
ComplianceOne Newsletter – Feb 2025

The topics discussed in this monthly newsletter are as follows:
REGULATORY UPDATES
1. SFC convenes inaugural VA Consultative Panel meeting
2. SFC sets out ASPIRe roadmap as blueprint to navigate Hong Kong as a global virtual asset hub
3. Hong Kong's market watchdog reviews 8 brokerages amid IPO oversubscription frenzy
4. SFC Supports Listing of Alternative Funds to Boost Investor Options
5. SFC Leads Regional Consensus on Sustainability, Tech, and Investor Protection
6. SFC proposes to relax position limits for key exchange-traded derivatives
7. SFC flags cybersecurity incidents in a thematic review report
MARKET NEWS
8. SFC supports government budget measures
9. HashKey Capital is granted approval for VA discretionary accounts management services
ENFORCEMENT NEWS
10. SFC Imposes Restriction Notices on Money Concepts Entities
11. SFC Launches Insider Dealing Case Against Wong Pak Ming
Regulatory Updates
1. SFC convenes inaugural VA Consultative Panel meeting
Earliest on 14 FEB, the SFC had convened an inaugural meeting of the Virtual Asset Consultative Panel (“VACP”) for the licensed virtual asset trading platforms (“VATP”s).
Chaired by the SFC’s Executive Director of the Intermediaries Dr Eric Yip, the VACP comprises all the licensed VATPs represented by members of their senior management, and is expected to provide invaluable contribution to the SCF’s formulation of regulatory policy to further facilitate the development of a sustainable and resilient virtual asset ecosystem.
Members of the VACP will collaborate towards the aim of identifying policy priorities,
paving way for market and regulatory developments. As added by Dr Eric Yip, “The SFC
looks forward to close collaboration with the members to encourage and develop innovation while ensuring adherence to regulatory standards in this rapidly changing landscape”.
SIGNIFICANCE:
The VACP is a good example of SFC’ s proactive engagement with the licensed VATPs in addition to its previous engagement in launching the swift licensing process for new VATP applicants with a streamlined approach.
2. SFC sets out ASPIRe roadmap as blueprint to navigate Hong Kong as a global virtual asset hub
The SFC outlined 12 major initiatives to enhance the security, innovation and growth of Hong Kong’ s virtual asset (“VA”) market under a five- pillar “ASPIRe” roadmap, which stands for Access, Safeguards, Products, Infrastructure and Relationships.
A snapshot of the pillars and initiatives:
FIVE-pillars (incorporating the TWELVE initiatives)
“A-S-P-I-Re” Roadmap for a Resilient Virtual Asset Ecosystem
(1) Pillar A (Access) – Streamline market entry through regulatory clarity
Key objectives:
(i) Expand market accessibility
(ii) Encourage responsibility participation
(iii) Enhance investor opportunities
Initiative 1: Establish licensing regimes for OTC trading and custody services
Initiative 2: Attract global platforms, order flows and liquidity providers
(2) Pillar S (Safeguards) – Optimising compliance burdens without compromising security
Key objectives:
(i) Align compliance requirements
(ii) Adopt risk-proportionate oversight
(iii) Promote regulatory clarity
Initiative 3: Explore adopting a dynamic approach to custody technologies and storage ratios
Initiative 4: Enhance insurance and compensation frameworks
Initiative 5: Clarify investor onboarding and product categorization
(3) Pillar P (Products) – Expand product offerings and services based on investor
categorisation
Key objectives:
(i) Enable risk-appropriate investment tools
(ii) Safeguard retail investors
(iii) Mitigate potential risks
Initiative 6: Explore regulatory framework for professional investor-exclusive new token listings and virtual asset derivative trading
Initiative 7: Explore virtual asset margin financing requirements aligned with securities market risk management safeguards
Initiative 8: Consider allowing staking and borrowing/lending services under clear custody and operational guidelines
(4) Pillar I (Infrastructure) – Modernise reporting, surveillance and cross-agency
collaboration
Key objectives:
(i) Strengthen market-wide oversight capabilities
(ii) Early detection of illicit activities and misconduct
(iii) Safeguard investor assets
Initiative 9: Consider solutions for efficient regulatory reporting and deploy advanced
surveillance tools to detect illicit activities
Initiative 10: Strengthen local cross agency collaboration and promote cross border
cooperation with global regulators
(5) Pillar Re (Relationships) – Empower investors and industry through education,
engagement and transparency
Key objectives:
(i) Enhance investor understanding
(ii) Foster industry participation
(iii) Promote fit-for-purpose policy making
Initiative 11: Consider regulatory framework for financial influencers (Finfluencers) to address new investor engagement channels
Initiative 12: Cultivate sustainable communication and talent network
SIGNIFICANCE:
Encountered with the ever-changing VA ecosystem, market participants are facing challenges from all edges: institutional-retail bifurcation, fragmented liquidity, and regulatory arbitrage risk due to discrepancies in development of VA regulatory regimes across regions; the SFC is pioneering itself with a pragmatic ASPIRe roadmap to secure and gradually materialize the mission of positioning Hong Kong as an international VA hub.
