The SFC’s new ‘Manager in Charge’ Regime

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On 16 December 2016, Hong Kong’s Securities and Futures Commission (“SFC“) issued a circular regarding new measures to increase the accountability of senior management personnel of licensed corporations.

Who are Managers-in-Charge?

A “Manager-in-Charge” is a person performing any core function within a licensed corporation. Such a person holds a senior position with authority to make decisions and to manage the core function on a day-to-day basis. A Manager-in-Charge may be located within or outside Hong Kong, and extends to executives responsible for the following support functions:

  • overall management oversight;
  • key business line;
  • operational control and review;
  • risk management;
  • finance and accounting;
  • information technology;
  • compliance; and
  • anti-money laundering and counter terrorist financing.

What is the new regime?

Under the existing rules of the SFC, licensed corporations are required to disclose information relating to responsible officers and regulated persons. From 18 April 2017, licensed corporations and corporate license applicants will, in addition, be required to provide the SFC with up-to-date management structure information and organisation charts, detailing the positions of all “Managers-in-Charge” and the job titles of persons reporting to such Managers-in-Charge and persons to whom the Managers-in-Charge report.

Where a licensed corporation changes any of its Managers-in-Charge, the licensed corporation will become obliged to provide the SFC updated version of its organisation chart.

Purpose

The new regime takes inspiration from the ‘senior managers regime’ implemented by the Financial Conduct Authority in the UK, and is aimed at enabling the SFC to gain a better understanding of the management structure of licensed corporations in Hong Kong.

The new requirements increase the accountability of senior managers of licensed corporations. Additionally, it is expected that licensed corporations will need to re-document their internal reporting lines for the purpose of meeting the new rules. This is intended to promote awareness of senior management obligations and to improve corporate governance.

What actions should be taken by licensed corporations now?

If your company is a licensed corporation, it would be advisable for the Managers-in-Charge to be identified, and for each of them to acknowledge his or her appointment to such a position and also the particular core functions for which he or she is responsible. This will ensure that any uncertainties as to roles and functions are clarified in good time before the new rules take effect. This would be helpful for the company when the time comes for it to submit organisation charts and to apply for Managers-in-Charge to be approved by the SFC as responsible officers, where necessary.

As a Manager-in-Charge is classified as a licensed corporation’s senior management, once the Managers-in-Charge of your company are identified, they should be made aware of the standard of conduct expected of them by the SFC. Examples of applicable conduct expectations are:

  • General Principle 9 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the “Code of Conduct“)[1];
  • Paragraph 14.1 of the Code of Conduct;
  • Management Supervisions and Internal Control Guidelines for Persons Licensed by or Registered with the Securities and Futures Commission[2]; and
  • Guideline on Anti-Money Laundering and Counter-Terrorist Financing[3].

It is further recommended that you be aware of the SFC’s guidance workshops, which the SFC is planning for the purpose of introducing their online portal which is to be used for submission of information relating to Managers-in-Charge.

Key dates

  • 18 April 2017: Commencement date of the new regime.
  • 17 July 2017: Deadline for existing licensed corporations to submit their management structure information to the SFC via its online portal.
  • 16 October 2017: Deadline for Managers-in-Charge to register with the SFC for approval as responsible officers.

Contact:

Ronald.Wan@incelaw.com

This publication is up to date as at 6 January 2017. It should not be used as a substitute for taking legal advice in any specific situation. Ince & Co accepts no responsibility for any action taken or not taken in reliance on it.

[1] Link: http://www.sfc.hk/web/EN/assets/components/codes/files-previous/web/codes/code-of-conduct-for-persons-licensed-by-or-registered-with-the-securities-and-futures-commission/01.12.2015%20-%2023.03.2016.pdf

[2] Link:  http://www.sfc.hk/web/EN/assets/components/codes/files-previous/web/guidelines/management,-supervision-and-internal-control-guidelines-for-persons-licensed/Management,%20Supervision%20and%20Internal%20Control%20Guidelines%20for%20Persons%20Licensed%20by%20or%20Registered%20with%20the%20SFC%20-%201997-05-01%2000:00:00.pdf

[3] Link: http://en-rules.sfc.hk/en/display/display_main.html?rbid=3527&element_id=3705

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