Date Event 2 June 2023 ENM and the Offeror (Solution Bridge Limited) jointly announced a proposed privatisation of ENM by way of a scheme of arrangement under section 673 of the Companies Ordinance, offering $0.58 per share for cancellation of approximately 55.72% of ENM's issued share capital, subject to 75% approval from disinterested shareholders at a court meeting scheduled for 26 September 2023. 22 September 2023 CHOI learned from proxy forms that the required voting threshold for the privatisation could not be met, constituting inside information. 25 September 2023 CHOI sold all his 1,500,000 ENM shares, despite knowing the inside information. 27 September 2023 ENM announced the lapse of the privatisation, causing ENM’s share price to fall 10.26% to close at $0.35, resulting in CHOI avoiding a loss of around $289,500. Court Order On 4 December 2025, the Eastern Magistrates’ Courts convicted CHOI of insider dealing following a prosecution by the SFC. CHOI pleaded guilty. The Eastern Magistrates’ Courts then sentenced CHOI to two months of imprisonment on 18 December 2025. He was ordered to pay a fine of $289,500 (equivalent to the losses avoided) and the SFC's investigation costs of $120,407. The Court noted that although CHOI showed remorse, insider dealing is a serious offense warranting an immediate custodial sentence. SIGNIFICANCE: The SFC’s Executive Director of Enforcement, Mr. Michael DUIGNAN, stated: “ The conviction underscores the SFC’s commitment to tackle insider dealing and enhance the integrity of Hong Kong’s financial markets. The immediate jail sentence by the Court serves as a strong deterrent. The misuse of non-public information for personal gain, particularly market professionals in a position of trust, is unacceptable and will have serious consequences. The SFC will continue to take robust enforcement action to protect investors and uphold a level playing field for all market participants. ” 6. SFC Obtains Order to Freeze $101 Million Belonging to Suspected Shadow Director in Corporate Misconduct Case Involving Teamway (1239.HK) On 16 December 2025, the SFC obtained a court order from the Court of First Instance to freeze more than $101 million in cash held in the personal bank account of Mr NG Kwok Fai (“ NG ”), a suspected shadow director of Teamway International Group Holdings Limited ( 1239.HK ) (“ Teamway ”). This action was taken by consent between the SFC and NG in ongoing legal proceedings under section 214 of the SFO, stemming from allegations of corporate misconduct. The freeze follows NG and others agreeing to pay $192 million in compensation to independent public shareholders of the delisted Combest Holdings Limited (“ Combest ”) for related misconduct. Case Details The SFC's investigation revealed that NG and Mr YANG Zhihui (“ YANG ”) allegedly gained control of Teamway and acted as shadow directors, transforming it into a "listed shell" for injecting new businesses while prejudicing the company's interests through a series of transactions. The SFC claims that the below individuals breached their fiduciary duties by approving these transactions or allowing NG and/or YANG to dominate company affairs: Name Position/Role Mr LIU Liangjin; Mr HE Xiaoming; Ms XIE Yan; Mr LING Zheng; Ms NGAI Mei; Mr XU Gefei; and Ms DUAN Mengying The seven former executive directors (“ ED ”) Mr CHAN Chun Kau; Mr LAM Chi Wai; and Mr Joshua LEE Chi Hwa The three Former independent non-executive directors (“ NED ”) Additionally, the former company secretary, Ms CHOI Yee Man (“ CHOI ”), is accused of negligence or recklessness in her duties. This case spans several years, involving interconnected corporate actions and related proceedings. Below is a timeline of key events: Date Event 2015 NG and YANG acquired a 75% interest in Teamway through a nominee, becoming shadow directors and planning to transform it into a "listed shell" by injecting new businesses to replace its original packaging operations. 2015–2022 NG and YANG, as shadow directors, allegedly engineered prejudicial transactions, with former directors approving them and the company secretary failing in oversight duties. May 2020 SFC commenced court proceedings under sections 212 and 214 of the SFO against NG, Mr LIU Tin Lap (“ LIU ”), and Mr LEE Man To (“ LEE ”) for misconduct related to Combest. Source: SFC’s press release dated 21 May 2020 . 8 November 2022 SFC initiated section 214 proceedings against Teamway and 13 individuals, including NG, YANG, the seven EDs, three NEDs, and the company secretary. September 2024 SFC and Combest, NG, LIU, and LEE reached an agreement via the Carecraft procedure to dispose of Combest proceedings. Source: SFC’s press release dated 16 September 2024 . 