Updates

On 26 July 2024, Hong Kong’s Securities and Futures Commission (HK SFC) and Hong Kong’s Insurance Authority (HK IA), to address suspected irregularities involving the investment portfolio of Tahoe Life Insurance Company Limited, announced the appointment of Joint and Several Managers to take full control of Tahoe Life’s affairs and property.

The investigation in this case began in May 2020 when the HK IA sought assistance from the HK SFC regarding specific investments made by Tahoe Life. Subsequent inspections by the HK SFC of several licensed fund managers revealed that Tahoe Life’s assets were being directed into financial instruments associated with a related party in Mainland China. This raised concerns about potential conflicts of interest and the proper management of the company’s assets.

In September 2020, HK SFC and the HK IA signed a Memorandum of Understanding (MoU). This MoU established a framework for cooperation and information-sharing between the two regulatory bodies, to enhance their ability to jointly address cross-sector irregularities in Hong Kong’s financial industry.

Since mid-2020, HK IA had implemented several supervisory interventions at Tahoe Life. These efforts were aimed at urging the company’s management and majority shareholders to resolve issues arising from investments linked to related party transactions. Despite these interventions, Tahoe Life failed to submit audited financial statements for 2022 and 2023, secure new strategic investors, or improve its corporate governance.

On 16 August 2023, HK IA invoked powers under Section 35(2)(a) of the Insurance Ordinance (Cap. 41) (IO) to appoint Peter Whalley and Peter Greaves of PricewaterhouseCoopers Limited as Advisors. Their role was to support Tahoe Life in areas such as asset management, investment strategy, and the declaration of benefits to policyholders, with an aim to strengthen Tahoe Life’s internal controls and corporate governance, providing additional safeguards for policyholders without affecting the company’s daily operations.

After the failure of previous supervisory interventions to improve Tahoe Life’s compliance and governance, on 26 July 2024, HK IA exercised its powers under Section 35(2)(b) of the IO and appointed Joint and Several Managers to take full control of the Company’s affairs and property. The appointed managers, Derek Lai and Forrest Kam of Deloitte Touche Tohmatsu, along with Oliver Cheng of Deloitte Advisory (Hong Kong) Ltd. The managers are tasked with managing the company’s affairs, assess the company’s financial and solvency position, preserve its capital resources, and identify the most effective recovery solutions.

Ms. Julia Leung, the Chief Executive Officer of the SFC, made a statement applauding the collaboration stating “This united effort highlights our shared dedication to upholding the integrity of Hong Kong’s financial markets by ensuring no misconduct putting investors in harm’s way falls through the cracks between different regulators. As close partners, the SFC and the IA will continue to work closely to ensure resilience, accountability, and trust are firmly embedded in the financial sector.”

Mr. Clement Cheung, the Chief Executive Officer of the IA, expressed his appreciation for the support of HK SFC in the statement as follows “The IA expresses deep appreciation to the SFC for providing valuable support during an investigation on related party transactions entered into by Tahoe Life. This bears testimony to the efficacy of the MoU in protecting the interest of policyholders and the image of Hong Kong as an international financial centre.”

On 26 July 2024, HK IA reassured the public that life insurance products issued by Tahoe Life would remain unaffected, with the Managers responsible for ensuring the continuity of all business operations, including customer service, premium payments, and claims settlement. Policyholders were advised to carefully assess their circumstances and avoid making hasty decisions regarding their policies.

Despite multiple interventions and opportunities for correction, Tahoe Life’s governance failures and financial irregularities compelled regulatory intervention. This case pertains to a interconnected financial ecosystem, lapses in compliance where collaboration between regulatory bodies becomes a necessity to prevent and address financial misconduct.