AsianInvestor's regulatory roundup, August 12

China: CSRC chief’s job at risk
The head of the China Securities and Regulatory Commission (CSRC) could be replaced because of his handling of the mainland’s A-share market turmoil, according to a report on Monday (August 10).

Quoting two sources, Reuters said the Communist Party had already shortlisted three potential candidates to replace the current chairman Xiao Gang, although a final decision has yet to be made.

The potential candidates include Huang Qifan, who is currently mayor of the Sichuan metropolis of Chongqing and is seen as the favourite for the CSRC post. Other candidates remain unknown.

Hong Kong: State Bank of India HK fined for regulatory failings
The Hong Kong Monetary Authority (HKMA) has slapped a HK$7.5 million fine on State Bank of India’s Hong Kong subsidiary for lapses in its anti-money laundering processes. The fine was announced on July 31.

Investigations by the city’s banking regulator found that between April 2012 and November 2013 the lender failed to: carry out customer due diligence on 28 new corporate customers; continuously monitor relationships with its customers; establish and maintain procedures for determining whether customers were politically-exposed persons; and other failings.

“This was a case of internal control failures relating to anti-money laundering/counter-terrorist financing systems,” said Meena Datwani, HKMA director-general for enforcement. “The HKMA takes such failures seriously and wants to send a clear message to the industry that all authorised institutions should have effective AML/CFT systems and controls in place to, among other things, detect and report suspicious transactions based on their knowledge of their customers.”

The news comes amid media reports that the Indian government is currently seeking the cooperation of private banks in Hong Kong and India in a bid to gain access to information on their Indian customers.

International: Brokers’ risk assessment methodology delayed by FSB
The finalisation of assessment methodologies to be used for assessing the riskiness of some financial institutions has been postponed until a later date, the Financial Stability Board (FSB) has announced.

The global financial regulatory organisation said on July 30 that setting assessment methodologies to be used for identifying risks within finance companies and broker-dealers would have to wait until the completion of its work over risk assessment for asset managers.

In late May the FSB ended a consultation - assessment methodologies for identifying non-bank non-insurer global systemically important financial institutions  - which looked into the risks posed by finance companies, broker-dealers and asset managers.

The FSB will discuss the initial findings from its work on asset management activities at its Plenary meeting in September. The body will report on this work to the G20 later this year and will develop activities-based policy recommendations by spring 2016.

Australia: Regulator reports strong fintech development
Australia is seeing rapid developments in its nascent financial technology (fintech) industry, reports the watchdog which overlooks the sector.

In April the Australian Securities and Investments Commission (Asic) established an online innovation hub to help the sector navigate Asic’s regulatory system. On August 5 it announced that since then it had:

- started work in relation to 22 businesses, including applications for licences and requests for guidance;

- released new webpages for fintech businesses with targeted information;

- established an external committee to provide guidance to Asic on its engagement with the fintech sector;

 - set up a senior internal taskforce to coordinate its work on new business models across the financial services industry.

The establishment comes as global investment in fintech ventures tripled to $12.2 billion in 2014, up from $4 billion in 2013.

Other markets including the Korean and Singaporean governments have also made fintech a priority development area. The Monetary Authority of Singapore announced in late July that it has formed a new fintech & innovation group within its organisation.

US: SEC adopts rule for pay ratio disclosure
The US Securities and Exchange Commission is requiring listed companies to disclose the pay ratio between a CEO and the median pay of employees as mandated by the Dodd-Frank rules.

 “The Commission adopted a carefully calibrated pay ratio disclosure rule that carries out a statutory mandate,” said chairwoman Mary White. “The rule provides companies with substantial flexibility in determining the pay ratio, while remaining true to the statutory requirements.”

The new rule, which will be introduced from the beginning of January 2017, will see disclosures required in registration statements, proxy and information statements, and annual reports.