On 19 May 2021, Part 2 of the Arbitration (Amendment) Ordinance 2021 (‘Amendment Ordinance‘) came into operation, making amendments to the Arbitration Ordinance (Cap 609) necessary to fully implement the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region (‘Supplemental Arrangement‘) signed between the Government of the Hong Kong Special Administrative Region (HKSAR) and the Supreme People’s Court of the People’s Republic of China on November 27, 2020.

Two of the measures under the Supplemental Arrangement are the removals of the requirement that Mainland arbitral awards must be made by a ‘recognized‘ Mainland arbitral institution to be enforced in Hong Kong, and of the restriction against concurrent proceedings in Mainland and Hong Kong courts for enforcement of an arbitral award.  To implement these measures, it was necessary to amend Section 2 and repeal Sections 93 and 97 of the Arbitration Ordinance, which has now been done by way of the Amendment Ordinance.  It is hoped that these changes will assist parties in cross-border enforcement of arbitral awards.

For completeness, the Amendment Ordinance also amends the Arbitration (Parties to New York Convention) Order to add Ethiopia, Palau, Sierra Leone and Tonga as parties to the New York Convention.

The text of the Amendment Ordinance is available here.

On 16 July 2021, the Securities and Futures Commission (“SFC”) issued a warning statement concerning virtual asset platforms. In the warning statement, the SFC highlighted their awareness that Binance may offer trading services in “stock tokens” in Hong Kong, and that no entity in the Binance group is licensed or registered to conduct any “regulated activity” in Hong Kong.

According to the SFC’s warning statement, stock tokens are virtual assets that are represented to be backed by different depository portfolios of underlying overseas listed stocks, with their prices closely tracking the performance of the respective stocks. As stock tokens can be denominated in factional units, they are promoted as an alternative means for investors to purchase fractional shares instead of the entire fully paid-up shares.

Although there is uncertainty as to whether stock tokens fall within the definition of “securities” under the Securities and Futures Ordinance, the SFC expressed their view in the warning statement that stock tokens are likely to be “securities” and thus within their regulatory remit. This means that unless a person is licenced by the SFC (or unless an applicable exemption applies), any person who offers stock tokens or the trading of stock tokens to the Hong Kong public may be criminally liable.

See here for the full warning statement issued by the SFC.

On 5 July 2021, the proposed amendments to the Hong Kong Listing Rules relating to the paperless listing and subscription regime have come become effective, pursuant to which (i) all listing documents in a new listing be published solely in an electronic format; and (ii) all new listing subscriptions, where applicable, be made through online electronic channels only, subject to certain exceptions. The Stock Exchange of Hong Kong Limited (SEHK) has also issued a series of FAQs to assist applicants and issuers to understand and comply with the amended Listing Rules.

This regime forms part of the SEHK’s paperless initiatives and commitment to lower costs and streamline the processes for listing in Hong Kong. The SEHK considers that the Listing Rules requirements for printed form physical listing documents and the physical display of documents are out-of-date, and the amendments will bring the Listing Rules in line with the common practice of other Hong Kong and overseas regulators for paperless documentation.

The disciplinary action

The Insurance Authority (IA) earlier this month reprimanded a former individual insurance agent (the Agent) and prohibited him from applying to be licensed for 5 months.

In early 2020, during the COVID-19 pandemic, when the Hong Kong Government was taking steps to limit travel from Hubei Province to prevent the spread of COVID-19, the Agent sent a message to his contacts using his social media account to encourage them to leave Hubei Province and come to Hong Kong to escape the pandemic and take out insurance from him.  The Agent’s action resulted in numerous complaints and the Agent’s appointment was terminated by the appointing insurer.

In the disciplinary proceedings, the IA concluded that the Agent, among other things, had contravened the IA’s Code of Conduct for Licensed Insurance Agents in failing to comply with his appointing insurer’s internal policy on cross-border selling practices, carried on regulated activity without integrity and failed to exercise reasonable care, skill and diligence in carrying out regulated activity.  He was found guilty of one count of misconduct and was not a fit and proper person to be a licensed individual insurance agent.

Commentary

This disciplinary decision shows that the IA does not tolerate unethical business practices, and that the requirements under the Code of Conduct for Licensed Insurance Agents apply to both online and offline business practices.  Unethical use of social media has severe ramifications and can lead to loss of trust and confidence.

Practitioners should also be mindful of the risks associated with the use of the Internet and social media.  These risks may include data breaches, reputational damage, malware attacks and hacks and other data security issues.

Apart from managing the above risks by familiarising and complying with the IA’s Guideline on the Use of Internet for Insurance Activities, the IA’s circulars on the use of non-face-to-face insurance distribution channels, and the relevant organisations’ internal policies and guidelines, practitioners should generally have a sense of risk awareness when it comes to the use of the Internet and social media.

For more information, please visit the IA’s website .

Pursuant to section 71 of the Inland Revenue Ordinance (Cap.112), the Commissioner of Inland Revenue may in his discretion order a surcharge of not exceeding 5% on the amount of tax outstanding after the due date and a further surcharge of not exceeding 10% on the amount remaining unpaid after 6 months from the due date.

On 18 June 2021, the Inland Revenue Department (IRD) announced a relief measure on tax payment.  For taxpayers who have obtained the IRD’s approval for instalment settlement of the demand notes for Salaries Tax, Profits Tax and Personal Assessment for the year of assessment 2020/21 issued between May 2021 and May 2022, no surcharge will be imposed for a maximum period of one year counted from the respective due dates of the demand notes, provided that the instalment plans are duly adhered to.

If the tax demand under the first instalment of the demand note has been settled on or before the due date and instalment plan is only granted for settlement of the tax demanded under the second instalment, the one-year period will count from the due date for the second instalment.

For more information, please refer to the Inland Revenue Department’s website.