Monthly APAC Private Wealth Legal Developments – September 2022 – Fund Management/ REITs

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Welcome to Herbert Smith Freehills monthly updates on the Asian private banking industry.

Each month, we survey ten Asian jurisdictions on legal developments regarding trust and estate planning that are of interest to the private wealth management industry, and provide a succinct summary in tabular form. Jurisdictions covered by the update are Hong Kong, Singapore, China, Taiwan, Japan, India, Malaysia, Indonesia, Thailand, and the Philippines. We hope these updates will prove to be a useful resource for keeping private clients, business people and lawyers informed of legal updates in the region.

hong kong

SEHK and HKFE announce enhancements to market maker requirements for stock options and stock index options

Improvements announced by the Stock Exchange of Hong Kong Limited (SEHK) to market maker requirements in the equity options market aim to support market liquidity, with requirements refined based on the characteristics of the underlying securities and relevant market conditions. The improvements will be introduced in two phases: the first phase, comprising (1) the introduction of a new level of liquidity and (2) the standardization of obligations for options on exchange-traded funds, will come into effect on October 31, 2022; and the second phase, concerning the management of bond adjustments under exceptional conditions and including the mechanisms (1) Agile-LL3 and (2) Fast Market, will take effect provisionally in the first half of 2023, subject to market preparation.

The improvements announced by the Hong Kong Futures Exchange Limited (HKFE) to market maker requirements for options on specific equity indices aim to support market liquidity in exceptional market conditions via a “quick market” mechanism. They will enter into force provisionally in the first half of 2023.

SFC Deputy CEO Delivers Keynote on Market Resilience, Virtual Assets and Sustainable Finance at the 2022 AIMA APAC Annual Forum

The Deputy Managing Director and Executive Director of Intermediaries of the Securities and Futures Commission (SFC), Ms. Julia Leung, recently gave a keynote speech at the annual AIMA APAC 2022 forum, discussing developments related to market resilience, virtual assets and sustainable finance.

In terms of market resilience, the growth of non-banking financial intermediation, including the hedge fund sector, has translated into an increase in financial risks held outside the banking sector. Following the Archegos incident, discussions focused on improving the transparency of hedge fund positions and the ability of regulators to detect market concentration risks. For virtual assets, the SFC takes a “same business, same risk, same rules” approach. The Anti-Money Laundering Amendment Bill recently introduced in the Legislative Council would make SFC licensing mandatory for any entity operating a centralized virtual asset exchange in Hong Kong or targeting Hong Kong investors. In sustainable finance, the first phase of new regulatory requirements under the amended Code of Conduct for Fund Managers entered into force last month, and quantitative disclosure is expected in mid-2023.

In a next step, the SFC is examining fund managers’ use of environmental social governance (ESG) ratings and data product providers, starting with a fact-finding exercise to understand the operating model of these providers as well as current fund market practices. managers when selecting and engaging with these vendors. The study will inform SFC guidance to the asset management industry on the use of ESG service providers.


MAS on Digital Asset Innovation

The Monetary Authority of Singapore (MAS) has released the keynote speech delivered by Ravi Menon, Chief Executive, at the Green Shoots Seminar. Under the title “Yes to digital asset innovation, no to cryptocurrency speculation”, Mr. Menon explained the complexities of the digital asset ecosystem and its difference, what MAS actively promotes, what MAS discourages and what risks MAS seeks. to manage. In particular, there are five areas of risk in digital assets that MAS’ regulatory approach focuses on: (1) addressing money laundering and terrorist financing risks; (2) manage technology and cybersecurity risks; (3) protection against harm to retail investors; (4) maintain the stability promise of stablecoins; and (5) mitigate potential risks to financial stability. According to the MAS, innovation and regulation are not incapable of coexisting. As Singapore aims to be a hub for innovative and responsible digital asset businesses that improve efficiency and create economic value, MAS’ development strategy positions the country as one of the most conducive and more enabling for digital assets. At the same time, MAS’ evolving regulatory approach makes Singapore one of the most comprehensive countries when it comes to digital asset risk management, and one of the strictest in areas such as investment discouragement. retail in cryptocurrencies.


RBI issues digital lending guidelines

The Reserve Bank of India (RBI) has issued a circular, Guidelines on Digital Lending, which sets out the instructions applicable to “existing customers benefiting from new loans” and “new customers entering” as of the date of the circular. Regulated Entities (REs) have been given until November 30, 2022 to put in place adequate systems and processes to ensure that “existing digital loans” (sanctioned September 2, 2022) also comply with the guidelines.


SCM Addresses Islamic Finance News UK Forum

The Securities Commission of Malaysia (SCM) has published the speech delivered by its Deputy Managing Director, Datuk Zainal Izlan Zainal Abidin, at the Islamic Finance News UK Forum 2022, held at Mansion House in London. Highlights of the speech included:

  • According to the 2022 Islamic Financial Services Industry Stability Report, global Islamic financial assets grew by 11.3% to reach US$3.06 trillion in 2021.

  • As of August 2022, 23 issuing companies have raised funding under the Sukuk for Sustainable and Responsible Investment (SRI), which includes the world’s first green sukuk and issuances for social purposes such as education and housing. affordable.

  • The SRI Sukuk Framework was introduced in June and aims to facilitate companies’ access to the capital market to meet transition financing needs.


The BoT marks the launch of the TBA ESG Statement

The Bank of Thailand (BoT) has issued a press release marking the launch of the Thai Bankers Association (TBA) ESG statement. As part of the ESG statement, all TBA members agreed on six shared priorities for action:

  • Governance: ensure good corporate governance and effective oversight at board level, with clear responsibility and accountability at management level for the ESG agenda;

  • Strategy: Integrate ESG into business strategies and define sustainable finance frameworks to support Thailand’s transition to net zero;

  • ESG risk management: integrating ESG into risk management processes;

  • Financial products: using digital technology to increase financial accessibility; helping customers achieve net zero emissions and sustainable growth;

  • Communication: Communicate and collaborate with all stakeholders to raise awareness of ESG issues; and

  • Disclosure: Develop monitoring and reporting systems that comply with Thai regulatory frameworks and global sustainability disclosure standards.

With the ESG Statement, the TBA has committed to acting coherently and collectively for change, with transparency and resilience, to ensure interoperability and comparability among all TBA members, based on the principle of “apply or explain “. A manual specifying the actions, deadlines and key performance indicators for each ESG component must be developed.


BSP publishes ESG rules on investments

The Bangko Sentral ng Pilipinas (BSP) announced that the Monetary Council has approved guidelines on integrating sustainability principles into banks’ investment activities. The guidelines cover bank book investments or portfolios of debt and equity securities that are not traded by the bank as part of its proprietary position. Banks are expected to take into account their sustainable development objectives in their investment activities and ensure that these investments contribute to sectors considered to have a beneficial impact on the environment or society.

This is the third set of regulations issued by BSP that aim to promote the sustainability agenda in the financial system. PASB issued Circulars Nos. 1085 and 1128 on Sustainable Finance Framework (April 2020) and Environmental and Social Risk Management Framework (October 2021), respectively. The frameworks offer banks a three-year transition period from May 2020 to integrate sustainability principles into their strategic objectives, corporate governance and risk management system.

The contents of this document are provided for reference only. Some of the information comes from public sources and may not be complete, accurate or current; where we have relied on third party information and sources, this has not been verified by us. The document does not constitute legal advice and should not be relied upon as such. Specific legal advice regarding your specific situation should always be separately sought before taking any action based on this publication, and all facts contained herein should be ascertained for your specific situation at the time you wish to use or refer to them. .

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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