9 February, 2012
Legal News & Analysis – Asia Pacific – Hong Kong – Regulatory & Compliance
FRR notification requirements: An SFC licensee has to notify the SFC “…as soon as reasonably practicable and in any event within one business day of becoming aware of…”, among other things, its liquid capital falling below 50% of the amount reported in its previous return or 120% of its required liquid capital amount.
The “50%” drop notifications are usually one-way communications if a suitable explanation is provided with the notice as long as the reduced amount will still exceed the required liquid capital and the licensee is able to maintain a sufficient level of buffer. Falling into the buffer zone is however a serious warning sign that the liquid capital is in danger and in most cases the SFC will need to see that the licensee has taken specific action to rectify the issue.
It is important to also be aware that licensees need to monitor compliance with these 50% and 120% and other thresholds continuously and not just when the financial returns are filed.
For further information, please contact:
Nick Chiu, Deacons