Hong Kong Regulator Reshuffles Enforcement Division, Prioritises Focus Areas

The Hong Kong Securities and Futures Commission ("SFC") has changed its focus and reshuffled resources to concentrate on high-priority cases, said Tom Atkinson, executive director of enforcement. 

Atkinson, who joined the SFC in May this year, said the regulator had in recent years seen an annual rise of 20 percent in cases and it was necessary to reassess its priorities and organizational structure. 

"We carried out a comprehensive and structured strategic review of the entire enforcement division over the past few months," Atkinson told the Thomson Reuters Pan-Asian Regulatory Summit on Wednesday. 

The rapid growth in enforcement cases spurred the reorganisation, Atkinson said. 

"Enforcement cases have been increasing rapidly…and are generally increasing in complexity. We could try to double our staff every five years to cope with this trend, but even if we do this, we would still be treading water," he said. 

"We clearly need to rethink how we perform our work. We need to move from a try-to-do-everything approach to a focused approach, targeting the key risk areas."

Atkinson said the SFC should identify cases which would have the highest impact when enforcement is initiated and at same time drop cases with little prospect of success as early as possible.

"By doing this, we will be able to bring successful enforcement outcomes to the market while the cases are still relevant, which in turn will maximise the deterrent effect of our efforts," he said. 

Focus Areas

He said the SFC's enforcement division would set up permanent and temporary specialised teams to focus on a number of significant risk areas: corporate fraud, corporate misfeasance, insider dealing, market manipulation and intermediary misconduct. 

The corporate fraud and corporate misfeasance teams would target corporate fraud and the misuse of powers by senior managers of listed companies, and investigate types of misconduct and failings, he said. These teams would be led by experienced professionals with long track records in these areas.

The insider dealing and market manipulation team's leader has a strong investigation background and the team comprises specialists with expertise in market analysis and investigation. This team would focus on investigating market misconduct and related offences, Atkinson said. 

The intermediary misconduct team would focus on misconduct by regulated persons, including the investigation of short selling issues, mishandling of client orders, misappropriation of client assets and investment bank malpractice.

Atkinson also said the enforcement division had set up four temporary specialised teams to tackle emerging risks. 

They include a sponsor team that focuses on sponsor misconduct during initial public offerings, a GEM team that investigates irregularities in the Growth Enterprise Market, an AML team that targets know your customer/anti-money laundering control failings and a specific products team to deal with mis-selling of specific investment products. 

He said the temporary teams would be disbanded once they have addressed the underlying risks and new teams would be formed to deal with other areas of concern as they arise.


North Asia editor for Thomson Reuters Regulatory Intelligence. He is based in Hong Kong.