Hong Kong SFC Highlights Asset Manager Deficiencies & Substandard Conduct in Managing Private Funds & Discretionary Accounts, Hong Kong SFC to Conduct On-Site Inspection, Key Points Include Lack of Integrity, Conflicts of Interests, Utilising Funds Assets to Finance Related Entities, Charging Higher Fees for Financing, Preference in Allocating Trades & Redemptions, Receiving Monetary Benefits from Funds Transactions, Inadequate Risk Management, Failure to Conduct Proper Investment Due Diligence, Exposing Investors to Concentration, Liquidity & Credit Risks, Questionable Valuation Methodologies, Board, Senior Management, Managers-in-Charge & Responsible Officers Bear Primary Responsibilities and are Required to Report Breaches
12th October 2024 | Hong Kong
The Hong Kong Securities & Futures Commission (SFC) has highlighted asset manager deficiencies & substandard conduct in managing private funds & discretionary accounts, with Hong Kong SFC to conduct on-site inspection. Key points include lack of integrity, conflicts of interests, utilising funds assets to finance related entities, charging higher fees for financing, preference in allocating trades & redemptions, receiving monetary benefits from funds transactions, inadequate risk management, failure to conduct proper investment due diligence, exposing investors to concentration, liquidity & credit risks, questionable valuation methodologies, and the board, senior management, managers-in-charge & responsible officers bear primary responsibilities and are required to report breaches. Hong Kong SFC (9/10/24): “The Securities and Futures Commission (SFC) today issued a circular flagging various deficiencies and substandard conduct identified during its supervision of licensed corporations engaged in managing private funds and discretionary accounts (referred to as asset managers in the circular). The severity of misconduct in many of these cases has seriously jeopardised investor interests, thereby undermining confidence in Hong Kong’s market integrity and status as an international asset management centre. These instances also reflected a lack of integrity on the part of the asset managers or their senior management who were involved, as well as failure of the senior management to provide effective supervision. The circular highlighted cases involving breaches of regulatory requirements in areas ranging from conflicts of interest, risk management and investment within mandate, information for investors, to valuation methodologies. It also sets out the existing obligations applicable to asset managers in these circumstances. Asset managers should review the areas of concern set out in the circular and take measures to rectify any deficiencies identified accordingly. The SFC will commence a thematic inspection on asset managers managing private funds to review their compliance with applicable regulatory requirements. The SFC also stressed in the circular that the board of directors and senior management of asset managers, including the managers-in-charge of core functions and responsible officers, bear primary responsibility for ensuring appropriate standards of conduct. To this end, they should strengthen their supervisory and compliance functions, where necessary, to ensure compliance with all applicable regulatory requirements.”
“ Hong Kong SFC Highlights Asset Manager Deficiencies & Substandard Conduct in Managing Private Funds & Discretionary Accounts, Hong Kong SFC to Conduct On-Site Inspection, Key Points Include Lack of Integrity, Conflicts of Interests, Utilising Funds Assets to Finance Related Entities, Charging Higher Fees for Financing, Preference in Allocating Trades & Redemptions, Receiving Monetary Benefits from Funds Transactions, Inadequate Risk Management, Failure to Conduct Proper Investment Due Diligence, Exposing Investors to Concentration, Liquidity & Credit Risks, Questionable Valuation Methodologies, Board, Senior Management, Managers-in-Charge & Responsible Officers Bear Primary Responsibilities and are Required to Report Breaches “
Hong Kong SFC Highlights Asset Manager Deficiencies & Substandard Conduct in Managing Private Funds & Discretionary Accounts, Hong Kong SFC to Conduct On-Site Inspection, Key Points Include Lack of Integrity, Conflicts of Interests, Utilising Funds Assets to Finance Related Entities, Charging Higher Fees for Financing, Preference in Allocating Trades & Redemptions, Receiving Monetary Benefits from Funds Transactions, Inadequate Risk Management, Failure to Conduct Proper Investment Due Diligence, Exposing Investors to Concentration, Liquidity & Credit Risks, Questionable Valuation Methodologies, Board, Senior Management, Managers-in-Charge & Responsible Officers Bear Primary Responsibilities and are Required to Report Breaches
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