Hong Kong SFC’s Manager-In-Charge regime – are you on track?

On December 16, 2016, the Securities and Futures Commission of Hong Kong issued a circular to all licensed corporations in Hong Kong, which introduced measures to heighten the accountability of the senior management at licensed corporations and increase awareness of the obligations of senior management under the current regulatory regime (the Manager-in-Charge Regime).

The Manager-In-Charge Regime impacts all SFC licensed corporations and their senior management in Hong Kong. Senior management outside of Hong Kong may also fall within the scope of the Manager-In-Charge Regime if, for example, a core function of a Hong Kong licensed corporation reports directly to a regional or global head situated in another country.

The Manager-In-Charge Regime requires licensed corporations to review their current organisational structure, the roles of senior management and their current responsible officers (ROs) in light of the SFC’s classification of core functions within licensed corporations and its guidelines on identifying Managers-In-Charge of Core Functions (MICs). The Manager-In-Charge Regime also imposes new reporting requirements on licensed corporations.

Key questions

In view of the Manager-In-Charge Regime commencing shortly on April 18, 2017, below are some key questions to help you assess if you and your organisation are on track for compliance with the Manager-In-Charge Regime.

1. Has there been a review of the existing business / operational functions in Hong Kong (and regionally or globally, if applicable) to identify whether, and to what extent, they fall within, or overlap with, the 8 core functions identified by the SFC?
   
   The 8 core functions are: overall management oversight, key business line(s), operational control and review, risk management, finance and accounting, information technology, compliance, and anti-money laundering and counter-terrorist financing.
   
   
2. Have one or more individuals within each of those 8 core functions been identified as the MICs of those functions?
   
   The individual(s) should have sufficient seniority and authority within the organisation and have accountability for the applicable function. MICs may be individuals located in Hong Kong or overseas. Each MIC should also be notified of, and acknowledge, his or her appointment as an MIC for a function.
   
   For each MIC, an information sheet (Supplement 8A) should also be prepared and submitted to the SFC on or before July 17, 2017.
   
   
3. Are the MIC(s) of overall management oversight function and key business line(s) function are already ROs in respect of the regulated activities they oversee?
   
   If not already ROs, RO applications (and any waiver applications) will need to be prepared and submitted to the SFC on or before October 16, 2017.
   
   
4. Has an organisational chart been prepared in accordance with the SFC’s requirements?
   
   The SFC requires the organisational chart to show the management and governance structure of your licensed corporation, business and operational units, and key human resources and their respective reporting lines. It should also include all the MICs and their reporting lines, and the job titles of the persons reporting directly to the MICs in relation to the operations of the licensed corporation.
   
   This organisational chart must be submitted to the SFC on or before July 17, 2017.
   
   
5. Has an internal alert system been implemented to notify the relevant compliance officer of any changes to the MICs or any change in the information of an MIC?
   
   The system should have notifications for any new appointments or cessation of appointments of MICs, and any changes to the previously submitted information of an MIC.
   
   Information relating to these changes must be submitted to the SFC via the SFC Online Portal within 7 business days of the change, together with updated organisational charts showing the latest MICs and most up-to-date reporting lines (if applicable).
   
   

Further details on the Manager-In-Charge Regime and FAQs can be found on the SFC’s website.