REGULATORY ENFORCEMENT NEWSLETTER - ISSUE 1
A quarterly roundup of regulatory issues
without a trial. … this is a rule of practice and not a rule
of law.’ Taking account that the paramount duty of the
court is to do the fullest justice for the victim, he
decided when a genuine need existed declaratory relief
can be granted in the absence of the defendant.
When is there a ‘
DHCJ Cooney SC stated the necessary need existed
The defendant bank account holder receives funds
obtained by fraud.
The victim makes a proprietary claim for the funds
traced into the defendant’s bank account.
A victim is at risk should other creditors appear.
A declaration by the court that the funds are the
victim’s will earmark them as their property and put
them out of the reach of the any other creditors. This
approach is obviously a welcome change. Victims of
fraud can safe guard their property at an early stage. A
Statement of Claim will be needed but if this is served
on the defendant at the start of the litigation it will then
be possible to enter judgment with the necessary
declaratory relief after the passage of 14 days.
Combining the above approach with vesting orders
under section 52 of the Trustee Ordinance allows a
victim with the declaratory relief to then obtain their
money. Vesting orders can be made when there is no
prospect of the defendant transferring the victim’s
money back to them. This situation will clearly exist
when the defendant has disappeared. The courts are
nowadays prepared to make a vesting order against a
bank where the funds are held, requiring the bank to
transfer the sum back to the victim.
That the courts are prepared to give declaratory relief
when a need arises is an encouraging development and
combining this with the relief available in the Trustee
Ordinance, victims can secure their property and have
it transferred back to them more quickly and with less
risk than before.
Anti-money laundering (“AML”)
In their circular to licensed corporations and associated
entities dated 26 January 2017, the SFC has identified
compliance with AML and counter financing of terrorism
”) as a focus for their market supervision.
The SFC has been and will continue to conduct in-depth
reviews of firms’ internal AML/CFT policies, procedures
During 2016 and the review of AML/CFT practices in
over 290 firms, the SFC found more than 200 incidents
of non-compliance. No doubt, the SFC’s increased
action is related to the fact that the Financial Action
Task Force (the inter-governmental body promoting
effective implementation of legal, regulatory and
operational measures for combating money laundering,
terrorist financing and other related threats to the
integrity of the international financial system) will be
evaluating Hong Kong in mid-2018.
What can breaches of the AML/CFT
In April alone, the SFC has disciplined and fined:
Guoyan Securities Brokerage (HK) Ltd. HK$4.5
million for breaches between 2010 and 2012 of the
SFC’s Prevention of Money Laundering and
Terrorist Financing Guidance Note, the Guideline on
Anti-Money Laundering and Counter-Terrorist
Financing and Code of Conduct; and
iStar International Futures Co. Ltd. HK$3 million for
its failures to comply with AML requirements when
processing third party deposits and transfers, such
as not verifying the source of funds, providing AML
training or having effective compliance.
Are you ready for new client agreements?
In December 2015, licensed intermediaries were
instructed that they had until 9 June 2017 to comply
with new Code of Conduct requirements governing the
contents of all client agreements.
Aimed at reducing misselling and the effect of
contractual boilerplate, client agreements are required
to include a representation that the sale or
recommendation of any financial product must be
reasonably suitable to investors taking account of their
financial situation, investment experience and
The SFC has stated that all client agreements must be
in compliance with the above by 9 June. Failure to do
so will no doubt incur disciplinary action.