Hong Kong Corporate and Regulatory Insights - January 2021 - Hogan Lovells
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1 Hogan Lovells
Hong Kong Corporate and
Regulatory Insights
January 2021
Contents
Equity Capital Markets 3
• The Stock Exchange of Hong Kong Limited (SEHK) publishes results of latest review of issuers'
annual report disclosure.
• SEHK publishes revised Listing e-Forms and guidelines for Main Board and GEM issuers and
new applicants.
• The Listing Committee of SEHK (Listing Committee) takes disciplinary action against
Sandmartin International Holdings Limited (Stock Code: 482) and eight of its current and
former directors for breaches.
• SEHK publishes Listing Newsletter.
• The Listing Committee criticizes Xinming China Holdings Limited (Stock Code: 2699) and its
executive director Mr. Chen Cheng Shou for breaches.
Financial Services Regulation 8
• Inland Revenue (Amendement) (Tax Concessions for Carried Interest) Bill 2021 gazetted.
• Report on "AML/CFT Regtech: Case Studies and Insights."
• Mutual recognition of funds (MRF) between Thailand and Hong Kong.
• Consultation conclusions on the Insurance (Special Purpose Business) Rules.
• Profits tax concessions for insurance-related businesses to commence on 19 March 2021.
• Revised form for application for approval to become an Executive Officer of a Registered
Institution under section 71C of the Banking Ordinance (Cap. 155).
• Prescribed scenarios for long term insurance business in relation to Guideline on Enterprise
Risk Management (GL21).
• Self-assessment of compliance with the Code of Banking Practice 2020.
• Applications for new insurance intermediaries licenses by deemed licensees.
• The Process Review Panel in relation to the regulation of Mandatory Provident Fund
Intermediaries publishes 2020 Annual Report.
Data Protection 133
• Privacy Commissioner urges users to carefully consider new terms of use in instant messaging
apps.
Hogan Lovells
Hong Kong Corporate and Regulatory Insights January 2021 2 • Privacy Commissioner reports on work of the Privacy Commissioner for Personal Data in 2020. Contacts 15
3 Hogan Lovells
Equity Capital Markets
The Stock Exchange of Hong Kong such needs in a timely manner. Where
Limited (SEHK) publishes results of there are material changes in the reporting
items, issuers should develop appropriate
latest review of issuers' annual report and supportable estimates for these items,
disclosure document key judgments made, and
consider retaining experts if necessary.
SEHK published a report on the findings and
They should also engage in early
recommendations from its annual review of
discussions with their auditors and agree in
issuers' annual reports for the financial years
advance the timing, form, and approach of
ending between 1 January and 31 December
the assessment of these estimates as early
2019.
as practicable.
As part of its strategic technology-empowered
• Continuing connected transactions –
initiatives, SEHK has recently introduced
Independent nonexecutive directors
artificial intelligence, including machine
(INEDs) play an important role in
learning, pattern recognition, and natural
providing checks and balances over the
learning processing, to assist in reviewing
issuers' corporate affairs, business
issuers' annual reports and their compliance
operations and transactions, and in
with the Rules Governing the Listing of
particular, in the monitoring of continuing
Securities on the Stock Exchange of Hong Kong
connected transactions (CCTs). Issuers
Limited (Listing Rules) governing annual
should have in place appropriate internal
report disclosure vetting.
controls and mechanisms to monitor and
SEHK has made the following assist INEDs in overseeing their CCTs, and
recommendations to issuers: their INEDs should review the
appropriateness of these internal control
• Disclosure on the impact of the procedures.
