United States: SFC Introduces Measures For Enhancing The Accountability Of Senior Management

Key Points

  • New Managers-In-Charge regime
  • Outlines the regulatory obligations and potential liabilities of the senior management of licensed corporations who do not conduct regulated activities
  • Deadlines for implementation of new regime for existing licensed corporations


On 16 December 2016, the Securities and Futures Commission (SFC) published a Circular to Licensed Corporations Regarding Measures for Augmenting the Accountability of Senior Management (“Circular”), in which the SFC set out specific measures for enhancing the accountability of senior management, with the aim to:

  • add clarity as to which individuals should be regarded as members of the senior management of a licensed corporation, and enhance awareness of their accountability, regulatory obligations and potential liabilities
  • standardize the format for submission of information by licensed corporations and corporate licence applicants in respect of overall management structures
  • better align senior management with the existing regime governing responsible officers (ROs)
  • help further strengthen the corporate governance of licensed corporations.

The Regime

Meaning of Senior Management

The senior management of a licensed corporation includes, among others, its (a) directors, (b) ROs and (c) MICs (defined below). These categories are not mutually exclusive.  For instance, an individual can simultaneously be a director, RO and MIC of the corporation.

Managers-In-Charge of Core Functions

The new regime requires that an individual be designated by a licensed corporation (“Managers-In-Charge” or “MIC”) to be principally responsible, either alone or with others, for managing any of the following functions of the corporation (“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.

A licensed corporation may appoint one or more individuals to manage a Core Function. The SFC expects that a licensed corporation should adopt a formal document, approved by its board of directors, clearly setting out the management structure of the corporation, including the roles, responsibilities, accountability and reporting lines of its senior management personnel in each of the designated functions. Where a licensed corporation designates more than one individual to be the MICs of a particular Core Function, the board of directors should ensure that the aforesaid document contains sufficient details regarding the specific responsibilities of each MIC concerned.

In determining whether to designate an individual as an MIC for a particular Core Function, the licensed corporation should take into account the individual’s seniority and authority within the corporation. An MIC should hold a senior position with sufficient authority to make decisions and manage the Core Function on a daily basis. Also, he or she should report directly, and be accountable, to the board of directors or the MIC with the overall management oversight function.

An MIC who is not a licensed person or a licence applicant need not be approved by the SFC, with the exception of the MICs with responsibility for overall management oversight and key business line function. A licensed corporation should, however, ensure that any person it employs or appoints to conduct business is fit and proper and is qualified to act in the capacity so employed or appointed.

An MIC can be located in Hong Kong or outside Hong Kong. In addition, an MIC will not necessarily be employed by the licensed corporation.  However, an MIC should hold a position of authority within the licensed corporation and should be properly accountable to it.

Responsibilities of Senior Management

In stating that the contents of the Circular constitute merely a clarification of the position to date, the SFC referred to:

  • General Principle 9 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (“Code of Conduct”) states that the senior management of a licensed corporation should bear primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures by the corporation.
  • Paragraph 14.1 of the Code of Conduct further specifies that senior management of a licensed corporation should:
    1. properly manage the risks associated with the business of the corporation, including performing periodic evaluation of its risk management processes
    2. understand the nature of the business of the corporation, its internal control procedures and its policies on the assumption of risk
    3. understand the extent of their own authority and responsibilities.
  • The Internal Control Guidelines state that members of a licensed corporation’s senior management, including its directors, chief executive officer, managing director or other senior operating management personnel (as the case may be), are ultimately responsible for the adequacy and effectiveness of the corporation’s internal control systems.

Legal Liabilities of Senior Management

Under Part IX of the Securities and Futures Ordinance, the SFC may exercise disciplinary powers to sanction a “regulated person” if the person is, or was at any time, guilty of misconduct or is considered not fit and proper to be or remain the same type of regulated person.

Whether the SFC will discipline an MIC who is guilty of misconduct depends on the specific facts of each case. In determining where responsibility lies, the SFC will take into account the individual’s apparent or actual authority in relation to the particular business and operations, his or her level of responsibility within the licensed corporation concerned, any supervisory duties he or she may perform, and the level of control or knowledge that he or she may have concerning any failure by the corporation or persons under his or her supervision to follow the Code of Conduct. The SFC’s power to discipline an MIC applies regardless of where that MIC is located.

Roles and Responsibilities of the Board of Directors of a Licensed Corporation

The board of directors of a licensed corporation, to which the senior management is accountable, has the ultimate responsibility for the conduct, operations and financial soundness of the corporation. The board of directors retains responsibility for delegated decisions and is required to have systems and controls in place to supervise those who act under the delegated authority.

The SFC expects that the licensed corporation should adopt a formal document, approved by the board of directors, clearly setting out the management structure of the corporation, including the roles, responsibilities, accountability and reporting lines of its senior management personnel.

The management structure of a licensed corporation (including its appointment of MICs) should be approved by its board of directors. Furthermore, the board of directors should ensure that each of the corporation’s MICs has acknowledged his or her appointment as an MIC and the particular Core Function(s) for which he or she is principally responsible.

Submission of Management Structure Information

The SFC expects an applicant for an SFC licence to provide information regarding its MICs and its organisational chart in its licence application.

In respect of each of its MICs, an applicant for an SFC licence should submit the following particulars via the SFC Online Portal using a new form (Supplement 8A):

  1. full name
  2. identification information
  3. job title
  4. place of residence
  5. the Core Function(s) which he or she is in charge of
  6. the job title(s) of the person(s) to whom he or she reports within the corporation and, if applicable, within its corporate group.

In addition, the applicant should submit an organisational chart illustrating its management and governance structure, business and operational units, and key human resources and their respective reporting lines. The chart should include all MICs engaged by the corporation, their respective reporting lines and the job titles of the persons reporting directly to these MICs in relation to the operations of the corporation.

A licensed corporation should notify the SFC of any changes in its appointment of MICs (including any new appointment and cessation of appointment) or any changes in the particulars of its MICs within seven business days of the changes. Where a change involves a new appointment or cessation of appointment, or a change in the particulars referred to in items (5) and (6) above, the licensed corporation should also submit an updated organisational chart reflecting the same.

Next Steps for Existing Licensed Corporations

The new regime will come into effect on 18 April 2017.

Existing investment managers will need to submit the MIC information and organisational charts to the SFC on or before 17 July 2017. The MICs of the overall management oversight function and the key business line function who are not already ROs will be required to make an application for approval to become ROs on or before 16 October 2017.

The full text of the Circular can be accessed via the link below:


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.