Hong Kong Financial Regulator Plans Specialist Probe Teamsby and
Proposals envisage manipulation, fraud and misconduct teams
Enforcement division has almost doubled staff this decade
Hong Kong’s financial regulator plans to speed up its probes and create teams focused on investigating specific areas of wrongdoing, such as market manipulation.
Thomas Atkinson, who became executive director and head of enforcement at the Securities and Futures Commission in May, wants to accelerate inquiries, according to a client note by law firm Ashurst LLP, whose staff attended an Aug. 29 event at which Atkinson spoke. The SFC will set up teams for manipulation, corporate fraud and brokerage misconduct, and also plans to upgrade its surveillance systems and encourage cooperation with local firms and global regulators, according to Ashurst.
“Many firms are frustrated with the length of time it takes to resolve investigations, which can often take several years,” said James Comber, a partner at Ashurst who was at the talk. “Bringing more efficiency to investigations would be a welcome development.”
The initiatives come as Hong Kong has been improving scrutiny of the market to attract international and Chinese investors, a strategy outlined by SFC Chief Executive Officer Ashley Alder in a June speech. The regulator has nearly doubled enforcement staff since 2010, from 115 to a projected 202 next year, and seen a recent doubling in the number of requests for investor identifications sent to brokers. The agency is readying proposals that would allow it to identify investors behind trades in real time.
Ernest Kong, a spokesman at the SFC, declined to comment on the enforcement division’s plans.
Atkinson said at the Aug. 29 talk that his unit will focus on “high-impact cases” that will change market behavior and better protect individual investors, Comber said. Future investigations may have larger fines and greater publicity to encourage improvements in behavior.
New technology is making patterns of behavior in the market easier to identify, enabling more investigations, said Keith Pogson, senior partner for Asia Pacific financial services at Ernst & Young LLP.
“Markets have become more sophisticated and there’s a rising number of brokerages in Hong Kong,” he said. “You’ve got a lot more automated trading and other activities going on. The world has changed over the last decade, quite dramatically.”
Atkinson, previously head of enforcement at Canada’s Ontario Securities Commission, succeeded Mark Steward, who left the SFC in September 2015 after nearly 10 years and is now director of enforcement and market oversight for the U.K.’s Financial Conduct Authority.
Comber said that a possible difference in approach between Atkinson and Steward is the new enforcement chief’s desire to cut the number of active probes at the regulator, which opened 1,068 investigations and closed 798 in the two years to March 31, according to its annual report.
“The SFC has a large number of open investigations, and Mr. Atkinson appears to want to clean that up quite quickly,” he said.