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.

The Securities and Futures Commission (the “SFC”) recently publicly reprimanded and imposed a fine in the sum of HK$400,000 on a Money Laundering Reporting Officer (“MLRO”) / Compliance Officer of a SFC licenced firm for his failure to discharge his duties as a member of the firm’s senior management, including failures to conduct adequate enquiries before approving unusual or suspicious third party fund transfers, to maintain proper records of enquiries, to ensure proper and adequate systems were in place to mitigate money laundering risks, etc.

In this case, the MLRO is not a licensed person under the Securities and Futures Ordinance (“SFO”), but comes within the definition of a “regulated person” under section 194(7) of the SFO for being a person involved in the management of the business of a licensed corporation.

This case serves as a reminder that the SFC continues to focus on anti-money laundering in its supervision and enforcement work, and will exercise its disciplinary powers against members of senior management of a licenced firm irrespective of whether they are licensed or registered with the SFC.

For more information, please refer to the SFC’s website at LINK.

Our client bulletin for June 2021 covers the following topics:

• Hong Kong Stock Exchange’s Consultation on Review of Listing Rules Relating to Disciplinary Powers and Sanctions.
• Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings Between the Courts of Mainland and of Hong Kong.
• Arbitration Update.
• Remote Hearings in Hong Kong Arbitration and Court Proceedings.
• Use of a Competitor’s Registered Trade Mark in the Context of Comparative Advertising.
• Corporate Culture, Director Independence and Diversity-the Latest Consultation on Corporate Governance by the Hong Kong Stock Exchange.
• SEHK’s Consultation Conclusions/SFC and SEHK’s Joint Statement

Please click here to view the bulletin.

Pursuant to the new Part 4A and Schedule 7 of the Financial Reporting Council Ordinance (FRCO) gazetted on 17 May 2021, starting from 1 January 2022, the Financial Reporting Council (FRC) will begin to collect levies from (i) sellers and purchasers of securities (i.e. FRC Transaction Levy); (ii) public interest entities (PIEs); and (iii) PIE auditors.

The FRC Transaction Levy for the seller is at a rate of 0.00015% of the consideration for the sale and for the purchaser at a rate of 0.00015% of the consideration for the purchase. The FRC Transaction Levy will be collected on behalf of the FRC by Hong Kong Exchanges and Clearing Limited. No levy is payable for a sale and purchase of a stock option.

​​For more details about the FRC levies, please visit the FRC’s website.