COVID-19 pandemic in issuers'
business review and Management • Material intangible assets – Issuers
Discussion and Analysis (MD&A) should perform proper analysis and
section – Issuers should disclose in their carefully consider the impact of the
next annual reports (i) the effect of the COVID-19 pandemic on impairment tests
COVID-19 pandemic on their operations, and update the assumptions used to reflect
and the relevant risks or uncertainties that the latest available information and
will materially affect their future evidence.
performance; (ii) quantitative measures of
• Material level three financial assets –
the financial or operational impact of the
Issuers should develop robust disclosure on
COVID-19 pandemic; (iii) assessments of
level three fair value measurements, in
the liquidity positions and working capital
particular providing the qualitative and
sufficiency with reference to their
quantitative information to the extent
operations and capital commitments; and
necessary for an understanding of the
(iv) measures to manage the impact of the
valuation techniques and the underlying
COVID-19 pandemic.
unobservable inputs.
• Financial statements with auditors'
Click here to view the report.
modified opinion – Issuers should
continuously review their liquidity HKEx, 29 January 2021
positions and funding needs, and formulate
and implement action plans to addressHong Kong Corporate and Regulatory Insights January 2021 4
and
SEHK publishes revised Listing e- Acknowledgem
ent
Forms and guidelines for Main Board DU004G Director's
Declaration,
✓ ✓
and Growth Enterprise Market (GEM) Undertaking
and
Acknowledgem
issuers and new applicants ent (PRC
issuer)
DU005G Supervisor's ✓ ✓
The revised Listing e-Forms for Main Board declaration,
undertaking
issuers (MB), GEM issuers (GEM), and new and
acknowledgem
applicants (NA) are as follows: ent in respect
of an issuer
Content MB GEM NA incorporated
e-Forms in the PRC
CF006 Size Tests for ✓ ✓ FF004 (see above) ✓ ✓ ✓
Notifiable FF201G Application ✓
Transactions Form – Equity
and Connected Securities (of
Transactions an issuer part
of whose share
FF004 Contact details ✓ ✓ ✓ capital is
form for
already listed)
Director/
FFD001M Formal ✓
Supervisor/
Application
Authorised
(for Equity
Representative
Securities)
s/ Company
Secretary/
Compliance
Officer HKEx, 23 January 2021
SE001 Sponsor ✓
Engagement
M103
Notification
Main Board – ✓
The Listing Committee of SEHK
IPO – Form A1
– Listing (Listing Committee) takes disciplinary
Application
Form (for action against Sandmartin
Equity
Securities
Debt
& International Holdings Limited (stock
G103
Securities)
GEM Board – ✓
code: 482) and eight of its current and
IPO – Form 5A
– Listing former directors for breaches
Application
Form (Equity
Securities of an The Listing Committee censures:
issuer no part
of whose share
capital
already listed)
is Company
Guidelines
M103 (see above) ✓ • Sandmartin International Holdings
G103 (see above) ✓
CF006 (see above) ✓ ✓ Limited (Company) for failing to announce
CF093 Trading
Arrangement
✓ ✓
a connected transaction in a timely manner
DU003M
Form
Declaration ✓ ✓
pursuant to Rules 14.34, and 14A.35 of the
and
Undertaking
Listing Rules, and for disclosing inaccurate,
with regard to incomplete, misleading, and/or deceptive
Directors
DU004M Declaration ✓ ✓ information in announcements and
and
Undertaking circulars pursuant to Rule 2.12(2) of the
with regard to
Directors of an Listing Rules.
issuer
incorporated
in the PRC Relevant Directors
DU005M Declaration ✓ ✓
and
Undertaking • Mr. Hung Tsung Chin (Mr. Hung),
with regard to
Supervisors of executive director (ED) of the Company,
an issuer
incorporated and Ms. Chen Mei Huei (Ms. Chen), former
in the PRC
DU003G Director's ✓ ✓ ED of the Company, for failing to (i) fulfill
Declaration,
Undertaking their fiduciary duties expected of them of5 Hogan Lovells
their knowledge and experience and MyHD
holding their office within the Company
under Rule 3.08(f) of the Listing Rules, and MyHD is owned by a friend and business
(ii) comply to the best of their abilities with associate of Mr. Hung and Ms. Chen. The
the Listing Rules, and (iii) use their best Company acquired MyHD and made a series of
endeavors to procure the Company's loans to MyHD. MyHD became a 51 percent
compliance with the Listing Rules owned subsidiary of the Company when certain
pursuant to their Declaration and loans were capitalized. However, the Company
Undertaking with regard to Directors failed to announce the acquisition, which is a
(Undertaking). connected transaction, in a timely manner.
