On 22nd May 2026,The Securities and Futures Commission (SFC) recently conducted a review of 12 licensed securities brokers, uncovering severe deficiencies in account opening practices and the oversight of cross-border correspondent relationships (CBCR) with overseas intermediaries. Specifically, several brokers accepted questionable or forged documentation during client onboarding and failed to detect critical red flags, such as accounts utilized strictly for fund depositories without trading activity. Consequently, these operational gaps have significantly exposed licensed corporations (LCs) to heightened money laundering and terrorist financing risks.In response, the SFC has mandated strict corrective actions, emphasizing zero tolerance for non-compliance. LCs must immediately conduct internal look-back reviews to identify forged documents and subsequently terminate any implicated accounts. Furthermore, due to the high concentration of irregularities involving Chinese Mainland investors, the SFC has introduced stringent additional measures in Appendix B. These require LCs to close zero-balance dormant accounts and implement mandatory investor declarations for new client onboarding.
Additionally, the circular highlights cross-border compliance, explicitly referencing the joint notice issued by Chinese Mainland authorities on May 22, 2026, regarding illegal cross-boundary activities. Therefore, LCs operating outside Hong Kong must strictly comply with local regulations, as extraterritorial breaches will constitute violations of paragraph 12.1 of the SFC Code of Conduct. Ultimately, senior management bears primary responsibility for maintaining robust internal control systems and ensuring comprehensive staff training. Failure to rectify these deficiencies promptly will call into question the fitness and properness of both the firm and its management, thereby triggering aggressive supervisory or enforcement actions
Sources:https://apps.sfc.hk/edistributionWeb/gateway/EN/circular/intermediaries/supervision/doc?refNo=26EC29
Related Documents:
Appendix A
Appendix B
Appendix C