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SFC released a Manager in Charge Regime in Hong Kong

 

SFC released a Manager in Charge Regime in Hong Kong
SFC Circular

13 Jan 2017

In December 2016, the SFC released a circular on clarifications to its current regime on senior management, expectations as to Board obligations of licensed firms and setting out new requirements in relation to licensing of senior management. The circular effectively introduces a Hong Kong manager in charge regime.

Initially all firms will need to provide the SFC with information on their organisational structure and managers from 18th April 2017 to 17th July 2017. By 16th October 2017, any MICs who are not already ROs and are required to be under the new rules must have applied for approval.

Who is Senior Management

Senior management of a licensed corporation includes, among others:

  • directors of the corporation,
  • ROs of the corporation, and
  • individuals whom we call the Managers-In-Charge of Core Functions (MICs),

Director is defined in Schedule 1 to the SFO to include a shadow director and any person occupying the position of director by whatever name called. A person could be a director, RO and MIC of a licensed corporation.

During its soft consultation period, the SFC drew the industry’s attention to s194 of the SFO. Under Part IX of the SFO, the SFC may exercise its disciplinary powers to sanction a regulated person if the person is, or was at any time, guilty of misconduct or is considered not fit and proper to be or to remain the same type of regulated person. The term “regulated person” means a person who is or at the relevant time was any of the following types of person:-

  • a licensed person;
  • an RO of a licensed corporation; or
  • a person involved in the management of the business of a licensed corporation (regardless of whether he or she is licensed).

The SFC added that there was need to delineate who are senior management of a licensed corporation as they are a subset of such regulated person.

“Among others” is important as the SFC clearly intends to reserve the ability to determine that other people may also be considered as senior managers.

Responsibilities of Senior Management

The existing responsibilities and liabilities of senior management are set out in a number of places in various Codes but the key ones are:-

  • General Principle 9 of the Code of Conduct states that senior management should bear primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures by the corporation
  • Paragraph 14.1 of the Code of Conduct specifies that senior management should properly manage the risks associated with the business of the corporation, including performing periodic evaluation of its risk management processes; understand the nature of the business of the corporation, its internal control procedures and its policies on the assumption of risk and understand the extent of their own authority and responsibilities
  • The Internal Control Guidelines state that senior management, including directors, chief executive officer, managing director or other senior operating management personnel (as the case may be), are ultimately responsible for the adequacy and effectiveness of the corporation’s internal control systems. The Internal Control Guidelines also contain specific control guidelines for certain important areas, including information management, compliance, audit or related reviews, operational controls and risk management
  • The Guideline on Anti-Money Laundering and Counter-Terrorist Financing sets out detailed expectations regarding compliance and control functions that will be particularly relevant to MICs responsible for managing the Anti-Money Laundering and Counter-Terrorist Financing function

For more information about the Liabilities of Senior Management, the Role of the Borad of a Licensed Corporation, and Who Should be Managers in Charge of Core Functions, read our full article here.

 
 

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