SFC publishes Annual Report 2021-22

The Securities and Futures Commission (SFC) today published its Annual Report 2021-22 which sets out its priorities for upholding market integrity and strengthening Hong Kong’s status as a premier international financial centre amidst a fast-changing environment.

During the year, the SFC concluded a consultation on conduct requirements for bookbuilding and placing activities to help ensure that capital market transactions in Hong Kong are fair and orderly. It also issued consultation conclusions on proposals to put top-level trustees and custodians of SFC-authorised collective investment schemes under its direct supervision as a new Type 13 regulated activity and on the proposed investor identification and over-the-counter securities transactions reporting regimes which will enable more timely surveillance of the securities market (Note 1).

Combating investment fraud and scams on online platforms remained an SFC enforcement priority. The SFC traced the operators of ramp and dump schemes (Note 2) and dissolved their networks. It also strengthened its collaboration with local and overseas regulators and law enforcement agencies.

“Hong Kong is an essential gateway to the Mainland for global firms and investors and our markets have demonstrated strong resilience throughout unprecedented challenges,” said Mr Tim Lui, the SFC’s Chairman. “We are confident that Hong Kong’s position as a leading global financial centre is secure.”

“Financial market activities are increasingly interconnected and cross-disciplinary in nature, and this calls for an agile and targeted regulatory approach,” said Mr Ashley Alder, the SFC’s Chief Executive Officer (CEO). “We keep a laser focus on the areas of greatest risk where our work must have the greatest impact.”

To strengthen Hong Kong’s competitiveness as a leading asset and wealth management centre, the SFC authorised a number of new exchange-traded funds and other investment products in Hong Kong. In addition, the launch of the MSCI China A 50 Connect Index Futures contract provides an additional risk management tool for hedging exposures to the Mainland’s A-share market.

To promote sustainability and tackle climate change, the Green and Sustainable Finance Cross-Agency Steering Group (Note 3), co-chaired by the SFC and the Hong Kong Monetary Authority, published a preliminary feasibility assessment of carbon market opportunities for Hong Kong and announced next steps to transition the financial ecosystem towards carbon neutrality. The SFC also concluded a consultation on requirements for fund managers to consider climate-related risks in investment and risk management processes and provide investors with appropriate disclosures.

“Our new climate-related disclosure requirements for funds and fund managers will make it easier for investors to make informed decisions,” said Ms Julia Leung, the SFC’s Deputy CEO and Executive Director of Intermediaries. “This kind of regulatory support is essential to mobilise finance to support the transition to a low carbon economy.”

Other highlights include changes to enhance the competency framework for licensees and the launch of the next generation, fully-ditigalised licensing platform on WINGS (Note 4).

Key statistics for the year (Note 5) include the following:

• The number of licensees and registrants increased to 48,401 and the SFC received 7,163 new licence applications
• The SFC authorised 166 collective investment schemes, bringing the total number to 2,849 as of end-March 2022, of which 866 were domiciled in Hong Kong
• It vetted 306 listing applications and supervised 385 takeovers-related transactions
• It directly sought information from or expressed concerns with seven listing applicants, exercising its powers under the Securities and Futures (Stock Market Listing) Rules
• It conducted 262 risk-based on-site inspections of intermediaries and noted 1,416 incidents of breaches of the SFC’s rules
• It made 7,308 requests for trading and account records from intermediaries as a result of market surveillance
• It disciplined 17 firms and 19 individuals, imposed fines totalling $410.1 million for intermediary misconduct and executed search warrants in 37 cases
• Mainland-Hong Kong Stock Connect covered 1,487 Mainland stocks and 547 Hong Kong stocks as of end-March 2022, representing about 80% of the two markets’ combined market capitalisation, and southbound trading net inflows reached RMB1,983.1 billion since the scheme’s launch

The Annual Report is available on the SFC website together with a video message from Mr Lui, Mr Alder and Ms Leung which is also available on the SFC’s Facebook and LinkedIn pages. As an environmentally friendly measure, the SFC has for the first time published this year’s Annual Report in a digital version only.

End

Notes:

1. Subject to the market’s readiness, the new regime will be implemented tentatively in the fourth quarter of 2022 at the earliest.
2. “Ramp and dump” schemes are a form of stock market manipulation: fraudsters “ramp” up the price of a stock, use social media to lure unwary investors to buy at an artificially high price and then sell or “dump” the stock to take profits causing the price to collapse.
3. The steering group is co-chaired by Mr Alder and Mr Eddie Yue, the Chief Executive of the Hong Kong Monetary Authority, and also includes representatives from the Environment Bureau, Financial Services and the Treasury Bureau, Hong Kong Exchanges and Clearing Limited, Insurance Authority and Mandatory Provident Fund Schemes Authority.
4. A web-based platform for SFC electronic forms and online submission services launched in January 2019.
5. The report covers the period from 1 April 2021 to 31 March 2022.

Page last updated 22 Jun 2022