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Extension of Financial Dispute Resolution Scheme in Hong Kong

 

Extension of Financial Dispute Resolution Scheme in Hong Kong

18 Sep 2017

The Financial Dispute Resolution Centre applies to all licensed or registered firms in Hong Kong which should comply with the Financial Dispute Resolution Scheme (“FDRS”) for managing and resolving disputes administered by the Financial Dispute Resolution Centre Ltd ("FDRC") in full and be bound by the dispute resolution processes provided for under the FDRS. 

The FDRS will apply to licensed or registered persons other than firms which carry on Type 10 regulated activity under the SFO i.e. provision of credit rating services. 

The FDRS only applies to Eligible Claimants which are currently limited to individuals and sole proprietors and the maximum claim is HK$500,000. 

After a consultation the FDRC has recently announced the following changes:

1. The limitation period for lodging claims will be extended to 24 months and the maximum claim limit will be increased to HK$1 million.

2. By mutual agreement both parties can refer matters above that amount to the FDRS.

3. Small enterprises (limited companies or partnerships) will be included as Eligible Claimants. They are defined as:

  • A firm or group with annual turnover of less than HK$50 million.
  • A firm or group with gross assets of less than HK$50 million; and 
  • A firm or group with fewer than 50 employees in Hong Kong.

4. A financial institution which is also a small enterprise is specifically permitted to apply to the FDRS as an eligible claimant but would have to pay half the fees of the dispute resolution.

Changes 1 and 2 of the  rules will be effective from 1 January 2018 and the rules for small enterprises come into effect in July 2018.

This means that many firms which previously were unlikely to deal with FDRC issues (primarily because they do not deal with individuals or sole proprietors) will now be in scope.  It also raises the possibility of claims being made by family offices, smaller regulated firms and smaller corporate PIs.

If you wish to discuss this further please contact marketing@complianceasia.com.

 
 

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