2 June 2025 Court ordered NG, LIU, and LEE to pay $192 million in compensation to Combest's independent public shareholders. Source: SFC’s press release dated 2 June 2025 . Enforcement Act The SFC is seeking compensation orders totaling $532 million against NG, YANG, and the 10 former directors for losses incurred by Teamway and its subsidiaries, along with disqualification orders against them and CHOI from serving as directors or managing any listed or unlisted corporation in Hong Kong. The asset freeze against NG remains in effect until the proceedings are resolved or further court order. SIGNIFICANCE: This enforcement action highlights the SFC's commitment to combating corporate misconduct in listed entities, particularly where shadow directors exploit control to prejudice company and shareholder interests. By freezing assets and seeking substantial compensation and disqualifications, it underscores the importance of fiduciary duties, transparency, and accountability in Hong Kong's financial markets. Company with listed affiliations should review governance practices to mitigate similar risks, as such cases can erode investor confidence and trigger broader regulatory scrutiny across financial sectors. 7. SFC Secures Conviction and Eight-Month Prison Sentence in False Trading Prosecution Involving China All Access Shares On 4 December 2025, the Shatin Magistrates’ Courts convicted Ms WONG Yuk Lan (“ WONG ”), Administration Controller of China All Access (Holdings) Limited (former stock code: 633.HK ) (“ China All Access ”), for false trading in the company’s shares, following a prosecution initiated by the SFC. Case Details The case stemmed from WONG’s actions as the “Spouse” of Mr Chan Yuen Ming, the company’s Chairman, who held a beneficial interest in 381,400,000 China All Access shares through a securities margin account under Creative Sector Limited, a company he wholly owned and controlled. Between 29 and 31 December 2014, WONG placed a series of bid orders for China All Access shares via her personal securities account. These orders were executed in the final minutes before market close and at prices above prevailing market levels. The court determined that WONG had no genuine intent to purchase the shares but aimed to create a false or misleading appearance of market demand to alleviate margin call pressures on Creative’s account. Court Order This offense violates section 295 of the SFO, which prohibits actions intended to create a false or misleading appearance regarding the market for, or price of, securities. Magistrate Mr Jeffrey SZE Cho Yiu emphasized during sentencing that WONG’s misconduct harmed market integrity by fabricating an illusion of active trading. WONG was subsequently sentenced to eight months in prison on 17 December 2025, and ordered to pay the SFC’s investigation costs. SIGNIFICANCE: This enforcement action underscores the SFC’s dedication to preserving market integrity and deterring manipulative practices that undermine investor confidence in Hong Kong’s financial markets. By securing a conviction and prison sentence for false trading, it highlights the severe consequences of creating artificial market appearances to evade financial pressures, such as margin calls. Financial professionals and firms should strengthen internal controls and compliance measures to prevent similar misconduct, as such cases can lead to reputational damage, regulatory penalties, and broader scrutiny across interconnected sectors. 8.SFC Suspends Dealings in Dashan Education (9986.HK) Shares over Significant Overstatement of Corporate Bank Balances On 3 December 2025, the SFC directed The Stock Exchange of Hong Kong Limited (“ Stock Exchange ”) to suspend dealings in the shares of Dashan Education Holdings Limited ( 9986.HK ) (“ Dashan ”) effective from 9:00 am, under the Securities and Futures (Stock Market Listing) Rules (“ SMLR ”). This measure aims to maintain a fair and orderly market and protect investors amid an ongoing SFC investigation into suspected financial irregularities. Case Details The SFC's inquiry revealed discrepancies in bank statements related to a software development project (April 2022 to November 2023) and a UK company acquisition (September 2022), including omitted circular fund flows and overstatements of bank balances totaling RMB36.4 million as of 30 June 2023 (19% of net asset value) and RMB76.3 million as of 31 December 2023 (55% of net asset value). These findings suggest the transactions may not have been genuine or at arm's length, with potential fabrication of documents to conceal issues, raising concerns about management integrity, particularly involving executive director Mr. ZHANG Hongjun (“ ZHANG ”), internal controls, and market disclosures. Follow-up Action Dashan has not provided satisfactory explanations, and the SFC suspects the September 2024 trading resumption was based on misleading information. Trading had been halted at Dashan's request since 28 November 2025 pending inside information release. See HKEX News 28 November 2025 for more information. SIGNIFICANCE: This suspension emphasizes the SFC's role in upholding market transparency and investor protection by addressing potential financial misrepresentations in listed companies. It highlights risks associated with overstated assets, inadequate internal controls, and management accountability, which could impact stakeholder confidence and prompt enhanced due diligence for financial intermediaries dealing with similar entities. As the investigation continues, it may lead to further regulatory actions, underscoring the need for robust compliance frameworks in Hong Kong's capital markets. [End of ComplianceOne Newsletter – December 2025] For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . Unit 1104, 11/F, 299QRC, 287-299 Queen's Road Central, Sheung Wan, Hong Kong Tel: (852) 39550277 www.complianceone.hk