3. Hong Kong's market watchdog reviews 8 brokerages amid IPO oversubscription frenzy
On 14 February 2025, a press release showing the SFC’s explicit concern with the oversubscription frenzy in IPO offering observed recently from eight brokers.
Some key points are worth noted:
the SFC will examine the brokers IPO financing policies, and advise that brokers should take into consideration the clients’ repayment ability, and set appropriate loan limit to avoid overfinancing;
in November 2023 a couple of years ago, a circular form the SFC had been posted to remind brokers of the need to adopt a prudent risk management policy in providing IPO subscription services to its clients, in particular after the launch of FINI on 22 November then;
since under the new FINI settlement, brokers are only required to pay for the maximum number of shares allotted in the IPO instead of the “full amount” of the subscriptions, thus allowing opportunities to further scale up the leverage offered to the clients. It is observed that some brokers tend to accept large subscription orders without collecting sufficient initial subscription deposits from clients as minimum upfront payments;
brokers tend to take advantage of “the exemption to pay the full amount” to grant more IPO loans to the clients with larger multiples which further add fuel to boost up the oversubscription frenzy.
SIGNIFICANCE:
The FINI mechanism shortens the settlement period from “t+5” to “t+2” while at the same time alleviating the financial costs burden of having to pay the full amounts of subscription in previous arrangements. Though initial intention of the FINI is to streamline the IPO settlement process, it unexpectedly allows the possibility for more speculative IPO overfinancing activities.
Market participants also expect the SFC to provide more clear guidelines on the margin-financing policies, not only as reference for prudent risk management, but also as a note of reminder to brokers of the potential risk of breaching the financial resources requirements amid the vehement buoyancy of IPO offerings.
4. SFC Supports Listing of Alternative Funds to Boost Investor Options
The SFC of Hong Kong has issued new regulatory circular to encourage the listing of closed-ended alternative funds on the Stock Exchange of Hong Kong Limited (“SEHK”). Announced on 17 February 2025, this move aligns with the HKSAR Government’s 2024 Policy Address to expand private equity fund distribution and solidify Hong Kong’s position as a global asset management hub.
Key takeaways:
Funds already listed on recognized international exchanges may also qualify, subject to comparable regulations.
Size & Scale: Funds must be sizeable (HK$780 million market cap), with management companies managing at least HK$780 million in alternative assets.
Diversification: Funds should invest in well-balanced portfolios, with borrowing capped at 30% of net asset value (NAV).
Transparency: NAV must be published quarterly, and offering documents must detail investment strategies, risks, and valuation methods.
Investor Education: Management companies are urged to educate investors before launching these funds in Hong Kong.
SIGNIFICANCE:
“We’ve always welcomed closed-ended alternative funds,” said Ms. Christina Choi, SFC’s Executive Director of Investment Products. “This clarity will help investors tap into opportunities managed by top-tier asset managers.”
This initiative broadens Hong Kong’s investment landscape, offering sophisticated investors access to alternative assets while maintaining robust safeguards. The SFC aims to balance innovation with investor protection, reinforcing the city’s financial competitiveness.
5. SFC Leads Regional Consensus on Sustainability, Tech, and Investor Protection
The SFC has taken a pivotal role in shaping the future of capital market regulation across the Asia-Pacific, forging a united front with regional counterparts at the International Organization of Securities Commissions (“IOSCO”) Asia-Pacific Regional Committee (“APRC”) meetings held from 19 Feb 2025 to 21 Feb 2025, in Da Nang, Vietnam.
Key takeaways:
Collaborative Roadmap: Chaired by SFC CEO Ms. Julia Leung, the APRC brought together over 70 regulators from 19 jurisdictions to align on tackling scams, online harm, and investment fraud, while leveraging technology for regulatory innovation.
