The Securities and Futures Commission (SFC) today published its Annual Report 2022-23, which sets out its achievements in the past year as well as its vision for nurturing high-quality market growth and upholding world-class regulation to advance Hong Kong’s position as a leading international financial centre.

Highlights of the year included the introduction of Swap Connect, which commenced with northbound access in May 2023 (Note 1) and the launch of a new listing regime for specialist technology companies with limited or no revenue or profit track record (Note 2). The investor identification regime for Hong Kong’s securities market, which took effect in March 2023, strengthened the SFC’s market surveillance capabilities. In addition, the Hong Kong Dollar-Renminbi (RMB) Dual Counter Model for the secondary market trading of a first batch of  stocks was launched on 19 June 2023 (Note 3).

During the year, the SFC consulted the public on the regulatory requirements for the new licensing regime for virtual asset trading platforms (Note 4) as well as on legislation for implementing a paperless securities market in Hong Kong. A separate consultation set out proposed risk management guidelines for licensed persons dealing in futures contracts to help them better manage business-related risks. The SFC also concluded a consultation (Note 5) to prepare for the new regime to bring depositaries of SFC-authorised collective investment schemes under its direct supervision.

“We are committed to strengthening market resilience and integrity and expanding the breadth and depth of our financial markets as a premier gateway to Mainland China,” said Mr Tim Lui, the SFC’s Chairman. “This means deepening mutual market access with the Mainland and ensuring our financial industry and infrastructure are well prepared for any challenges which may arise.”

“We strive to promote sustainable and responsible development of our financial markets whilst safeguarding investor interests and managing market risks through our robust regulation, vigilant supervision and resolute enforcement action,” said Ms Julia Leung, the SFC's Chief Executive Officer.

“This will support Hong Kong’s long-term, sustainable market growth which is integral to its continued success as a leading global financial centre connecting China and the rest of the world.”

Cracking down on investment fraud and social media ramp and dump scams remained the SFC’s enforcement priority. During the year, the SFC conducted joint search operations with the Hong Kong Police Force and the Independent Commission Against Corruption concerning ramp and dump syndicates, arrested suspected fraudsters and froze the proceeds of their schemes. The SFC also launched a consultation on proposals to amend the Securities and Futures Ordinance (SFO) to facilitate more effective enforcement action (Note 6).

For the first time, this year’s report details the SFC’s sustainability efforts with reference to the TCFD Recommendations (Note 7) and its commitment to achieve carbon neutrality before 2050. In August 2022, the SFC published its Agenda for Green and Sustainable Finance, a strategic roadmap to develop Hong Kong as a regional and global sustainable finance hub by focusing on corporate disclosures, asset management, environmental, social and governance funds and carbon markets.

Key statistics for the period from 1 April 2022 to 31 March 2023 include:

• The number of licensees and registrants stood at 48,294 and the SFC received 7,384 new individual and corporate licence applications. Type 9 (asset management) and Type 4 (advising on securities) regulated activities accounted for 44% and 35% of the new licensed corporation applications approved during the year.
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• The SFC authorised 175 collective investment schemes, bringing the total number to 2,939 as of end-March 2023, of which 913 were domiciled in Hong Kong. Sixty-nine open-ended fund companies were registered during the year, bringing the total to 131.
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• It vetted 180 listing applications and reviewed 305 takeovers-related transactions and applications.
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• It directly sought information from or expressed concerns with seven listing applicants, exercising its powers under the Securities and Futures (Stock Market Listing) Rules.
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• It conducted 226 risk-based on-site inspections of intermediaries and noted 1,230 incidents of breaches of the SFC’s rules.
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• It made 5,851 requests for trading and account records from intermediaries as a result of market surveillance.
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• It disciplined 13 firms and 18 individuals, imposed fines totalling $41.7 million for intermediary misconduct and executed search warrants in 35 cases.
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• Mainland-Hong Kong Stock Connect covered 2,526 Mainland stocks and 561 Hong Kong stocks as of 31 March 2023, representing about 86% of the two markets’ combined market capitalisation. Net inflows reached RMB2,310 billion for southbound trading and RMB1,910.5 billion for northbound trading since the scheme’s launch.
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The Annual Report is available on the SFC website together with a video message from Mr Lui and Ms Leung which is also available on the SFC’s Facebook, LinkedIn and WeChat pages.

Notes:

1. 1.Northbound access enables offshore investors to execute interest rate derivatives transactions with onshore investors in Mainland China as a means to manage interest rate risks arising from investments in the Mainland bond market. The SFC, together with the People’s Bank of China and the Hong Kong Monetary Authority (HKMA), jointly announced the development of Swap Connect in July 2022.
2. 2.Following a public consultation and the SFC’s approval, the Stock Exchange of Hong Kong Limited published a consultation conclusions paper on the new regime together with related Listing Rules amendments and the regime took effect in March 2023.
3. 3.To promote the use of RMB in offshore investments and provide broader choices for investors, the SFC, HKMA and Hong Kong Exchanges and Clearing Limited formed a working group to prepare a dual-counter model for Hong Kong-listed securities. Please refer to the “Strategic Priorities” section of the Annual Report 2022-23.
4. 4.The SFC issued consultation conclusions on the new regime for virtual asset trading platforms in May 2023 and it came into effect on 1 June 2023.
5. 5.In March 2023, the SFC issued consultation conclusions on proposed amendments to subsidiary legislation and SFC codes and guidelines to implement the regime for the new Type 13 regulated activity, which will take effect in October 2024 after an 18-month transition period.
6. 6.The proposed amendments to the SFO would broaden the scope of some provisions to expand the basis for the SFC to apply for remedial and other orders against a regulated person.
7. 7.The Task Force on Climate-Related Financial Disclosures (TCFD) helps identify the information needed by investors, lenders and insurance underwriters to appropriately assess and price climate-related risks and opportunities. Issued in June 2017, the final TCFD Recommendations cover four core areas: governance, strategy, risk management and metrics and targets.