Hong Kong Regulatory Updates

What Changed

This is not a regulatory change but rather an enforcement precedent establishing that: "Scaffolding" strategy is prosecutable: Repeatedly placing and cancelling trading orders at progressively higher prices constitutes false trading under section 295 of the Securities and Futures Ordinance. Wash trading across multiple accounts is actionable: Using various securities accounts to simultaneously act as both buyer and seller of shares violates false trading prohibitions. Price impact + market de

What You Need To Do

• *For brokers and licensed intermediaries
• *Enhance surveillance systems to detect scaffolding patterns (repeated placement and cancellation of orders at progressively higher prices)
• *Monitor cross-account trading to identify wash trading where the same beneficial owner trades with themselves across multiple accounts
• *Implement controls to flag suspicious trading activity that artificially impacts share prices without genuine economic purpose
• *Document compliance procedures for detecting and reporting false trading under section 295 of the Securities and Futures Ordinance

Key Dates

References

• [1] fxnewsgroup.com
• [2] fxnewsgroup.com
• [3] sfc.hk
• [4] apps.sfc.hk
• [5] caproasia.com
• [6] mas.gov.sg
• [7] wikifx.com
• [8] caproasia.com

What Changed

The SFC has successfully prosecuted a case of false trading under section 295 of the Securities and Futures Ordinance, which constitutes an offence.

What You Need To Do

• Implement or review existing controls to detect and prevent false trading, including monitoring for suspicious trading patterns such as 'scaffolding' and wash trades
• Provide training to trading staff on the risks and consequences of false trading

Key Dates

Related Regulations

What Changed

This is an enforcement action, not a new rule change, but it reinforces existing SFC circulars requiring VA products (including unauthorised funds and exchange-traded VA derivatives) to be offered exclusively to professional investors (PIs). Key requirements reiterated include: conducting VA-specific product due diligence; assessing client knowledge of VA investments; providing sufficient VA-specific information and warnings; and implementing platform controls to restrict retail access to comple

What You Need To Do

• Conduct immediate VA product due diligence using SFC-specific procedures, not just group-wide protocols, to identify unauthorised VA funds and derivatives
• Implement client knowledge assessments for VA investments before transactions, especially for retail clients
• Provide VA-specific warnings and information on platforms and ensure retail access is blocked for PI-only products
• Review and enhance online platform controls for suitability checks on complex products; audit historical VA trades for compliance gaps
• Update internal policies to align with SFC circulars on VA distribution, including staff training on breaches like those at SCMHK

Key Dates

References

• [1] apps.sfc.hk
• [2] structuredretailproducts.com
• [3] rootdata.com
• [4] binance.com
• [5] financemagnates.com
• [6] hoganlovells.com
• [7] jdsupra.com

What Changed

VA Dealer Regime: Introduces licensing for VA dealing activities (e.g., VA conversions, broker-dealer services at physical outlets or otherwise), excluding tokenized securities/derivatives (regulated under existing regimes) and HK-licensed stablecoin issuers; dealers must use only SFC-licensed VA custodians (not overseas) for client assets and may need to partner with SFC-licensed VA trading platforms (VATPs) for liquidity, mirroring Type 1 (dealing in securities) financial resources rules. VA C

What You Need To Do

• Pre-Application Engagement
• License Applications
• Custody Segregation
• Compliance Mapping
• Monitor Further Consults

References

• [1] tannerdewitt.com
• [2] slaughterandmay.com
• [3] gibsondunn.com
• [4] reedsmith.com
• [5] sidley.com
• [6] fstb.gov.hk
• [7] kwm.com
• [8] info.gov.hk

What Changed

This is an enforcement case, not a regulatory change; no new rules, requirements, or amendments to the SFO or Listing Rules were introduced. It exemplifies ongoing application of existing insider dealing prohibitions under SFO sections 270-271, where individuals with inside information (e.g., on privatization failure from proxy forms) must not deal in relevant securities. The court's emphasis on "immediate custodial sentence" for professionals in positions of trust signals stricter sentencing no

What You Need To Do

• Enhance insider dealing training
• Strengthen information barriers
• Monitor personal trading
• Conduct insider lists and attestations
• Audit workflows

Key Dates

References

• [1] fxnewsgroup.com
• [2] fxnewsgroup.com
• [3] timothyloh.com
• [4] complianceone.hk
• [5] apps.sfc.hk
• [6] hubbis.com
• [7] hubbis.com
• [8] caproasia.com