The topics discussed in this monthly newsletter are as follows: ComplianceOne Newsletter - October 2023 The topics discussed in this monthly newsletter are as follows: 1. China banned new offshore brokerage accounts to prevent “bypassing” of forex controls 2. SFC/HKMA joint circular on intermediaries’ virtual asset-related activities 3. Circular on distributors providing additional returns and other services or arrangements when marketing SFC-authorised funds 4. SFC consulted on market sounding guidelines 5. SFC expressed support for development of an industry-led voluntary code of conduct for ESG ratings and data products providers 6. SFC banned Ivan Chan Chuk Cheung for seven years for IPO sponsor failures 7. SFC, ICAC and AFRC conducted first tripartite operation against suspected corporate fraud and misconduct MARKET NEWS 1. China banned new offshore brokerage accounts to prevent 'bypassing' of forex controls According to Reuters news on 12 October 2023, China had for the first time issued a notice prohibiting domestic brokerages and their overseas units from taking on new mainland clients for offshore trading; whereas new investments by existing mainland clients are also subject to strict monitoring to prevent investors from bypassing China’s foreign exchange controls. The China Securities Regulatory Commission (CSRC) had made it explicit earlier in September that brokers should cease providing securities trading from offshore accounts such as from Hong Kong to new mainland investors, and activities now considered as illegal include cross-border securities brokerage services, securities lending, fund sales or investment consultancy. The story can be traced back to last December when the CSRC put a ban on the offshore investments through two main online brokers, Futu Holdings Ltd and UP Fintech Holdings Ltd where it was stated that such activities were in breach of the securities laws in China. Despite of the recent tightening measures, institutional investors from mainland China are still able to gain access to the HK stock markets through the Stock Connect, though on a quota-restriction basis. SIGNIFICANCE: The notice and subsequent actions are conceived by many market participants as symbols of restricting capital outflows from mainland, particular amid the weakening of RMB in the foreign exchange market over the past months. This impact from the regulatory regime can be far-reaching and suppressing, especially for brokerage firms with strong mainland backgrounds of which larger portion of offshore retail business was originated from. 2. SFC/HKMA Joint circular on intermediaries’ virtual asset-related activities On 20 October 2023, the SFC and the HKMA published a “ Joint Circular on intermediaries’ virtual asset-related activities ” amid the buoyant interests and enquiries from intermediaries about the distribution of virtual assets-related (VA-related) products, advisory and dealing services as well as asset management services in virtual assets industry. The SFC and the HKMA have been reviewing their existing policies for intermediaries contemplating to engage in virtual assets-related industry in the light of the ever-changing and fast-growing VA activities. This Joint Circular incorporated FOUR main categories of VA-related activities with relevant Appendices, providing guidance and “terms & conditions” in details for intermediaries engaging the following categories: A. Distribution of VA-related products B. Provision of virtual asset dealing services (VA dealing services) C. Provision of asset management services in respect of virtual assets D. Provision of virtual asset advisory services SIGNIFICANCE: Intermediaries with intention to engage in VA-related business or dealing services are strongly recommended to take notes of the relevant Appendices which serve as regulatory guidelines to ensure intermediaries themselves of being in compliance while conducting their VA-related activities or VA brokerage services. Please be reminded the prevailing Joint Circular supersedes the previous versions, and intermediaries have the obligations to keep abreast of the changing VA regulatory regime in collaboration with the ongoing concerted efforts of the law-enforcing counterparts like the SFC and the HKMA in order to develop and consolidate a sound regulatory landscape. 3. Circular on distributors providing additional returns and other services or arrangements when marketing SFC-authorised funds On 24 October 2023, this circular was published in the light of the recent observations of licensed corporations’ practice in offering and promoting SFC-authorised funds. It was noticed that intermediaries have been offering additional returns or other incentives that may divert the client’s focus from properly considering the risks and features of the underlying funds. In some observed cases, “guaranteed returns” and “lock-up period” are the common features. Guaranteed returns The “guaranteed returns” typically comprise: (i) the actual return of the relevant fund(s) invested by the investor (i.e., fund return); and (ii) a top-up return to make up the difference between the fund return and the guaranteed rate of return offered by the distributor. Moreover, the guaranteed returns offered by some distributors may be considered as a “gift” which may contravene paragraph 3.11 of the