SFC announces thematic review

On 16 November 2018 the Securities and Futures Commission (SFC) announced that it is commencing a thematic review of licensed corporations (LCs) to assess their risk governance and oversight framework as well as their risk management practices. The review will focus on the risks in three areas: LCs’ remote booking models (relevant to groups using an overseas central booking entity to book trades originating in the various markets in which they operate); operational risk; and data risk. Following the review, the SFC aims to provide further guidance for LCs to cope with evolving risks in these areas.

The thematic review will be conducted through a combination of industry surveys, meetings and on-site inspections:

  • questionnaires will be sent to selected LCs in Hong Kong;
  • the SFC will analyse the responses to identify any red flags suggesting potential concerns or instances of non-compliance;
  • LCs will be selected for meetings and on-site inspections, which will involve the SFC meeting with key personnel and inspecting internal controls and risk management activities; and
  • existing SFC regulatory requirements will be compared to those of other major financial market regulators. Market practices will be assessed to identify good practices or common issues.

The circular is available on the SFC’s website: https://www.sfc.hk/edistributionWeb/gateway/EN/circular/openFile?refNo=18EC82.