ENG-2020 — Page 101

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Financial and Monetary Affairs

Recent Developments

During the year, the SFC issued guidance to clarify the regulatory obligations of private equity firms and family offices which conduct business in Hong Kong.

Enhancements to the investor compensation regime took effect in January. These included raising the compensation limit from $150,000 to $500,000 per investor per default and extending coverage to include northbound trading under Stock Connect.

Under a scheme which facilitates the cross-listing of ETFs between Hong Kong and the Mainland, the SFC authorised two ETFs for listing on the SEHK and the China Securities Regulatory Commission approved two ETFs for listing on the Shenzhen Stock Exchange. The SFC oversees a robust regulatory framework for virtual asset trading platforms that offer trading of at least one security token. In December, it granted the first licence under the regime. The licensed platform serves professional investors only and is subject to tailor-made requirements similar to those applicable to securities brokers and automated trading venues.

In April, the SFC concluded a joint consultation with HKEX and the Federation of Share Registrars Limited on a proposed operational model for implementing an uncertificated, or paperless, securities market in Hong Kong.

On the enforcement front, the SFC takes disciplinary action to maintain market integrity. Of the SFC licensees disciplined in the year, 19 were individuals and 16 were corporations. Fines totalled $2,804 million.

Listing Regime for Emerging and Innovative Sectors

The SEHK's listing rules, revised in 2018, facilitate the listing of companies from emerging and innovative sectors, subject to safeguards. The expanded listing regime allows the Main Board listing of pre-revenue and pre-profit biotechnology companies, high-growth and innovative companies with weighted voting rights (WVR) structures, and qualifying issuers seeking a secondary listing on the SEHK through a new concessionary route. Further enhancements during 2020 included the extension of the current WVR regime to accommodate secondary listings by issuers with corporate WVR structures that meet certain requirements.

The listing regime caters for fund-raising needs in the new economic environment and makes Hong Kong's listing platform more attractive to issuers from different jurisdictions, thereby strengthening the city's overall competitiveness vis-à-vis other major international listing venues. As at the year end, 39 companies were listed successfully on the SEHK under the new regime.

Regulation of OTC Derivatives

In line with G20 commitments to reform OTC derivatives markets, the HKMA and the SFC are working on implementing an OTC derivatives regulatory regime in Hong Kong by phases.

Commodity Trading

Hong Kong operates one of the most active physical gold markets in the world and is among Asia's largest OTC gold trading centres. Spot gold can be traded through two closely related yet

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