Regulatory roundup, March 19
South Korea: Watchdog toughens stance on mis-selling
A study by South Korea’s financial regulator has found that many investors choose investments that carry greater risk than they are willing to take. As a result, the Financial Supervisory Service has put prevention of financial product mis-selling at the top of its priority list for 2014.
The FSS plans to increase monitoring, mystery shopping and on-site examinations at banks. It will focus on firms that have significantly more high-risk investments and high-risk-appetite investors than the industry average.
Additionally, the sale of high-risk investments will require prior approval by a branch manager, as well as a statement signed by an investor indicating that he has selected investments with higher risk than his/her risk tolerance and accepted those risks.
Banks will be encouraged to refrain from selling an investment product with a risk level much higher than their risk tolerance level.
Hong Kong: SFC waives annual licensing fees for two more years
Hong Kong’s Securities and Futures Commission (SFC) will waive annual licensing fees for another two-year period, benefiting some 39,000 intermediaries.
This will apply to all licensed corporations, registered institutions, responsible officers and representatives. Fees for new licence applications and transfers will not be affected.
SFC chief executive Ashley Alder said: “We hope that the two-year fee waiver will help relieve the cost pressures facing the securities and futures industry.”
The annual fee for a type 9 annual licence is HK$4,740 ($610).
Japan: Agreement with US on derivatives trading
Japan’s Financial Services Agency (FSA) and the US’s Commodity Futures Trading Commission (CFTC) have signed a memorandum of cooperation to exchange information on financial institutions that operate in the two countries.
The move is a result of G20 commitments to ensure standardised trading on regulated platforms, protecting liquidity and providing greater transparency to market participants. It will affect only those entities trading derivatives.
The agreement, signed on March 10 by CFTC acting chairman Mark Wetjen and FSA commissioner Ryutaro Hatanaka, covers trading platforms, central counterparties, trade repositories, intermediaries, dealers and other market participants.
Separately, Wetjen has called for regulators globally to put more effort into achieving a harmonised framework for the derivatives market.
Malaysia: fund AUM grow by nearly a fifth
Fund assets under management in Malaysia expanded by 16.5% last year to RM588 billion ($180 billion), with domestic savings playing an important role, according to the country’s Securities Commission.
Unit trust funds continued to be the largest contributor to the growth in AUM, with net asset value rising to RM336 billion, equivalent to one-fifth of stock market capitalisation.
This reflects the general growth of Malaysia's capital market, which expanded 10.5% to RM2.7 trillion.
The bond market ended the year at RM1.0 trillion and maintained its position as the third-largest in Asia relative to GDP.
Equity market capitalisation grew to RM1.7 trillion, with the benchmark index rising 10.5%, making the market one of the top performers in Asia. The domestic small-cap index gained 36.7%.
China: Pilot programme for preferred share issuance
The Chinese financial regulator is said to be launching a pilot programme allowing listed companies to issue preferred shares, reports Reuters.
Three sources were quoted as saying that Chinese banks would be the first to benefit from the new rules, with major state-owned banks already doing preparatory work. Ultimately, it is expected that all companies – listed and non-listed – will be able to apply to issue preferred shares.
Investors holding preferred shares will have priority over common shareholders on the distribution of dividends and liquidation proceeds.