Managers in Charge
March 2017
SFC introduces new “Managers in Charge” regime to increase senior management accountability within licensed corporations.
Key Points
The MICR will come into effect on 18 April 2017, with deliverables to be submitted to the SFC no later than 17 July 2017. The key parts of the new regime are as follows:
• The SFC is emphasising that ultimately the board of directors hold all accountability for a licensed corporation’s affairs.
• Eight Core Functions have been identified with the necessity of a manager-in-charge.
• Up to date management structure information must be submitted to the SFC by all licensed corporations.
• MICs must be aware of their regulatory obligations – licensed corporations will need to review their HR policies and procedures in assurance of this.
“Senior management” – who is a manager-in-charge?
As per the Circular, MIC is a newly defined category of senior management of a licensed corporation. Alongside the previously existing senior management comprised of both directors and responsible officers (ROs) respectively of the corporation, MICs will be the individuals appointed to hold responsibility for managing any of the Core Functions a corporation may perform. There should be at least one individual appointed as MIC for each Core Function.
The Core Functions
• Overall Management Oversight
• Key Business Line
• Operational Control and Review
• Risk Management
• Finance and Accounting
• Information Technology
• Compliance
• Anti-Money Laundering and Counter-Terrorist Financing
Finding the right people for the job
It isn’t necessary for an MIC to be in Hong Kong or even employed by the licensed corporation. Determining who the right individuals are to be MICs is largely dependent upon an individual’s seniority and authority. The MIC should report directly either to the licensed corporation’s Board of Directors or the MIC for the Overall Management Oversight function
Roles and responsibilities of the Board
It is expected of a licensed corporation to have approval by the Board of Directors regarding its management structure including the appointment and choosing of MICs. The Board is responsible for making sure each MIC is aware; the MIC must acknowledge his or her appointment in addition to their responsibility regarding the Core Function(s) for which they are primarily responsible.
The Board must also ensure that all information submitted to the SFC under this new regime is accurate and complete.
Responsible Officers and MICs
Most of the time, MICs do not need to be ROs. For two of the eight Core Functions, however, the Overall Management Oversight and the Key Business Line functions, it is generally expected by the SFC that the MICs of these functions would be ROs. This is due to these MICs actively participating in or holding responsibility for directly supervising the Regulated Activities. It is important to note that not all ROs are required to be MICs, nor are all MICs required to be ROs.
Roles and responsibilities of the Board
Part IX of the Securities and Futures Ordnance (SFO) describes the potential use of the SFC’s disciplinary powers to sanction a regulated person if there is any misconduct by the individual, either current or previous, or if the regulated person is considered unfit and improper to be or to remain the same type of regulated person.
A “regulated person” is defined as a person who is, or at a relevant time was, one of the following:
• a licensed person;
• an RO of a licensed corporation; or
• a person involved in the management of the business of a licensed corporation.
Legal liability
All members of the senior management of a licensed entity are regulated persons regardless of whether the individual is licensed. Regulated persons are held accountable for ensuring that safeguards exist to prevent any misconduct by the licensed corporation. Criminal liability of any individuals who are regulated persons can be extended by the SFC if the corporation they are associated with (either licensed or otherwise) has been found guilty of an offence under the SFO. This can occur where any such offence(s) is committed with the consent, participation or otherwise due to plain recklessness of the regulated person(s) in question.
How we can help
The implementation of the MICR will be a complex and tedious task, and we are very aware and sensitive to the issues involved. It would be our pleasure to assist your company with this process. If you have any questions, please contact Heinbro Consulting.
