The Securities and Futures Commission (SFC) today published its latest Quarterly Report which summarises key developments from April to June 2021.
During the quarter, the SFC provided asset managers with further guidance on disclosures for environmental, social and governance funds, especially those with a climate-related focus, to help investors better understand these products and combat greenwashing (Note 1). In July, Hong Kong’s Green and Sustainable Finance Cross-Agency Steering Group, co-chaired by the SFC and the Hong Kong Monetary Authority, announced the next steps in its collaborative strategy to transition the financial ecosystem towards carbon neutrality.
The SFC also stepped up its joint efforts with the Stock Exchange of Hong Kong Limited (SEHK) to combat misconduct and improper behaviour in new listings (Note 2). Problematic applications with red flags indicating a lack of genuine investor interest are now subject to heightened scrutiny, and the regulators will object to or reject an application if necessary.
In other highlights, the SFC concluded a consultation on proposals to upgrade standards in the industry by updating the competency framework for intermediaries and individual practitioners (Note 3). To encourage a broader range of investment vehicles, it began accepting applications for the Government’s grant scheme to subsidise the setting up of open-ended fund companies and real estate investment trusts (REITs) in Hong Kong.
The Government published consultation conclusions in May on a legislative proposal for the SFC to regulate centralised virtual asset exchanges. In a July statement, the SFC warned investors of the risks of trading virtual assets on an unregulated platform (Note 4).
In a joint operation against a syndicate suspected of operating ramp and dump market manipulation schemes and committing fraud, the SFC and the Police searched a Hong Kong listed company’s office premises and its senior executives’ residences. The Police arrested four persons, including three of the company’s senior executives. The SFC also extended its campaign to raise awareness of social media investment scams organising community outreach events with the Police and reminding licensees to notify the SFC when they detect suspected ramp and dump schemes (Note 5).
Key figures for the quarter include:
- The number of licensees and registrants totalled 47,527, of which 3,174 were licensed corporations.
- The SFC vetted 120 new listing applications, including five from companies with a weighted voting rights structure and 14 from pre-profit biotech companies.
- It authorised 39 unit trusts and mutual funds (including 17 Hong Kong-domiciled funds), two investment-linked assurance schemes, one REIT and 24 unlisted structured investment products for public offering.
- The first two exchange-traded funds were cross-listed on SEHK and the Shanghai Stock Exchange in June.
- 71 in-depth inspections of licensed corporations were conducted to review their compliance with regulatory requirements.
- The SFC made 2,319 requests for trading and account records triggered by untoward price and turnover movements.
- It issued section 179 directions (Note 6) to gather additional information in 28 cases and wrote to detail its concerns in one case as part of its review of corporate disclosures.
- Four corporations and three individuals were disciplined, resulting in total fines of $5 million.
The report is available on the SFC website.
Notes:
- See the 29 June 2021 circular to management companies of SFC-authorised unit trusts and mutual funds - ESG funds.
- Please refer to the joint statement dated 20 May 2021.
- The revised Guidelines on Competence, Guidelines on Continuous Professional Training and Fit and Proper Guidelines will become effective on 1 January 2022.
- See the 16 July 2021 Warning statement on unregulated virtual asset platforms.
- See the 29 June 2021 circular on notification to the SFC of suspected ramp and dump scams involving market manipulation in the shares of companies listed on the Stock Exchange of Hong Kong.
- Section 179 of the Securities and Futures Ordinance gives the SFC the power to compel the production of records and documents from persons related to a listed company.