Code of Conduct that “distributors should not offer any gifts (other than a discount of fees or charges) in promoting a specific investment product or a particular type of investment product to a client", lest investors may be distracted from the unique features and risks of such particular fund per se. Lock-up period and dealing frequency When distributing SFC-authorised funds, some distributors imposed a lock-up period on their clients’ investments or lowered the funds’ dealing frequency. It is reminded that distributors should act fairly and in the best interests of their clients in providing services in accordance with General Principle 1 (Honesty and fairness) of the Code of Conduct that clients should not be restricted to redeem his investment in a fund which interferes with his timely investment decisions. SIGNIFICANCE: SFC-authorised funds without guaranteed features are required to highlight in their offering documents that they do not have these features and that investors may not get back the principal of their investment. For this reason, any guaranteed returns provided by distributors may create a misleading impression to the investors that these returns are provided by the underlying funds which is not a factual presentation indeed! As for the lock-up period, the SFC has made its expectation expressly that distributors should use their best endeavours to adhere to a fund’s dealing frequency as stipulated in the offering documents despite the need to achieve any administrative efficiency in setting any cut-off times. 4. SFC consulted on market sounding guidelines On 11 October 2023, the SFC launched a consultation on proposed guidelines for market soundings which highlighted the general principle of honesty, fairness and best interests to the clients while conducting the regulated activities. Under the proposals, intermediaries would have to implement robust governance and effective policies and internal control procedures to prevent the misuse and leakage of non-public information they are entrusted with. As Ms Julia Leung, the SFC’s Chief Executive Officer, has said: “ both sell-side brokers and buy-side participants have obligations to uphold market integrity by keeping in strict confidence non-public information entrusted to them and not abusing that information. ” SIGNIFICANCE: This consultation follows a thematic review of market soundings the SFC commenced in early 2022. In developing the proposed guidelines, the SFC took into consideration local and overseas market practices and regulatory requirements, related cases as well as information gathered and feedback from intermediaries in the thematic review. 5. SFC expressed support for development of an industry-led voluntary code of conduct for ESG ratings and data products providers On 31 October 2023, the SFC announced that it would support and sponsor the development of a code of conduct for voluntary adoption by environmental, social and governance (ESG) ratings and data products providers providing products and services in Hong Kong. The Voluntary Code of Conduct (VCoC) will be developed via an industry-led working group, namely the Hong Kong ESG Ratings and Data Products Providers VCoC Working Group (VCWG). And The SFC also welcomed the International Capital Market Association (ICMA) to act as the Secretariat of the VCWG. The proposed VCoC would align with international best practices as recommended by the International Organization of Securities Commissions (IOSCO) and relevant expectations introduced in other major jurisdictions, with the SFC, HKMA and the Insurance Authority (IA) as observers to the VCWG. As Ms Julia Leung, the SFC’s Chief Executive Officer, has said: “ the Voluntary Code of Conduct will help strengthen the transparency, quality and reliability of ESG information used by licensed corporations in their investment decisions; this is an important initiative to mitigate the risk of greenwashing in investment products .” The initiative is the culmination of the SFC’s fact-finding exercise and industry outreach conducted since mid-2022, the key observations from the exercise and proposed way forward for these providers were summarised in a report published by the SFC that date. ENFORCEMENT NEWS 6. SFC banned Ivan Chan Chuk Cheung for seven years for IPO sponsor failures An announcement made on 11 October 2023, the SFC had prohibited Mr Ivan Chan Chuk Cheung (Chan), a former responsible officer (RO) of Changjiang Corporate Finance (HK) Limited (CJCF), from re-entering the industry for seven years from 10 October 2023 to 9 October 2030 for failing to discharge his supervisory duties as a sponsor principal in charge of five listing applications The disciplinary action followed the earlier sanctions against CJCF for serious and extensive failures in discharging its duties as the sponsor in six listing applications, five out of which were attributable to neglect on the part of Chan. SIGNIFICANCE: Given a ban of such long duration of seven years, Chan had failed in his role as the sponsor principal to: (i) exercise due skill, care and diligence in handling the Five Listing Applications; (ii) diligently supervise the transaction teams in carrying out the sponsor work; and (iii) ensure the maintenance of appropriate standards of conduct by CJCF. 7. SFC, ICAC and AFRC