Hong Kong’s financial regulator looks to UK ‘senior managers regime’ to increase individual accountability

31 January 2017 9:56am
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30 November 2016. By Phoebe Seers.

Hong Kong’s Securities and Futures Commission, or SFC, is going to circulate new rules next month that will increase individual accountability of senior company employees. The so-called “managers in charge” regime will require financial firms to disclose which of their managers are responsible for the day-to-day running of regulated activities and to register these individuals and their responsibilities.

The news has been leaked by undisclosed sources and details are not yet available. It is expected to be closely modelled on the UK Financial Conduct Authority’s “senior managers regime” under which key executives can be held criminally liable for bank failures.

“From a regulatory perspective, your IT guys, your risk guy, your compliance guy, your legal guy, will have accountability to the SFC to articulate what the risks are for that business,” Julia Gorham, partner and head of employment at law firm DLA Piper, said at a seminar in Hong Kong today.

In order to comply with the new rules, businesses will have to review their current organizational charts and be sure that their managerial staff have had adequate training, she added.

Since the UK introduced these rules, banks with international operations will have already started to implement this type of regime. However, the difficulty will lie in satisfying multiple training and reporting requirements, Gorham said. The Hong Kong regime will also cover senior executives involved in the day-to-day running of SFC-regulated activities who are based abroad.

As yet, no details have been circulated by the SFC, but a draft is expected in December, MLex has learned. Since the name of regime and the concept are almost identical to the UK regime, it is expected that the SFC will follow that structure closely. The SFC did not respond to questions for comment.

Under the UK regime, senior managers have a legal duty to take reasonable steps to prevent regulatory breaches from occurring, or from continuing to occur, in their area of responsibility.

Earlier this month, the chairwoman of the US Securities and Exchange Commission, Mary Jo White, called for new laws to aid enforcement authorities in holding senior executives accountable for misconduct that happens at their firms.

“We should closely study the track record of the UK’s senior manager regime for what it can teach us about implementing a broader and stronger enforcement regime in the United States,” White said.

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