Please note: the CUBE RegNews team is taking a break between 26th and 30th June.
SFC publishes annual report
The Securities and Futures Commission (SFC) has published its Annual Report 2022-23, which highlights the SFC’s achievements in the past year and its vision for the future.
One of the SFC’s key achievements in the past year was the introduction of Swap Connect, which allows investors in Hong Kong and mainland China to trade interest rate swaps across the border. Swap Connect began with northbound access in May 2023.
The SFC also launched a new listing regime for specialist technology companies with limited or no revenue or profit track record. This new regime is designed to make it easier for these companies to list in Hong Kong, and it is expected to attract more technology companies to the city.
In addition, the SFC implemented an investor identification regime for Hong Kong’s securities market. This regime strengthens the SFC’s market surveillance capabilities, and it helps to protect investors from fraud and other market abuses.
The SFC also consulted the public on a number of regulatory initiatives during the year, including the new licensing regime for virtual asset trading platforms and legislation for implementing a paperless securities market in Hong Kong. The report notes the SFC is committed to providing clear and transparent guidance to market participants, and will continue to consult with the public on its regulatory initiatives.
MAS proposes standards for digital money
The Monetary Authority of Singapore (MAS) has published a whitepaper proposing a common protocol to specify conditions for the use of digital money such as central bank digital currencies (CBDCs), tokenised bank deposits, and stablecoins on a distributed ledger.
The region is a keen digital hub and the new white paper outlines the technical specifications for digital assets used as purpose bound money, which enables money to be directed towards a specific purpose, without requiring money itself to be programmed.
ASIC charges credit provider
The Australian Securities & Investments Commission (ASIC) has commenced civil penalty proceedings against car finance provider Money3 Loans Pty Ltd (Money3) alleging breaches of its responsible lending obligations when providing finance for the purchase of second-hand vehicles.
Specifically, ASIC alleges that Money3:
- Entered into unsuitable loans with certain consumers, meaning the consumer could not meet their repayments without experiencing financial hardship;
- Failed to assess those loans as unsuitable by determining that the consumers could not meet the repayments without experiencing financial hardship;
- Failed to make reasonable inquiries about, and verify, those consumers’ financial situation, requirements and objectives;
- Failed to take reasonable steps to ensure that its representatives complied with the credit legislation and were adequately trained and competent.
SEC fines investment adviser for excessive fees
Insight Venture Management LLC, a New York-based investment adviser, has been charged by the Securities and Exchange Commission (SEC) with charging excess management fees and failing to disclose a conflict of interest to investors.
The SEC’s order finds that Insight violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-7 and 206(4)-8 thereunder.
Specifically, the SEC’s order finds that Insight:
- Inaccurately calculated management fees based on aggregated invested capital at the portfolio company level instead of at the individual portfolio investment security level, as required by the applicable limited partnership agreements.
- Failed to disclose to investors a conflict of interest in connection with its permanent impairment criteria.
The SEC’s order also finds that Insight’s permanent impairment criteria were narrow and subjective, making them difficult to satisfy. As a result, Insight’s investors were unaware that Insight had significant latitude to determine if an asset would be considered permanently impaired to reduce the basis used to calculate Insight’s management fees.
Insight has agreed to pay a $1.5 million penalty and $864,958 in disgorgement and prejudgment interest, which has already been paid back to the impacted funds. Insight has also agreed to a cease-and-desist order and censure.
The SEC’s order is a reminder to investment advisers that they must adopt or implement written policies or procedures reasonably designed to prevent violations of the Advisers Act to help accurately calculate their fees in accordance with the fund documents and disclose any conflicts of interest to investors.
HKMA Dear CEO letter
The Hong Kong Monetary Authority (HKMA) has issued a letter to advise all authorised institutions that they should strengthen protection for payment card customers in four specific areas:
- support, communication and education;
- unauthorised transactions handling and security; and
- responsible borrowing.
A comprehensive annex providing the steps banks need to take in order to comply with the requirements of the letter is available here.
Banks are expected to take steps to comply with the requirements as soon as practicable. Requirements which do not involve system changes will take effect by the end of June 2023, taking into account preparatory time.
A selected summary of key developments for regulated financial institutions
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