conducted first tripartite operation against suspected corporate fraud and misconduct On 19 October 2023, the SFC, the Independent Commission Against Corruption (ICAC), and the Accounting and Financial Reporting Council (AFRC) have conducted the first tripartite operation involving two Hong Kong-listed companies on suspicion that they falsified corporate transactions totalling HK$193 million. In the joint operation, three persons, including an executive director of a listed company, were arrested by the ICAC for suspected offences of agent using documents with intent to deceive his principal under the Prevention of Bribery Ordinance. The investigation revealed that the management of the two companies listed on the SEHK had allegedly conspired with members of the syndicate to falsify corporate transactions, resulting in overstatements of HK$83.9 million in their revenue and misstatement of assets in the sum of HK$109.2 million. Such overstatements and misstatement of assets might lead to disclosure of false or misleading information in the interim results and/or annual reports of the two listed companies. The SFC’s Executive Director of Enforcement, Mr Christopher Wilson, said: “ Directors of listed companies are entrusted to govern truthful and accurate financial disclosures which serve as the bedrock of our capital markets. The tripartite operation, and the first with the AFRC, underscores our shared commitment to holding accountable those who abuse that trust and defraud investors .” Meanwhile, Deputy Commissioner and Head of Operations of the ICAC, Mr Ricky Yau Shu-chun, and Ms Janey Lai, Acting Chief Executive Officer of the AFRC, separately expressed their appreciation of the tripartite operation in upholding the integrity of the financial market in Hong Kong. For more details, please click on the title of the topic above. ================================= ~ Make It Right Today, Better Tomorrow ~ ================================= The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice. For enquiries, please email to support@complianceone.hk or WhatsApp us at (852) 95164607 . 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The topics discussed in this monthly newsletter for insurance are as follows: ComplianceOne Insurance Newsletter – Jan 2025 The topics discussed in this monthly newsletter are as follows: 1. Hong Kong Solidifies Insurance-linked Security Leadership with First Multi-Peril Catastrophe Bond 2. Insurance Sector Pivots to Silver Economy as Population Ages 3. Key highlights of provisional business Q1–Q3 2024 Statistics 4. Revision of the Mainland China Visitors Definition 5. SFC bans Chan Ka Him for life for insurance fraud IA News Updates 1. Hong Kong Solidifies Insurance-linked Security Leadership with First Multi-Peril Catastrophe Bond The IA announced the successful issuance of a catastrophe bond by Taiping Reinsurance Company Limited through its special purpose insurer, Silk Road Re Limited. This bond marks a milestone as the first insurance-linked security (“ ILS ”) in Hong Kong covering multiple perils and triggers, offering three-year protection against named storms in the United States and earthquakes in Mainland China from 1 January 2025. Key Highlights: This is the sixth ILS issuance in Hong Kong since the launch of the city’s dedicated regulatory framework and pilot grant scheme in 2021. Total ILS transactions in Hong Kong now stand at US$748 million (HK$5.86 billion), reflecting robust growth in the region’s insurance-linked securities market. SIGNIFICANCE: The bond highlights Hong Kong’s evolution into a versatile ILS hub capable of structuring complex, multi-jurisdictional risk solutions. By covering both U.S. and Mainland China perils, it demonstrates the city’s ability to attract global investors while supporting regional resilience against climate-related risks. Note: ILS are different from Investment-Linked Assurance Schemes (“ ILAS ”); ILS: Financial instruments linked to insurance events like natural disasters, transferring risk to capital markets; ILAS: Life insurance policies combining investment and insurance, focused on long-term savings and retirement planning. 2. Insurance Sector Pivots to Silver Economy as Population Ages The IA spearheaded a critical dialogue on the role of insurance in harnessing opportunities within the silver economy at the Asian Financial Forum (“ AFF ”). Titled “Navigating the Silver Economy: Insurance Sector Opportunities in an Aging Society,” the panel convened industry leaders and academics to address challenges and innovations in serving aging populations, both locally and across the Greater Bay Area (“ GBA ”). Key Highlights: Demographic Shifts: Explored Hong Kong’s rapidly aging population and the growing demand for tailored insurance solutions. Protection Gaps: Identified unmet needs in elderly healthcare, retirement planning, and long-term care coverage. Cross-Border Potential: Emphasized opportunities for Hong Kong insurers to collaborate with GBA partners to deliver integrated services. Education & Literacy: Stressed the need to boost public understanding of retirement planning and insurance products. SIGNIFICANCE: With over 20% of Hong Kong’s population projected to be aged 65+ by 2030, the panel underscored the urgency for insurers to develop products that address longevity risks, chronic care, and income security. The discussion also highlighted Hong Kong’s strategic role in leveraging GBA integration to create region-wide solutions. For more details, please refer to AFF full programme here . 