Supervisory Cooperation: Vietnam’s State Securities Commission (“SSC”) joined as the 14th signatory to the APRC Multilateral Memorandum of Understanding (“SMMoU”), a milestone witnessed by Vietnam’s Finance Minister Mr. Nguyen Van Thang and celebrated during a signing ceremony.
Global Dialogue: Ms. Leung co-chaired the EU-Asia-Pacific Forum on Financial Regulation, driving discussions on digitalization, fintech, and sustainable finance with European and regional financial leaders.
Unified Approach to Emerging Challenges
Regulators agreed on strategies to combat scams and harness generative AI and other technologies to enhance oversight. SFC senior executives also contributed to Enforcement and Supervisory Directors’ Meetings, sharing insights on enforcement trends, virtual asset safekeeping, and tech-driven supervision.
Ms. Leung, in her keynote at the SSC Vietnam Symposium, underscored the APRC’s role: “This platform fosters collaboration essential for trust in our growing markets. Together, we can navigate emerging trends and risks effectively.”
SIGNIFICANCE:
As capital markets evolve with technology and sustainability at the forefront, the SFC’s leadership in the APRC reinforces Hong Kong’s role as a regulatory hub. This consensus sets the stage for stronger investor protection and innovation-friendly frameworks across the region.
On the sidelines, Ms. Leung met with SSC Chairwoman Ms. Vu Thi Chan Phuong to deepen supervisory ties, focusing on crypto regulation and shared capital market priorities. Vietnam’s SMMoU entry marks a step forward in regional cooperation, enhancing information-sharing among Asia-Pacific regulators.
For Ms. Leung’s full speech and more details, visit the SFC website.
6. SFC proposes to relax position limits for key exchange-traded derivatives
On 27 February 2025, the SFC launched a Consultation proposing to increase the position limits for exchange-traded derivatives based on the three major stock indices in Hong Kong to keep pace with market development.
To facilitate hedging activities of market participants, the proposals will lift the current position limits for the futures and options contracts as the table shown below:
Underlying Index | Existing position limit (net long/short position delta) | Proposed position limit (net long/short position delta) |
Hang Seng Index (HSI) | 10,000 | 15,000 (↑50%) |
Hang Seng China Enterprises Index (HSCEI) | 12,000 | 25,000 (↑108%) |
Hang Seng TECH Index (HSTECH) | 21,000 | 30,000 (↑43%) |
SIGNIFICANCE:
These will enable Hong Kong’ s derivatives markets to keep pace with the growth in the market capitalisations of major stock indices and trading volumes of their constituents over the past years, without introducing additional risks to the markets. As Ms Julia Leung said, “The relaxation of position limits will not only allow market participants to enjoy greater flexibility in managing positions, but also promote the liquidity and efficiency of both the derivatives and broader markets.”
7. SFC flags cybersecurity incidents in a thematic review report
Material cybersecurity incidents in recent years involving cyberattacks against licensed corporations (“LC”s) aroused attention of the SFC as LCs were vulnerable to significant business disruptions or hacking of client accounts.
A Report on the 2023/24 Thematic Cybersecurity Review of Licensed Corporations (“Report”) was issued by the SFC on 6 February 2025 where eight incidents of material cybersecurity breach were reported to SFC between 2021 and 2024, examples identified are: unauthorized access to trading in clients’ account through loopholes in the network security of the LCs; end-of-life (“EOL”) software and weak algorithm for encrypting client data.
In the light of these insufficient management oversight and inadequate controls on cybersecurity measures, the SFC has set out in the Report some standard of conduct expected of the LCs in relation to phishing detection and prevention, EOL software management, remote access control, third-party IT service providers management and cloud security.
SIGNIFICANCE:
As emphasized by Dr Eric Yip, the SFC’ s Executive Director of Intermediaries, that the LCs should take all necessary measures to tackle the sophisticated and prevalent cyberattacks, and failure to address these threats would cause detrimental influence on the LCs, their clients as well as the entire financial system in such a highly interconnected and digitalised world. Senior management should recognize the critical importance of safeguarding from and mitigating the cybersecurity risks by making reference to the Report for details.
Market News
8. SFC supports government budget measures
The SFC has expressed strong support for the Hong Kong government’s 2025-2026 budget measures, unveiled by Financial Secretary Paul Chan on 26 February 2025. These initiatives aim to solidify Hong Kong’s status as a leading international financial hub.
