AsianInvestor's regulatory roundup, July 29

CSRC seeks Connect trading records; EY drops appeal over audit paper; MAS sets out new consumer protection rules; Thai fund industry to offer riskier products; and Singapore regulator forms fintech group.
AsianInvestor's regulatory roundup, July 29

China/Hong Kong: CSRC seeks Connect trade data
The China Securities and Regulatory Commission (CSRC) is trawling through suspicious trades made in Hong Kong as the Chinese government continues to look for the cause of the market plunge earlier this month.

The stock crash which saw the CSI300 plunge 27% from its June 8 peak prompted the mainland Chinese financial regulator to look for market manipulators. The CSRC has previously suggested that foreign investors were to blame for shorting the market through stock index futures.

Some brokers are now reporting that they are being required by Hong Kong’s Securities and Futures Commission (SFC) to detail their Stock Connect A-share trading records, specifically around the time when the Chinese market began to slide, according to local media.

This is the first time that such a request has been made by the SFC since the launch of Stock Connect last November, local media added. Under a cooperation agreement between the CSRC and the SFC, both regulators can request information about potential or suspected wrongdoing in each other’s markets.

Last Friday, the CSRC said there had been 17 exchanges of information since November.

Hong Kong: EY drops appeal against SFC over audit paper
Auditor EY has dropped its appeal against the SFC regarding court orders to hand over sensitive accounting records relating to its ex-client Standard Water.

Last May, the Court of First Instance ordered EY to hand over its work relating to the proposed listing of Standard Water on the Hong Kong bourse. However, the records have since been produced by EY for the SFC.

The case dates back to November 2009 when EY informed the Hong Kong stock exchange of its resignation as auditor of Standard Water due to inconsistencies in its accounts. Shortly afterwards, Standard Water also withdrew its listing application. The SFC then bought proceedings against EY in 2012 in a bid to obtain the documents after EY failed to provide them as part of an SFC investigation into the proposed listing, but EY claimed that they could not be produced as they were protected under China’s state secrecy law.

Singapore: MAS sets out greater consumer protections
The Monetary Authority of Singapore has launched a consultation aimed at bolstering protection for consumers buying financial products and services from retailers and in public places.

With financial institutions now using various distribution strategies to market their products and services, such as roadshows in shopping malls, as well as greater tie-ups with retailers, the financial watchdog is seeking to address the risks that consumers are taking.

The consultation published on July 23 proposes issuing market conduct guidelines setting out safeguards that financial institutions are required to implement when conducting marketing and distribution activities in public places, ensuring that there are adequate controls for a proper sales and advisory process.

Financial groups may also have to notify MAS of its marketing and distribution activities in retail outlets and public places, allowing the regulator to monitor the extent of such activities and tailor its supervisory approach accordingly. 

Thailand: Mutual fund industry to see riskier products
Hedge funds and junk bond funds could soon be available to Thai investors, with the country's market regulator looking to publish regulations around riskier investment strategies by September.

The news - aimed at shaking up the conservative mutual fund industry in the country - would help satisfy the appetite for riskier investments with higher yields and at the same time keep funds onshore, the Securities and Exchange Commission told Reuters last Thursday (July 23).

The new regulations, which will initially be for high-net-worth individuals, will also permit positions to be taken on derivatives and commodities futures, as opposed to current rules which allow such tools to be used only for hedging.

Indonesia: Pension fund and insurer restrictions loosened
Investment restrictions for Indonesian pension funds and insurers are being relaxed as the government looks to boost the local capital market, Reuters reported.

Specifically, the two asset owners have been allowed to buy corporate bonds with ratings below “AA”, as part of a wider package involving 35 economic stimulation policies issued last Friday, including encouraging SMEs to list their businesses.

The policy will come into force for insurers later this year while the rules for pension funds are already in place.

Singapore: Regulator forms fintech group
The MAS will be setting up a new financial technology (fintech) & innovation group (FTIG) this August.

With responsibilities for regulatory formation and development strategies, the group will aim to facilitate the use of technology and innovation to better manage risks, enhance efficiency, and strengthen competitiveness in the financial sector.

Sopnendu Mohanty will head FTIG as chief fintech officer. Sopnendu joins MAS from Citibank, where he was the global head of consumer innovation lab networks & programmes. He will report to Jacqueline Loh, deputy director for monetary policy and investment, as well as international development.

“Technology is transforming financial services, and innovation will increasingly be the source of competitive advantage in the industry. The formation of FTIG is a serious commitment by MAS towards our vision of a Smart Financial Centre, where technology is applied pervasively to create new opportunities and improve people’s lives,” said Ravi Menon, MAS managing director.

UK: Ex-SFC chief ousted from UK regulator
UK regulator the Financial Conduct Authority is searching for a new head to replace Martin Wheatley, Hong Kong's former financial watchdog chief.

In a Financial Times report on July 17, it was revealed that Chancellor of the Exchequer George Osborne would not be renewing Wheatley’s contract when it expires in March 2016. As a result, Wheatley has resigned and will be leaving on September 12. Supervision head Tracey McDermott will take over as the interim head.

Wheatley has had a turbulent tenure, most prominently when an announcement into a major insurance sector investigation was botched in March 2014. It was only later clarified that the investigation will be limited to “zombie” funds – old closed insurance policies sold between the 1970s and 2000 - but not before £4billion ($6.7billion) had been wiped off insurance stocks.

Prior to joining the FCA, Wheatley was the chief executive of Hong Kong’s Securities and Futures Commission between 2006 and 2011.

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