Asia Financial Regulatory Update - December 2024

Hong Kong SAR

Asset Management

The SFC identifies deficiencies in asset management practices: On 9 October 2024, the Securities & Futures Commission of Hong Kong (SFC) released findings from its supervision of licensed corporations engaged in managing private funds and discretionary accounts. The report highlights significant risks due to deficiencies and substandard conduct, including conflicts of interest, inadequate risk management, and lack of transparency. It urges asset managers to strengthen compliance programs and warns of potential regulatory actions.

Market Sounding

The SFC concludes consultation on its proposed guidelines for market soundings: On 31 October 2024, the SFC released the consultation conclusions for guidelines applicable to licensed or registered persons conducting market soundings, commonly seen in block trades. These guidelines, supplemented by FAQs, emphasize the protection of confidential information and address market integrity issues related to its abuse, aiming to ensure fair conduct. The feedback from the consultation, which ran from October to December 2023 and received 27 submissions, led to refinements in the scope and clarity of requirements. The guidelines will come into effect on 2 May 2025.

SFC-authorised unit trusts and mutual funds and investment products

The SFC launches new FASTrack for fund authorisation: On 21 October 2024, the SFC issued a circular to announce the launch of the "Fund Authorisation Simple Track" (FASTrack) for swift authorisation of simple funds from MRF Jurisdictions, aiming to grant approvals within 15 business days. This initiative targets efficiency and competitiveness by expediting the process for qualifying equity, bond, mixed, index-tracking, and feeder funds with well-regulated management companies. The commencement date of FASTrack is 4 November 2024, for a six-month pilot period.

The SFC announces information disclosure on HKEX integrated fund platform: On 21 October 2024, the SFC issued a circular to notify management companies of SFC-authorised unit trusts and mutual funds about the launch of the Hong Kong Stock Exchange’s (HKEX) Integrated Fund Platform (IFP). This portal centralises fund information, enhancing investor access and supporting industry growth. Management companies do not need to make separate filings, as data from existing SFC submissions will be used. Submission processes and regulatory requirements remain unchanged. Further technical details will be provided by HKEX.

The SFC announces full adoption of e-IP system: On 24 October 2024, the SFC issued a circular to extend the parallel run of its electronic investment products (e-IP) application/submission system on WINGS by one month to 29 November 2024. From 30 November 2024, all applications and submissions for investment products administered by the Investment Products Division must be made exclusively via e-IP. This system streamlines processing and integrates current IP E-submission requests. The extension allows for enhancements based on user feedback.

The SFC updates fund data reporting requirements: On 25 October 2024, the SFC issued a circular to announce new reporting requirements for SFC-authorised funds, effective from 31 January 2025. Reports include monthly subscription/redemption, quarterly liquidity profiles, asset allocation, and annual securities transactions. Reports are to be submitted via e-IP on WINGS within specified deadlines. Sample forms are provided. The SFC may update these requirements based on market trends. For further details, contact the relevant case officers.

Licensing regime

The SFC implements new regime for public fund depositaries: On 30 September 2024, the SFC published an announcement that the new Type 13 regulated activity (RA 13) regime for public fund depositaries would take effect on 2 October 2024. This regime requires depositaries of SFC-authorised collective investment schemes to be licensed or registered. The SFC will grant RA 13 licences or registrations to 19 depositaries under major banking and insurance groups and to over 300 individuals. Updated codes and guidelines outline the conduct and regulatory requirements for RA 13 licensees. The SFC aims to align with international practices and enhance investor protection.

ESG

The SFC welcomes voluntary ESG code of conduct: On 3 October 2024, the SFC made an announcement to welcome the release of a voluntary code of conduct (VCoC) for ESG ratings and data products providers in Hong Kong. Developed by the Hong Kong ESG Ratings and Data Providers VCoC Working Group with support from the SFC and the International Capital Market Association, the code aligns with international best practices and standards. Providers who adopt the VCoC will publicly share self-attestation documents detailing adherence, aiding due diligence and ongoing assessments. The code aims to ensure reliable ESG information and combat greenwashing within Hong Kong’s sustainable finance ecosystem.

