Circular to licensed corporationsCircular to licensed corporations Review of internal controls on client asset protectionCircular to licensed corporations

On June 6, 2025, the Securities and Futures Commission (SFC) issued a circular to licensed corporations (LCs) emphasizing the importance of client asset protection and outlining red flags and control deficiencies identified in recent asset misappropriation cases. The SFC’s review, which involved selected small to medium-sized securities brokers, revealed vulnerabilities exploited by fraudsters, including impersonation and unauthorized access to bank accounts. Key recommendations for LCs include implementing stringent verification processes for client instructions, enhancing email request handling protocols, discouraging third-party transactions, and ensuring robust management of bank operations. The SFC also stressed the need for LCs to raise client awareness about safeguarding personal information and to take proactive measures against unauthorized trading, emphasizing that senior management holds primary responsibility for maintaining effective internal controls. Non-compliance could lead to regulatory actions against the firm and its management. Resources: https://apps.sfc.hk/edistributionWeb/gateway/EN/circular/intermediaries/supervision/doc?refNo=25EC32