Aggregated News From Investment Management Regulators

New SFC guidance addresses market misconduct

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The Securities and Futures Commission (SFC) today issued a statement to remind listed companies about their disclosure obligations together with a circular on the conduct expected of asset managers. These measures are part of the SFC’s ongoing efforts to tackle market and corporate misconduct.

The SFC’s statement reminds listed companies to ensure that their announcements and other documents do not include false, incomplete or misleading information about their counterparties in pending corporate transactions. In some cases, the SFC has observed that insufficient information was provided about counterparties’ controllers or beneficial owners.

Today’s circular sets out guidance for asset managers considering transactions or arrangements for private funds and discretionary accounts. During recent inspections, the SFC found a number of these to be dubious. Some were used to conceal the identities of the actual parties to a transaction and in some cases “nominees” and “warehousing” arrangements were suspected to be involved (Note 1). If a transaction or arrangement appears dubious, asset managers should make proper enquiries and not unquestioningly carry out investors’ instructions.

“We want to remind market participants that our disclosure obligations and misconduct provisions are key to maintaining a fair and clean market in which investors can have full confidence,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “Of particular concern is that special purpose vehicles and other means are being used to conceal ownership and as part of wider schemes to engage in illicit activities or market misconduct.”

Where listed companies do not disclose information which is necessary for shareholders to make an informed assessment of its activities or financial position, the SFC will use its powers under the Securities and Futures (Stock Market Listing) Rules to intervene in order to protect the investing public. In addition, the SFC would not hesitate to take regulatory action against asset managers which fail to detect dubious arrangements or transactions or which facilitate illegal or improper conduct due to material inadequacies in their procedures and controls.

End

Note:

  1. See the Circular to Intermediaries – Use of “nominees” and “warehousing” arrangements in market and corporate misconduct, 9 October 2018.

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Regulator Information

Abbreviation: SFC
Jurisdiction: Hong Kong

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