Updates

In January 2024, the Hong Kong’s Securities and Futures Commission (HK SFC) announced its SFC’s Strategic Priorities for 2024-2026, outlining the approach to strengthen Hong Kong’s financial markets. These priorities are designed to address current and emerging challenges. The SFC’s strategy emphasizes four key areas: enhancing market resilience, boosting global competitiveness, advancing technological innovation, particularly in Environmental, Social, and Governance (ESG) practices, and improving institutional efficiency. The global financial landscape is undergoing transformations, driven by geopolitical tensions, technological advancements, and shifting economic power dynamics. In Hong Kong’s 2024-2026 Strategic Plan, the HK SFC has set forth four key priorities designed to navigate this complex environment: maintaining market resilience, enhancing global competitiveness, leading market transformation through technology and ESG, and enhancing institutional resilience.

Maintaining Market Resilience and Mitigating Serious Harm

HK SFC’s first strategic priority revolves around the issues of global market volatility, geopolitical tensions, cybersecurity threats, and rapid technological change. HK SFC commits to enhancing risk management practices across the board, from market intermediaries to infrastructure providers by addressing cybersecurity and technological advancements. HK SFC plans to leverage surveillance and monitoring tools to better detect and respond to market misconduct. HK SFC is also prioritising public education, by collaborating with the Hong Kong Police Force and the Investor and Financial Education Council to combat investment scams and other risks. HK SFC wishes to enhance cross-border and in-land collaboration with regulatory counterparts for timely and effective responses to market misconduct.

Enhancing the Global Competitiveness and Appeal of Hong Kong Capital Markets

HK SFC’s second strategic priority focuses on Hong Kong’s global competitiveness by deepening its connections with Mainland China, expanding its international networks, and enhancing its market infrastructure. The SFC plans to leverage its proximity with Mainland China by expanding mutual market access programs and introducing more Mainland-related derivative products. HK SFC aims to broaden its international reach by engaging with international regulatory counterparts and international standard-setting bodies. HK SFC wishes to take leadership roles in the International Organization of Securities Commissions (IOSCO) to spearhead global financial norms and practices and solidify its status as a financial leader. SFC also recognises that Hong Kong’s appeal as a capital market is closely tied to its ability to facilitate initial public offerings (IPOs).

Leading Financial Market Transformation Through Technology and ESG

The rapid advancement of financial technology (FinTech) and the growing emphasis on ESG considerations are the basis of this priority by the HK SFC. The SFC’s third strategic priority focuses on driving market transformation through the adoption of new technologies and the promotion of sustainable finance. HK SFC wishes to advance the regulation of Virtual asset trading platforms by providing guidance on virtual assets activities, embrace the tokenization of traditional products, protect investors’ interests and promote a responsible and secure fintech ecosystem with blockchain and Web 3 technologies. HK SFC is also prioritising the development of corporate sustainability disclosure standards to bridge the gap between emerging and developed economies and also attract global sustainable investments. As ESG becomes mainstream, the risk of greenwashing, where companies exaggerate or falsify their environmental credentials, will increase. The SFC prioritises to stem greenwashing to nurture sustainable finance talent and reduce the SFC’s carbon footprint.

Enhancing Institutional Resilience and Operational Efficiency

SFC’s prioritises to increase institutional resilience and operational efficiency through budgeting and internal controls by being well-resourced, and technologically advanced to fulfill its mandate. SFC aims to enhance its resilience by implementing internal controls, ensuring sufficient financial resources, and improving its overall governance framework. To keep up with the fast-paced financial environment, the HK SFC will be focusing on process streamlining and automation, including digitalizing application and authorization processes, introducing artificial intelligence into workflows, and improving cross-divisional collaboration. SFC will be developing cybersecurity by stepping up its cyber resilience efforts to protect its own operations as well as the broader financial market from cyber-attacks and data breaches.

The SFC’s Strategic Priorities for 2024-2026 outline a comprehensive approach to addressing the challenges facing Hong Kong’s financial markets. While the initiatives are well-conceived and address critical areas of concern, their success will depend on effective implementation and the ability to adapt to a rapidly changing environment. The SFC’s focus on enhancing resilience, competitiveness, innovation, and institutional strength is appropriate, but careful consideration must be given to the execution and challenges associated with these strategies.