• Mr. Liao Wen I Tiger (Mr. Liao), former ED Emiratinvest
of the Company, for failing to (i) cooperate
Emiratinvest is solely owned by a former non-
with SEHK's investigation and (ii) use his
executive director of the Company, who is also
best endeavors to procure the Company's
a sibling of the owner of MyHD. Emiratinvest
compliance with the Listing Rules pursuant
became a connected person of the Company
to his Undertaking.
when MyHD became a subsidiary of the
And criticizes: Company, due to the sibling relationship
between the owners. The Company made a
• Mr. Frank Karl-Jeinz Fischer (Mr. Fischer), series of loans to Emiratinvest but failed to
former ED of the Company, for failing to (i) announce the loans in a timely manner.
use his best endeavors to procure the
Company's compliance with the Listing In addition, Emiratinvest owns 80 percent of
Rules in respect of independent third party Simple Media Network Pvt Ltd. (Simple
disclosures and (ii) ensure that the Media). Mr. Hung's son and daughter-in-law
Company had adequate and effective were directors of Simple Media, which also
internal control pursuant to his makes Simple Media a connected party to the
Undertaking. Company.
• Mr. Chen Wei Chun (Mr. Chen), ED of the The Company disclosed in subsequent
Company, Mr. Wu Chia Ming (Mr. Wu), announcements that (a) "to the best knowledge
independent non-executive director of the Company, [Emiratinvest] is not related
(INED) of the Company, Mr. Han Chien to [MyHD]"and (b) "Emiratinvest is an
Shan (Mr. Han), former INED of the independent third party not connected with the
Company, and Mr. Lee Chien Kuo Thomas Group." The Company further disclosed in a
(Mr. Lee), former INED of the Company, circular in respect of expected sales that "as
for failing to use their best endeavors to advised by the management of Emiratinvest,
ensure that the Company had adequate and Simple Media plans to place order of 55,000
effective internal control pursuant to their units to 80,000 units of set-top-box in the sum
Undertakings. of US$1.1 million to US$1.6 million from the
Group in the second half of 2017."
This case involves the Company's relationship
and transactions with MyHD Media FZ LLC Such disclosures were inaccurate because Mr.
(MyHD) and Emiratinvest Limited Hung and Ms. Chen were aware of the sibling
(Emiratinvest). relationship between the owners of MrHD and
Emiratinvest. Mr. Hung, Ms. Chen, and Mr.
Fischer were also aware of the positions held by
Mr. Hung's son and daughter-in-law withinHong Kong Corporate and Regulatory Insights January 2021 6
Simple Media. Mr. Hung, Ms. Chen, and Mr. • Mr. Hung, Mr. Chen, and Mr. Wu to attend
Fischer failed to appreciate the importance of 26 hours of training on regulatory and legal
such relationships with connected party topics including Listing Rule compliance
implications, and failed to report such and directors' duties.
relationships to the Company.
• As a prerequisite of any future
Further, Mr. Hung and Ms. Chen failed to appointments as director of any listed
ensure that certain figures relating to expected company, Ms. Chen, Mr. Fischer, Mr. Han,
sales used in the circular were accurate and up- and Mr. Lee to attend 26 hours of training
to-date. They were both aware that no set-top on regulatory and legal topics including
boxes had been sold by the Company to Simple Listing Rule compliance and directors'
Media in 2016 or in 2017 and that the expected duties.
figure of 55,000 to 80,000 units had been
provided by Emiratinvest six months before Click here to view the statement of disciplinary
the publication of the circular. The Company action.
actually only sold 100 units of set-top boxes to
HKEx, 22 January 2021
Simple Media for the whole of 2017.
