King & Wood Mallesons

Asia-Pacific 100 position: 3

Update on the SFC Code of Conduct - whistleblowing HK style

Amendments to the SFC Code of Conduct (Code) were announced earlier this year and the majority came into effect over the weekend, on 1 December 2012. Here we take a closer look at what is the most important new requirement, which imposes an obligation on licenced entities to report suspected market misconduct by clients.

The major change to the Code is a new paragraph in the reporting section of the Code (section 12.5) which requires licenced persons or entities to immediately report to the SFC:

“Any material breach, infringement or non-compliance of market misconduct provisions set out in Part XIII or Part XIV of the Securities and Futures Ordinance that it reasonably suspects may have been committed by its client, giving particulars of the suspected breach, infringement or non-compliance and relevant information and documents.”

This means that licensed persons/entities are now required to report suspected breached by their clients of the market misconduct provisions in the Securities and Futures Ordinance (“SFO”). This is a significant shift from the other requirements in section 12 of the Code, which focus on a licenced entities own compliance. Going forward, licensed persons/entities are now required to monitor their clients’ compliance with certain parts of the SFO…

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