The HKMA launches Sustainable Finance Action Agenda: On 21 October 2024, the HKMA announced the Sustainable Finance Action Agenda to consolidate Hong Kong’s position as a sustainable finance hub and support Asia's sustainable development. The agenda includes key goals for the banking sector, such as achieving net zero in operations by 2030 and in financed emissions by 2050, enhancing transparency on climate-related risks, and closing talent and knowledge gaps in sustainable finance. The HKMA will provide guidance, consult on new policies, and integrate climate considerations into the Supervisory Review Process.

REIT

SFC concludes consultation on enhancing REIT and market conduct regimes: On 8 October 2024, the SFC published the results of its consultation on proposals to introduce a statutory scheme for REIT arrangements and compulsory acquisitions and to enhance the market conduct regime for listed collective investment schemes (CIS) under the SFO. The REIT scheme proposal aims to facilitate privatisation and corporate restructuring with investor safeguards similar to those in the Companies Ordinance. The listed CIS proposal seeks to extend market misconduct regulations to listed CIS and REITs. Both proposals received general support, and legislative amendments are being prepared in collaboration with the Government.

Basel III Final Reform Package Implementation

Gazettal of Commencement Notice for Basel III Final Reform Package: On 10 October 2024, the HKMA announced that Parts 3 and 5 of the Banking (Capital) (Amendment) Rules 2023 (BCAR) will commence on 1 January 2025. The BCAR incorporates the Basel III final reform package, addressing credit risk, the output floor, operational risk, sovereign concentration risk, market risk, and credit valuation adjustment (CVA) risk.

Enforcement Actions

SFC obtains court order to freeze assets belonging to suspected manipulators of Ding Yi Feng shares: On 25 October 2024, the Court of First Instance granted an interim injunction order against 11 suspected manipulators of Ding Yi Feng Holdings Group International Limited (Ding Yi Feng) shares, in a case brought by the SFC under section 213 of the Securities and Futures Ordinance. The suspects allegedly manipulated Ding Yi Feng shares. The order prohibits removing, disposing of, or diminishing any of their assets within Hong Kong, up to the value of HKD 6,353,386,915, to ensure sufficient assets are available for potential restoration orders. 

Singapore

Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT)

IMC publishes recommendations to strengthen Singapore’s AML framework: On 4 October 2024, the Inter-Ministerial Committee (IMC) released its report on its findings and recommendations following a review of Singapore’s anti-money laundering framework. This report focuses on proactive prevention, timely detection, and effective enforcement based on lessons learned from a significant money laundering case in August 2023.

MAS published guidelines on AML/CFT measures: On 18 October 2024, the Monetary Authority of Singapore (MAS) published Guidelines to MAS Notice FSM-N02 on Prevention of Money Laundering and Countering the Financing of Terrorism – Financial Institutions’ Information Sharing Platform. These Guidelines provide detailed instructions for prescribed financial institutions (FIs) (currently DBS, OCBC, UOB, SCB, Citibank, and HSBC) on complying with MAS Notice FSM-N02 regarding the sharing of information through the COSMIC platform.

MAS issued circular on AML/CFT audit policies, procedures, and controls: On 21 October 2024, the MAS released a circular providing further guidance and showcasing good practices identified by the MAS to improve the efficiency of AML/CFT audits conducted by FIs. FIs are advised to review this circular alongside the applicable AML/CFT Notices and Guidelines, in addition to the Guidelines on Risk Management Practices – Internal Controls.

Singapore published National Anti-Money Laundering Strategy: On 30 October 2024, Singapore published its National Anti-Money Laundering Strategy, focusing on prevention, detection, and enforcement measures against money laundering. This strategy is supported by societal collaboration, legal frameworks, and international cooperation to maintain an effective AML framework. On the same day, Singapore also published its Money Laundering, Terrorism Financing, and Proliferation Financing Risk Assessments.

MAS published AML/CFT supervisory expectations from recent inspections: The MAS recently conducted a series of AML/CFT inspections across a range of FIs. On 30 October 2024, the MAS published an information paper outlining their AML/CFT supervisory expectations. This information paper sets out the MAS’ supervisory expectations and recommends good practices for developing effective AML/CFT frameworks and controls, which FIs should benchmark themselves against.

