Process Review Panel criticizes Hong Kong’s SFC for slow licensing and enforcement procedures

Maria Nikolova

PRP noted some progress in the work of the Hong Kong regulator but sees more room for improvement.

The Process Review Panel (PRP) for the Securities and Futures Commission (SFC) today published its annual report for 2017-18. Although the report was not as harsh as the one released last year, PRP remains critical of the way the SFC has handled enforcement issues and of the speed of reviewing licensing applications.

In 2017-18, PRP reviewed 60 cases selected from the monthly closed case lists submitted by the SFC.

The total of cases includes 22 enforcement cases. The processing time taken by the SFC to handle these cases ranged from two years seven months to some six years, PRP notes. PRP has identified some common issues that contributed to the long processing time of the cases reviewed. These include issues with resource management. For instance, an investigation team might be overloaded with a number of cases, both minor and serious.

PRP recommended the SFC to critically review its processes and procedures with a view to improving the effectiveness and efficiency of the enforcement work.

The licensing process remains clumsy. In 2017-18, PRP reviewed eight licensing cases. The processing time for these cases ranged from six months to 15 months.

PRP considered that the Licensing Department had taken longer time than necessary to process an application. PRP suggested that the Department should review its process in light of the changing circumstances in the financial market. Also, it should streamline its workflow in order to cope with the workload arising from the growth in the number of licensees and a wider range of regulated activities carried out by the licensees.

SFC’s Quarterly Report for the three months to end-June 2018 shows a rise in the number of license applicants. During the quarter, the SFC received 2,030 licence applications, up 2.7% from the preceding quarter and up 19.6% from the equivalent period in 2017. The number of corporate applications, however, dropped 10.7% from the last quarter to 75, down 6.3% year-on-year.

As at June 30, 2018, the number of licensees and registrants totalled 45,099, up 4.4% from last year, and the number of licensed corporations grew 8.9% to 2,775. Both were record highs.

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