3. Key highlights of provisional business Q1–Q3 2024 Statistics The IA’s released the provisional business statistics for the first three quarters of 2024, which highlights trends of long-term business, general business, and regulatory shifts critical for insurance licensees. Mainland Visitor Business: Adapt to Shifting Dynamics: While premiums from Mainland visitors remain significant (27.6% of new individual life business), the IA’s focus on monitoring this segment signals stricter enforcement of unlicensed referral practices. Recent discussions indicate a zero-tolerance stance on: (i) Unlicensed cross-border referrals (e.g. unlicensed Mainland agents/brokers directing clients to Hong Kong insurers); and (ii) non-compliant commission-sharing arrangements with unregulated third parties. For more details of unlicensed referral, please refer to circular issued by IA on 22 May 2024. Regulatory Overhaul: Prepare for RBC Changes: The Risk-based Capital (“ RBC ”) regime, effective 1 July 2024, introduces new reporting standards. Insurers now report by financial year instead of calendar year, and offshore general insurance metrics are now included. Historical comparisons may be unreliable—verify data context with partners. For more details of RBC regime, please refer to here . Semi-Annual Reporting: Starting Q1 2025, the IA will publish Mainland visitor business statistics semi-annually due to seasonal fluctuations. Long-Term Business Growth: New policy premiums for long-term business (excluding retirement schemes) reached $169.6 billion, up 15.7%. General Business Performance: Gross and net premiums for general business in the first three quarters of 2024 were $75 billion and $51.7 billion. For additional summary of the provisional statistics, please refer to the Annex and Market & Industry Statistics published by IA. SIGNIFICANCE: As the insurance landscape evolves, licensees must stay agile and informed. Adapting to the shifting dynamics of Mainland visitor business is crucial, especially with the IA's stricter enforcement on unlicensed referral practices. Aligning product offerings with Mainland visitor preferences and ensuring compliance with the new RBC regime will help licensees effectively navigate these regulatory changes. Market News 4. Revision of the Mainland China Visitors Definition The IA proposed to revise the official definition of Mainland China Visitors (“ MCV ”) to exclude individuals under related talent schemes (e.g. Top Talent Pass Scheme) to prevent data inflation and improve data accuracy and address risks tied to visitors’ limited familiarity with local insurance regulations. MCV Definition proposal Current MCV Definition: Mainland residents entering Hong Kong with a Double Entry Permit or Chinese passport. Proposed MCV Definition: Specific talent schemes participants may no longer be classified as MCV. Additionally, the IA will explore the possibility of collecting data on new policies from different regions. Considering the seasonal travel patterns of Mainland visitors, the related business statistics will be published semi-annually instead of quarterly starting from Q1 2025. Participating Business Reforms The IA has proposed three major changes to enhance transparency and consumer protection: Cap on Commission Rates: An annual review of maximum illustration rates, divided into HKD and non-HKD policy categories. Commission Ratio Comparison Platform: A public platform to compare insurers' actual vs. projected dividend payouts. Referral Compensation Review: An overhaul of unlicensed referrer’s commission structures. The above-mentioned will be reviewed and announced by IA within the year, with the cap on commission rates expected to be implemented first. SIGNIFICANCE: Reviewing the definition of Mainland visitors aims to prevent data inflation and improve consumer protection and risk management. The reforms in participating business practices will enhance transparency and ensure fair treatment of consumers. Licensed insurance companies and brokers need to adjust the business strategies promptly to comply with the new regulations and maintain client trust. Enforcement News 5. SFC bans Chan Ka Him for life for insurance fraud The SFC has permanently banned Mr. Chan Ka Him, a former insurance specialist at Standard Chartered Bank (Hong Kong) Limited, from re-entering the industry following his criminal convictions for insurance fraud. Case Details: Between January and March 2019, Chan assisted two clients in taking out insurance policies. Between August and September 2019, Chan induced one client to transfer US$52,300 and another client to transfer over HK$420,000 to a bank account connected to him, under the pretense that these transfers were for premium payments. Chan attempted to cancel the clients’ insurance policies by falsely representing to the insurer that the clients wished to do so. SIGNIFICANCE: Chan was sentenced to 20 months’ imprisonment by the District Court on 2 February 2024 after being convicted of three counts of fraud and one count of attempted fraud. For more details, please refer