AsianInvestor's regulatory round-up, Feb 11

Philippines: Regulator aims to sign ARFP this year
The Philippine securities regulator is looking to implement the Australian-initiated Asia Region Funds Passport (ARFP) scheme by the end of this year, report local media.

This will include the Manila-based Securities and Exchange Commission (SEC) becoming a full signatory to the agreement as set out by the International Organization of Securities Commissions (Iosco) – a process that the Philippines had already begun.

And if the country does get a positive response from Iosco, which is expected by the end of the year, the government will look to be included in the scheme by November, which coincides with the Asia-Pacific Economic Cooperation meeting in the Philippines, according to SEC chairwoman Teresita Herbosa, quoted on news website BusinessWorld.

Hong Kong/China: SFC's Lam looks ahead to mutual recognition
Work on the much-anticipated Hong Kong-China mutual fund recognition scheme is completed, with the Hong Kong securities regulator waiting for its mainland counterpart to give the go-ahead.

Alexa Lam, the outgoing deputy chief executive of Hong Kong’s Securities and Futures Commission, said the Chinese authorities understood the importance of the scheme and that now it was just down to choosing an appropriate time for the launch, local media reported.

She suggested that Hong Kong’s short- to medium-term advantage would lie in acting as a bridge for the mainland to connect to the world and vice versa. Global capital flows entering the mainland should go through Hong Kong aided by middlemen based in the city, such as brokers and fund managers.

Hong Kong should also take advantage of its transparent system and human resources to help the mainland reform its capital markets, she said.

But the city needed a clearer roadmap for developing its long-term future in relation to China, with Lam suggesting that it could act as a financing centre for the country’s ‘Silk Road Economic Belt’, which would link China and Europe through central Asia.

Lam, who will step down at the end of this month, added that she will return to the University of Hong Kong, her alma mater, to teach law.

Malaysia: SC’s new guidelines for equity crowdfunding
Malaysia’s Securities Commission (SC) has released new guidelines aimed at better regulating equity crowdfunding (ECF), a growing industry in the country.

ECF is a new form of fundraising that allows small firms to obtain capital through small equity investments from a relatively large number of investors, using online portals.

The new framework requires registration of ECF platforms and entrusts the fund’s governance to the operator.

The operator is required to ensure that the issuer is suitable for its investors before being hosted on the platform. The operator will also have to make sure that funds obtained from investors are safeguarded in a trust account until the funding goal is met.

An eligible issuer can raise up to RM3 million ($840,000) within a 12-month period.

Hong Kong: Water Oasis ex-CEO admits to insider trading
Salina Yu, the former CEO of skincare product distributor Water Oasis, has been ordered to pay the Hong Kong government HK$281,346 ($36,284) in losses she avoided through insider trading in 2012.

Yu admitted to the offence, and a disqualification order has been made against her by the Market Misconduct Tribunal. This will prohibit her from being a director or being involved in the management of any listed corporation without leave of the court.

The MMT said it was concerned that Yu were to return to a management position in Water Oasis or another listed corporation, “she may pose a threat to the integrity of the workings of such a business, a threat which may well reach out to undermine compliance with market regulations”.

US/China: Big Four accountants settle with SEC over China fraud probe
The ‘Big Four’ accountancy firms have each agreed to a $500,000 settlement with the US Securities and Exchange Commission (SEC) as punishment for refusing to turn over documents related to investigations of potential fraud in China.

As part of the settlement, the SEC said on February 6 that it had reprimanded the firms, which eventually provided the documents, and required them to perform specific steps to satisfy SEC requests for similar materials over the next four years.

Deloitte, EY, KPMG and PwC all admitted that they did not produce documents before proceedings were brought against them in 2012.  They agreed to the settlement without admitting or denying other findings in the order.

“This settlement recognises the SEC’s substantial recent progress in obtaining those documents from registered firms in China,” said Andrew Ceresney, director of the SEC’s enforcement division. “The settlement also holds four of the firms accountable for previously violating US rules, and makes clear that should production of documents cease, the SEC can restart the administrative proceeding.”