Key takeaways:
Boosting Securities and Derivatives Markets: SFC Chairman Dr. Kelvin Wong praised the budget for advancing Hong Kong’s securities, derivatives, and asset management sectors, reinforcing its competitive edge.
Tech-Focused Listing Channel: The SFC will collaborate with Hong Kong Exchanges and Clearing Limited (“HKEX”) to launch a "technology enterprises channel," streamlining listings for tech and biotech firms.
Listing Regime Refinement: A comprehensive review of listing rules, vetting processes, and market structures is underway, including exploring post-delisting trading mechanisms and optimizing dual/secondary listing thresholds.
Risk Management Enhancements: The SFC will soon consult on raising position limits for key index derivatives to better serve investors.
RMB Bonds and Fixed Income Hub: Partnering with the Hong Kong Monetary Authority, the SFC is crafting a roadmap to develop primary and secondary bond markets, alongside hosting a flagship forum in late 2025 to highlight Hong Kong’s strengths.
Virtual Assets and Fintech: Following a mid-February regulatory roadmap, the SFC will guide the sustainable growth of Hong Kong’s virtual asset market, aligning with the government’s upcoming policy statement on blending traditional finance with innovative tech.
SIGNIFICANCE:
SFC CEO Ms. Julia Leung emphasized ongoing collaboration with regulators and stakeholders to strengthen Hong Kong’s role as a fixed income and currency hub, advance virtual asset markets, and deepen ties with Mainland China and global markets.
The SFC’s proactive stance signals a dynamic year ahead for Hong Kong’s financial ecosystem.
9. HashKey Capital is granted approval for VA discretionary accounts management services
Following the approval from SFC, Hashkey Capital is now able to offer discretionary account management services for virtual assets to professional investors (“PI”s) subject to type 9 license.
This approval enables HashKey Capital to deliver customised services to professional investors subject to a pre-approved list of exchanges across the entire investment lifecycle ranging from:
(i) tailored investment mandates: from spot investments to OTC trading and derivatives;
(ii) flexibility in trading platforms: to offer discretionary account management service across a multiple of exchanges available to the clients taking into consideration the issues of compliance, operational efficiency;
(iii) seamless strategy execution: providing a full-fledged discretionary account management from buying, selling, asset allocation, monitoring, rebalancing and final reporting.
SIGNIFICANCE:
Hindered by the complex virtual assets landscape, investors are always averse to the unforeseeable risks beyond their investment perspectives; discretionary account management services offer a bespoke solution by shifting the burden of regulatory and technical complexities from investors to professional market practitioners who are more conversant in the newly evolving regime.
Enforcement News
10. SFC Imposes Restriction Notices on Money Concepts Entities
The SFC took decisive action on 18 February 2025, issuing restriction notices to Money Concepts (Asia) Holdings Limited (“MCAH”) and its subsidiary, Money Concepts Asset Management Limited (“MCAM”).
The SFC cited potential risks to the investing public and the broader public interest as key drivers for the restrictions.
Restriction in Place: Both firms are barred from engaging in any licensed regulated activities—directly or via agents—without prior SFC approval, until further notice.
SIGNIFICANCE:
The move stems from concerns over their honesty, reliability, integrity, and competence in conducting regulated activities, raising doubts about their fitness to remain licensed.
11. SFC Launches Insider Dealing Case Against Wong Pak Ming
The SFC kicked off criminal proceedings against businessman Wong Pak Ming on 27 February 2025, at the Eastern Magistrates’ Court. Wong, former chairman and controlling shareholder of Transmit Entertainment Limited (formerly Pegasus Entertainment Holdings Limited), faces charges of insider dealing tied to the company’s shares.
Case Details
Allegations: Wong is accused of counselling or procuring someone to trade Pegasus shares between 25 August 2017 and 17 October 2017, while possessing inside information about the company.
Background: Pegasus, listed on Hong Kong’s Growth Enterprise Market in 2012 and later moved to the Main Board in 2015, was renamed Transmit Entertainment in March 2018 after Wong sold his controlling stake.
Legal Basis: Insider dealing violates section 291 of the Securities and Futures Ordinance (“SFO”).
SIGNIFICANCE:
No plea has been entered yet. The case is adjourned to March 27, 2025. Wong was released on $200,000 cash bail with conditions to stay at his provided address, notify police of any residence change, and inform the SFC 24 hours before leaving Hong Kong.This prosecution highlights the SFC’s ongoing efforts to combat market misconduct.
[End of ComplianceOne Newsletter –February 2025]
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