Anti-Scam Measures

MAS and IMDA issued Guidelines on Shared Responsibility Framework: On 24 October 2024, the MAS published the Guidelines on Shared Responsibility Framework, which apply in respect of payment accounts issued to individuals. These Guidelines set out the roles and responsibilities of customers, responsible FIs, and responsible telecommunication companies in mitigating the risk of seemingly authorised transactions. They also clarify the allocation of losses arising from such transactions.

MAS published circular on anti-scam measures for institutions providing accounts that contain e-money: On 25 October 2024, the MAS published a Circular on Anti-scam measures by Major Payment Institutions Providing Personal Payment Accounts that contain E-money. The circular outlines the MAS’s supervisory expectations for major payment institutions that offer personal payment accounts containing e-money concerning anti-scam measures. It should be read in conjunction with the E-Payment User Protection Guidelines.

MAS published updated E-Payment User Protection Guidelines: On 25 October 2024, the MAS published an updated E-Payment User Protection Guidelines, which apply in respect of payment accounts issued to individuals and sole proprietors. The updated guidelines raise the standards of anti-scam controls across the financial sector and place greater emphasis on consumer vigilance and responsibility. These updated guidelines will take effect from 16 December 2024.

Digital Payments and Fintech

MAS published consultation paper on proposed regulatory approach for DTSPs under the FSM Act: On 4 October 2024, the MAS published a consultation which sets out the MAS’ proposed regulatory approach, regulations, notices and guidelines for digital token service providers regulated under Part 9 of the Financial Services and Markets Act 2022, to effect the objectives of the Act. This consultation closed on 4 November 2024.

MAS announced establishment of Global Finance & Technology Network: On 30 October 2024, the MAS announced the establishment of the Global Finance & Technology Network to strengthen Singapore as a global FinTech hub by fostering industry collaboration and innovation in financial services, with leadership changes to advance FinTech initiatives.

Valuation and Capital

MAS published a consultation paper on capital treatment for structure products and infrastructure investments for insurers: On 18 October 2024, the MAS published a consultation paper which sets out the proposed enhancements to the RBC 2 capital treatment for investment in structure products and infrastructure investments for insurers under RBC 2 framework. The MAS plans to introduce differentiated capital treatment for infrastructure investments and revising the capital treatment for structured products, as detailed in a consultation paper to be incorporated into MAS Notice 133.

Business Continuity

MAS and ABS conducted a business continuity exercise with financial institutions: On 15 October 2024, the MAS and the Association of Banks in Singapore (ABS) jointly conducted "Exercise Raffles", a business continuity exercise involving 20 key FIs to test and enhance crisis management and operational resilience, using simulated scenarios such as IT outages and cyber-attacks to improve the sector's preparedness and crisis response capabilities.

Enforcement Actions

Court convicted an individual for fraudulently inducing others to trade: On 10 October 2024, Mr Oon Yun Cong was yesterday sentenced to 16 months’ imprisonment and fined SGD 12,105.70 for fraudulently inducing others to deal in shares under the Securities and Futures Act.

MAS imposes composition penalty for breaches of AML/CFT requirements: On 29 October 2024, the MAS imposed a composition penalty of SGD 1.9 million on Atrium Asia Investment Management Pte. Ltd. for breaches of AML/CFT requirements. The MAS also issued a reprimand to its CEO, Mr Mintarja Oei, for failing to ensure the company’s compliance with the MAS’ AML/CFT requirements.

SGX RegCo reprimands directors for breaching the Catalist Rules: The Singapore Exchange Regulation (SGX RegCo) has reprimanded former directors and the former CEO of Sunrise Shares Holdings Ltd. for inadequate internal controls and inaccurate financial reporting for 1H2022. SGX RegCo imposed bans on the former Chairman and former CEO from being appointed as directors or executive officers for specified periods. The reprimand highlights the company's failures in financial oversight, especially after neglecting to replace their CFO, leading to significant financial misstatements.