to Judgment – DCCC 1157/2022 The SFC considers that Chan is not fit and proper to be a regulated person due to his criminal convictions. [End of ComplianceOne Insurance 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 for insurance are as follows: ComplianceOne Insurance Newsletter – July 2025 The topics discussed in this monthly newsletter are as follows: 1. Practice Note: Commission Up to 70% in the first year, with the remainder paid over 5 years 2. Compulsory RO-CPD Requirement for Responsible Officers 3. Anti-Scam Consumer Protection Charter 3.0 Regulatory News 1. Practice Note: Commission Up to 70% in the first year, with the remainder paid over 5 years On 30 July 2025, the IA released a Practice Note . It builds on Guideline GL16, which covers long-term insurance business (excluding investment-linked policies). The goal is simple: ensure insurance companies pay commissions to agents and brokers in a way that encourages fair treatment of customers. This practice guideline shall come into effect on 1 January 2026 . Who Does This Apply To? Insurers: All authorized insurance companies in Hong Kong that issue participating policies with regular premiums. Intermediaries: Licensed individual agents, agencies, and broker companies who sell and service these policies. Key Rule: How Commissions Must Be Paid To avoid "front-loading" (paying too much too soon, which might lead to pushy sales and poor after-sales service), commissions must be spread out: Up to 70% can be paid in the first policy year (from the start date to 12 months later). The remaining at least 30% must be paid evenly over the next minimum 5 years (policy years 2 to 6) – or over the full premium payment term if it's shorter than 5 years. Example - a policy where the total commission is $100 (based on premiums paid): Policy Year Before 1 January 2026 After 1 January 2026 Commission paid % of total commission Commission paid % of total commission Year 1 $100 100% $70 70% Year 2 $0 Nill $6 6% Year 3 $0 Nill $6 6% Year 4 $0 Nill $6 6% Year 5 $0 Nill $6 6% Year 6 $0 Nill $6 6% Year 7 $0 Nill $0 Nill Under the existing practice (“ Before 1 January 2026 ”), with all commissions paid in the first year, intermediaries may have reduced incentive to provide ongoing service from year 2 onward, potentially leading to policies receiving less attention or being neglected. For the new practice (“ After 1 January 2026 ”), the spreading of commissions ensures that intermediaries remain motivated to carefully handle and service policies over subsequent years to secure the remaining payments, promoting better long-term customer care. The new practice applies to the total commission per policy, including basic pay, overrides (to managers), and bonuses tied to sales volume (unless exempted – see below). Exceptions (When Spreading Isn't Required) You can skip the 70/30 split if the below scenarios apply, but still required to follow GL16's fair treatment rules: Scenario Remarks Overriding commission (Agents only) Applies to: Commissions for producing agents (who introduce, arrange, and serve policies) and overriding commissions for agent managers (who oversee producing agents). Exception: Overriding commissions are exempt if calculated using objective non-financial performance metrics, such as policy persistency rates, product variety in portfolios, customer feedback, and agent retention rates, to ensure adherence to "treating customers fairly." Volume-Based bonus commission (Agents only) Applies to : Bonuses for licensed insurance agents contingent on meeting sales volume targets (e.g., minimum premium volume), where eligibility and amount are uncertain until targets are met. Exception : Exempt if the bonus incorporates objective non-financial metrics (e.g., persistency rates, product diversity, customer feedback, agent retention) alongside volume. Note for Brokers : Volume-based commissions are outright prohibited for licensed insurance brokers per a 2006 circular from the Office of the Commissioner of Insurance. Fixed salaries Exception : Fully exempt for fixed remuneration packages, which are contractually guaranteed regardless of policy arrangements, servicing, or premium volumes. Bank channels (bancassurance) Exception: Allowed departure for commissions in the bancassurance channel (e.g., banks as insurance agencies under the Banking Ordinance), provided they adhere to overriding principles in GL16. The IA and Hong Kong Monetary Authority (“ HKMA ”) will monitor and act if needed. Policy Holders Who Are Professional Investors Exception : Departure permitted for commissions on policies with policyholders qualifying as Professional Investors (per Securities and Futures Ordinance and Rules), subject to: Establishing effective controls to verify PI status during onboarding and KYC processes. Confirming the policyholder meets PI criteria. Ensuring commission structures continuously comply with GL16's overriding principles. SIGNIFICANCE: This Practice Note strengthens regulatory oversight of long-term insurance conduct, promoting sustainable practices that prioritize policyholder protection over short-term sales. By mandating commission spreading, it reduces risks of misconduct, enhances industry integrity, and supports fair treatment amid fluctuating policy benefits. Insurers are encouraged to consult the full document and FAQs for guidance; the IA may update it based on market developments. For inquiries, contact the IA at relevant channels. 