News

SFC calls out HK fund managers over liquidity risk

Hong Kong’s financial regulator has warned local fund managers after finding a number of firms did not have adequate liquidity risk management systems in place. A circular issued by the Securities and Futures Commission (SFC) called on fund managers to review their current policies, procedures and systems and to take immediate action to rectify any deficiencies.  “It is of paramount importance for fund managers to exercise due care, skill and diligence in managing the liquidity of SFC-authorised funds under their management, minimise the risk of not meeting investors’ redemption requests and safeguard the interests and ensure the fair treatment of fund investors,” stated the circular. The SFC conducted a number of inspections of selected fund managers to ensure their risk management practices were in line with measures announced in 2016. In addition to the liquidity risk management shortcomings, the SFC reportedly found weaknesses in governance, asset and liability liquidity profiling, stress testing, reporting and other documentation. The regulator also noted that liquidity is a key risk during times of market stress. Hong Kong has seen weeks of civil unrest over local opposition to China’s extradition laws. Meanwhile financial markets in Asia continue to be volatile over fears of a continuing trade war between the US and China.  ©2019 funds global asia

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