Insurance Linked Securities - Hong Kong Doubles Down Extending its Subsidy Grant Scheme
In its Hong Kong 2023-24 Budget, the Financial Secretary announced an extension of its insurance-linked securities (“ILS”) grant scheme for a...
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An SFC on-site inspection is a regulatory review of an SFC licensed corporation's business and compliance systems.
An inspection can be an overall health check focused on an individual licensed firm.
... or it can be a review based on particular concerns of the SFC of the individual licensed firm
... or it can be a review which forms part of a large review of a number of licensed firms focusing on a particular theme.
SFC resource constraints appear to be reducing the relative likelihood of an inspection
More recently licensed firms may see a greater chance of an inspection
Most licensed firms will see an inspection at least once every 7 years
Licensed firms which fit SFC criteria for higher risk may see an earlier inspection
2017-18 |
2018-19 |
2019-20 |
2020-21 |
2021-22 |
|
Number of Inspections |
301 |
304 |
317 |
304 |
262 |
Number of LCs |
2702 |
2960 |
3109 |
3159 |
3231 |
Percentage of LCs Being Inspected |
11.14% |
10.27% |
10.20% |
9.62% |
8.11% |
2017-18 |
2018-19 |
2019-20 |
2020-21 |
2021-22 |
|
Breaches per Audit |
4.9 |
4.07 |
4.7 |
4.44 |
5.4 |
2017-18 |
2018-19 |
2019-20 |
2020-21 |
2021-22 |
|
Internal Control Weaknesses as % of Inspections |
36.00% |
36.00% |
30.00% |
38.00% |
30.00% |
Non-Compliance with AML Guidelines as % of Inspections |
12.00% |
16.00% |
22.00% |
15.00% |
21.00% |
Breach of Code of Conduct as % of Inspections |
22.00% |
22.00% |
18.00% |
19.00% |
19.00% |
Total |
70.00% |
74.00% |
70.00% |
72.00% |
70.00% |
Most commonly identified breaches are non-statutory in nature. Typically, non-statutory requirements are principles based. The specific standard is unstated and the SFC has wide latitude to interpret and re-interpret the standard over time.
Consequently, SFC licensed corporations must regularly review and update internal policie to meet evolving standards to comply with non-statutory requirements.
Review compliance policies to ensure they are complete and reflect current regulatory expectations
Conduct period walk throughs and sample checks to ensure current operating practices are consistent with compliance policies and such policies are responsive to current operations
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