Changes to Hong Kong BRMQs should not be overlooked

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The SFC’s updated Business and Risk Management Questionnaire contains significant changes which reflect wider updates to the Commission’s expectations and asks for new information. Your responses could be referenced in future inspections so it’s important to understand what’s required and make sure you have the right controls in place.

The SFC released an updated version of the Business and Risk Management Questionnaire – or BRMQ – in December 2022, The new version will be used in relation to financial years ending on or after 30 November 2023.

The BRMQ forms part of a licensed corporation’s annual audit package which it must submit to the SFC. Part of the SFC’s wider approach to supervision, the questionnaires provide an understanding of the industry landscape, helping to monitor market trends and identify emerging issues.

What is new?

Section A contains some significant changes which should prompt you to review your compliance framework and check whether you need to amend or create new policies and procedures accordingly.

1) Section A3 – Interconnectedness with Group or Affiliated Companies or Other Related Parties

  • Additional questions seek information on any financial issues from substantial shareholders and recurring operating expenses paid by group or affiliated companies or related parties.
  • The SFC expects licensed firms to have an appropriate contingency plan in place, as set out in the Circular issued in March 2022.

2) Section A8 – Handling of Client Accounts and Client Assets Protection

  • Additional questions seek information regarding bank accounts via online banking and relevant security measures, as well as information on authorised bank account signatories.
  • The SFC expects licensed firms to have implemented effective policies, procedures and controls in relation to the operation of their bank accounts, as set out in the Circular issued in June 2021.

3) Section A9 – Risk Management

  • An additional question relates to exit plans in case of closure of business.
  • The Circular issued in March 2022 highlights the expectations for licensed firms to have in place effective procedures to mitigate risks and impact of abrupt discontinuation of business.

4) Section A12 – Anti-Money Laundering and Counter-Financing of Terrorism

  • This section of the BRMQ has been substantially updated so that it reflects the amended AML/CFT Guidelines. Additional questions seek detailed information on several areas including Institutional Risk Assessments, senior management oversight, independent AML reviews, compliance checking, staff training, outsourcing, customer information and due diligence, transaction monitoring, and suspicious transaction reporting.
  • The SFC expects all licensed corporations to have in place adequate AML/CFT systems and controls.

Section B of the BRMQ relates to specific business activities, and includes changes to some subsections such as brokerage businesses, distribution of investment products or investment advisory services, discretionary account or management services for funds.

The BRMQ should not be treated as a checkbox exercise, as this is a representation that you are making to the regulator, which will be recorded and referred to during routine inspections. You should also take the opportunity to check whether you have adequate systems and controls in place to comply with the SFC rules and requirements.

How we can help

We can assist with the completion of the revised BRMQ, interpret the questions and advise on SFC requirements applicable to your licensed business.

We can help you assess if there are any deficiencies and assist with filling the gaps. Our support ranges from drafting or reviewing your policies and procedures, checking that you have the appropriate internal controls in place, to providing advice or practical solutions to meet the regulatory requirements.