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Hong Kong – SFC Routine Inspection Update – FRRs Tips.

25 November, 2012

 

Legal News & Analysis – Asia Pacific – Hong Kong – Regulatory & Compliance

 

Bank balances: Licensed firms have to make sure that the “bank balances” figure reported in their financial returns does not include anything other than bank deposits or cash. In particular, cash held in a money market fund should not be included and should instead be classified as a proprietary investment, and will be subject to a haircut the size of which will depend on the nature of the fund.


Bonus provision: Firms which do not accrue bonuses on an ongoing basis and instead only do so prior to payment, e.g. at year end, need to be aware of and act on the FRR implications of this “unplanned” approach. If a firm does not accrue bonuses on an ongoing basis, the effect of a sudden and big provision prior to year end can be quite significant in terms of the liquid capital position of the firm. It is important therefore for firms to consider the potential impact of bonus provisions on their liquid capital positions in advance and take preventative measures where required in order to avoid inadvertent breaches of the FRRs.

 

 

For further information, please contact:


Nick Chiu, Deacons

nick.chiu@deacons.com.hk


 

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