Firms regulated by the Securities and Futures Commission are required to appoint at least two responsible officers who are accountable for good governance and proper behaviour.
However, the regulator said that in some cases, a senior executive, while supervising several responsible officers, was not licensed as a responsible officer of the firm but only as a representative.
“In some extreme cases, some junior executives are appointed ROs while the controlling minds of the firm stay in the shadows in the hope of escaping regulatory scrutiny,” Leung said in a keynote speech during the Alternative Investment Management Association’s APAC Annual Forum 2017.
In her speech, she also discussed the importance of the manager-in-charge initiative. The SFC released a circular about the initiative in December last year, which outlines new measures that will require all members of a firm’s senior management team to take on legal liability of the firm, as reported.
The board of each licensed firm is expected to allocate responsibility, identify and appoint fit and proper individuals to act as managers-in-charge and to provide management structure information to the SFC on or before 17 July, she added.
According to Leung, it is not possible for the SFC to collect management structure information, particularly for certain core functions such as risk management and compliance, which aren’t regulated activities.
Some market participants are not aware that they are subject to the SFC’s disciplinary powers, she said. Although these individuals are not licensed as representatives, they manage functions in information technology or risk management.
The managers-in-charge initiative should heighten the awareness of individuals of their obligations and liability under the law, regardless of whether or not they are licensed.
“These new measures do not seek to increase the SFC’s powers, nor to make managers-in-charge more liable to disciplinary action,” Leung said, noting that all regulated persons, including those involved in management, have been subject to disciplinary action since the Securities and Futures Ordinance became effective in 2003.
