The Securities and Futures Commission (SFC) this week outlined an optimistic vision for the future of Hong Kong as a continued pre-eminent global financial centre, especially in relation to its position as the main conduit to the Chinese Mainland, based on the increased collaboration and more effective enforcement measures set out below.

Ashley Alder, chief executive, and Thomas Atkinson, head of enforcement, speaking at the Pan Asian Regulatory Summit on 10 and 11 October 2017 respectively, set out a unified vision for a more cooperative regulatory environment. This vision covers both public and private, foreign and domestic, cooperation and enhanced enforcement methods which, the regulators believe, are required to protect Hong Kong’s position and reputation in light of increased capital flows to and from the Chinese Mainland, and increasing threats to the markets.

Cooperation with Foreign Regulators

The unique relationship between Hong Kong and the Chinese Mainland has, in the words of Alder, required regulators in both jurisdictions to “establish an important series of arrangements to enable both markets to integrate and develop in a way that has never been attempted anywhere else”. The SFC believes that, without sophisticated and unique cooperative arrangements, its vision for Hong Kong maintaining and enhancing its reputation as a global financial centre will be unfulfilled.

In practical form, the cooperative arrangements between the SFC, the China Securities Regulatory Commission (CSRC) and the China Banking Regulatory Commission (CBRC) are required to meet the following interconnected challenges:

  1. regulation of Chinese Mainland companies listed in Hong Kong;
  2. regulation of persons based in the Chinese Mainland who trade on the Hong Kong markets through Stock Connect; and
  3. regulation of Chinese Mainland financial services firms established in Hong Kong.

Increased and closer cooperation is also required to open up greater capital flows between the jurisdictions in the future.

Alder highlighted this requirement for increased bilateral cooperation when he stated that “to protect our markets each of us need to rely on the other far more than in the past – for supervision as well as enforcement”. Alder highlighted two areas in which the SFC is working closely with the CSRC: risk management and surveillance through enhanced investor identification systems.

Cooperation with Domestic Regulators

The SFC has also sought closer cooperation with domestic regulators, for example it has collaborated with the Hong Kong Monetary Authority on parallel mis-selling cases, and has recently signed a memorandum of understanding with the Hong Kong Police aimed at furthering cooperation beyond mere operational matters and into policy making and training.


The unique nature of the enforcement challenges which Hong Kong faces require increased international cooperation. Practical examples given by Atkinson of this include joint training, secondment programmes and regular meetings with the CSRC.

This has been supported by a new, more proactive regulatory approach aimed at prevention, as demonstrated by the 10 trading suspensions issued by the SFC so far in 2017. Supported by increased internal collaboration at the policy and operational levels, the SFC is of the opinion that this provides the best means of protecting the Hong Kong financial system.

The SFC has sought to focus on the key challenges facing Hong Kong, namely activities which harm investors and/or damage market confidence, by reducing its caseload by a third in the past year in an attempt to prioritise cases which meet certain thresholds, reorganising its organisational structure and realigning its priorities.

Finally, the SFC’s Manager-in-Charge (MIC) regime, although not an enforcement measure, seeks to prevent misbehaviour by requiring licensed corporations to focus on individual culpability and consider which individuals are accountable for certain activities. Atkinson issued a stark warning: “where evidence supports it, we will take civil or criminal actions against the culpable individuals”.

Individual Cooperation in Enforcement Proceedings

Atkinson also provided useful guidance regarding the SFC’s position on cooperation during enforcement proceedings. He emphasised that the SFC’s enforcement regime has two key aims: general deterrence and specific deterrence. General deterrence of future misfeasance in the markets is the overriding goal of enforcement proceedings and as such sanctions imposed by the SFC will always try to ensure this is achieved, regardless of a person’s level of cooperation. However, the sanction imposed in relation to specific deterrence, which aims to prevent the same person repeating their misbehaviour, may be mitigated by cooperation such as prompt and full self-reporting. Atkinson stated that the SFC will soon be providing a more granular guidance note designed to encourage early cooperation.


A transcript of Ashley Alder’s speech can be found here.

A transcript of Thomas Atkinson’s speech can be found here.

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