The Manager-in-Charge (“MIC”) regime was fully implemented by the Securities and Futures Commission (“SFC”) on 17 October 2017 to promote proper conduct and increase awareness of individual responsibility and accountability. While the MIC regime was not intended by the SFC to be an enforcement tool, the SFC’s Enforcement Division has investigated whether certain MICs have appropriately fulfilled their obligations in supervising regulated activities within their corporations. It is therefore important for corporations to fully understand the regime. With this goal in mind, we have prepared the following overview and the SFC’s latest update on the MIC regime.
The MIC regime is only applicable to corporations licensed under section 116(1) of the Securities and Futures Ordinance (Cap. 571) and corporations applying for a licence under that provision.
Under the MIC regime:
The SFC provided an update on the implementation of the MIC regime in May 2018 in its SFC Compliance Bulletin. According to the report, about 10,600 individuals were appointed as MICs as of 31 March 2018. Among these individuals, around 90% of the MICs responsible for the OMO or KBL functions were approved as ROs of their respective principals. By May 2018, the SFC has handled about 2,000 RO applications from MICs of OMO or KBL functions. About 40% of all MICs are not licensed persons as they are mainly involved in compliance, control and operational functions. Below is a chart illustrating the percentage of different MICs as of 31 March 2018.
This year at the SFC Compliance Forum, Ms Julia Leung, Deputy Chief Executive Officer and Executive Director, Intermediaries of the SFC, reiterated that the MIC regime emphasises the importance of senior management bearing primary responsibility for ensuring appropriate standards of conduct and compliance. She stressed that if the firm's business strategy and the risks it is exposed to are too complex for senior management to understand, then it calls into question the competence of the senior management and the suitability of the business activities and risks for the firm.
Reflecting on the MIC regime, the SFC noted that its Licensing Division now receives much more detailed information on the senior management in place throughout various levels within a licensed corporation and its internal governance structures. With such information, the SFC can better determine whether senior management understand the firm's business strategy and the risks it is exposed to.
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