2. Compulsory RO-CPD Requirement for Responsible Officers The IA has officially rolled out the compulsory Continuing Professional Development (“ CPD ”) requirement for Responsible Officers (“ ROs ”) (here refer as “ RO-CPD ”) of all licensed insurance broker companies. Effective from 1 August 2025 . Key Details of the Requirement RO must complete at least 2 RO-CPD hours focused specifically on management and control functions during each assessment period. The RO-CPD hours fall under the " Ethics or Regulations " category and count toward the existing 15-hour annual CPD requirement for ROs. RO-CPD Course Details, and how to attend The IA will organize the courses, delivered through the two key broker industry bodies: Professional Insurance Brokers Association (“ PIBA ”) The Hong Kong Confederation of Insurance Brokers (“ CIB ”) Further details on training sessions for the 2025/26 assessment period will be announced soon. ROs must attend at least one session per period through either body. Consequence of Non-Compliance Non-compliance should not be taken lightly. Failure to meet the RO-CPD without reasonable excuse may result in: Disciplinary Action : As detailed in the IA's "Penalty Framework for Non-compliance with CPD" (from the circular dated 23 July 2021 ). Impact on Fit and Proper: May question the individual's ongoing suitability to serve as an RO. Increased Scrutiny : IA could apply heightened regulatory oversight to the associated broker company. SIGNIFICANCE: Given the growing complexity of these duties, the IA believes it's essential for ROs to dedicate time to enhancing their skills in management and control functions. This builds on positive feedback from a pilot scheme launched in the 2024/25 assessment period, which was well-received by the industry and successfully raised awareness about RO responsibilities. 3. Anti-Scam Consumer Protection Charter 3.0 In a united stand against rising financial frauds and scams, the Hong Kong Monetary Authority (“ HKMA ”), Securities and Futures Commission (“ SFC ”), the IA, and Mandatory Provident Fund Schemes Authority (“ MPFA ”) have unveiled the Anti-Scam Consumer Protection Charter 3.0 . Effective from 9 July 2025 . Building upon the foundations laid by Charters 1.0 (2023) and Charter 2.0 (2024) , Charter 3.0 expands the fight against scams by forging partnerships with technology and telecommunications firms. This collaborative framework aims to disrupt fraud at its core through six key principles outlined in the annex. These focus areas include: Charter 3.0 Principles include: 1. Reporting Functions for Users Participating Institutions will allow users to file reports related to suspected financial frauds and scams, and will endeavor to address them in a reasonable manner, once found to be in violation of the Participating Institutions’ policies. 2. Reporting Channels for Financial Regulators Participating Institutions will provide a direct and efficient process for the Financial Regulators to report suspected financial frauds and scams, and to follow up on such reports. 3. Checking of Advertisers Participating Institutions will adopt a risk-based approach to facilitate verification, applying measures that are necessary and proportionate. 4. Internal Monitoring Processes Participating Institutions will put in place and update from time to time internal rules, policies, processes, and tools to monitor advertisements and content that promote financial products or services on their platforms, with a view to creating a safe online environment for users. 5. Enforcement of Terms of Service Participating Institutions will enforce their own terms of service by detecting and removing financial scam advertisement or content that violate their platform policies. 6. Collaboration on Public Awareness Participating Institutions will work together with the Financial Regulators and the financial industry on raising public awareness about frauds and scams and promoting cybersecurity. This will include Participating Institutions’ collaboration with the Financial Regulators, financial institutions, or other agencies where appropriate, to launch anti-deception promotional campaigns to educate the Hong Kong public. 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: Julia Leung, Chief Executive Officer, SFC: "Charter 3.0 is a meaningful step forward, bringing in major technology and telecommunications companies to join the fight against online scams. It positions Hong Kong as a leader in safeguarding the financial world’s digital future, building a safer, more responsible online landscape." Clement Cheung, Chief Executive Officer, IA: "The Charter 3.0 represents collaborative efforts to forge a robust alliance against financial frauds. The IA will leverage this platform to strengthen public education and empower policyholders against sophisticated swindlers." With scams evolving rapidly in the digital age, Charter 3.0 emphasizes cross-sector collaboration to preempt threats. It aligns with global calls for action and reinforces Hong Kong's role as a secure financial hub. [End of ComplianceOne Insurance Newsletter – July 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