SEHK publishes Listing Newsletter
As a result, Mr. Hung and Ms. Chen failed to
discharge their directors' duties and SEHK published the second issue of the Listing
Undertakings to comply with the Listing Rules Newsletter (Newsletter). The Newsletter covers
to the best of their ability. Mr. Hung, Ms. Chen, various topics, including SEHK's efforts in
and Mr. Fischer failed to use their best digitalizing the initial public offering
endeavors to procure the Company's settlement process (such as e-listing forms and
compliance with the Listing Rules. new listing subscriptions through electronic
channels only), market consultation to raise
The Listing Committee also found that the
the profit requirement for entry into the Main
Relevant Directors failed to take an active role
Board, and the implementation of artificial
in implementing, reviewing, and monitoring
intelligence to review disclosures in issuers'
the effectiveness of the Company's internal
annual reports.
control procedures and placed excessive
reliance upon the company secretary for Click here to view the Newsletter.
Listing Rule compliance.
HKEx, 14 January 2021
Directors are expected to be familiar with the
connected transactions provisions of the The Listing Committee criticizes
Listing Rules, including the identification of Xinming China Holdings Limited (stock
connected parties. These rules are designed to code: 2699) and its executive director
protect the investing public, safeguard
minority shareholders, and to dispel any Mr. Chen Cheng Shou for breaches
conflict or perception of conflict in respect of
The Listing Committee criticizes:
transactions entered into by the Company.
• Xinming China Holdings Limited
The Listing Committee further directed:
(Company) for failing to comply with the
• The Company to retain an independent announcement, reporting, circular, and
professional adviser to review and make shareholders' approval requirements
recommendations to improve the applicable to a major transaction carried
Company's internal controls. out by its subsidiary pursuant to Rules7 Hogan Lovells
14.34, 14.38A, 14.40 and 14.41 of the
Listing Rules.
• Mr. Chen Cheng Shou (Mr. Chen),
executive director, chairman, and chief
executive officer of the Company, for failing
to fulfil his fiduciary duties expected of him
of his knowledge and experience and
holding his office within the Company
under Rule 3.08(f) of the Listing Rules, and
failing to comply to the best of his ability
with the Listing Rules and to use his best
endeavors to procure the Company's
compliance with the Listing Rules pursuant
to his Declaration and Undertaking with
regard to Directors.
This case involves Mr. Chen, on behalf of a
subsidiary of the Company, entering into a
guarantee agreement with an independent
third party. Following the guarantee
agreement, Mr. Chen on behalf of the relevant
subsidiary entered into seven pledge contracts
with a bank to facilitate the independent third
party's application for a letter of credit. By
reason of the failure of the independent third
party to settle the payments as agreed, the
pledge contracts were terminated. The pledge
contracts constituted a major transaction.
Mr. Chen entered into the pledge contracts
without notification to or authority form the
board of directors of the Company. He did not
take steps to ensure the Company would
comply with the applicable procedural
requirements under the Listing Rules after the
pledge contracts were entered into. Further,
the pledge contracts exposed the Company to
substantial financial risk and Mr. Chen did not
take adequate steps to safeguard the assets of
the relevant subsidiary that were pledged.
Click here to view the statement of disciplinary
action.
HKEx, 8 January 2021Hong Kong Corporate and Regulatory Insights January 2021 8
Financial Services Regulation
Inland Revenue (Amendment) (Tax banking sector. The report comprises examples
Concessions for Carried Interest) Bill of how banks of different sizes and business
scopes used AML/CFT Regtech, and aims to
2021 (the Bill) gazetted help identify an adoption process that is
The Bill was published in the Gazette on 29 applicable to the particular circumstances of an
January 2021. The purpose of the Bill is to institution.
amend the Inland Revenue Ordinance (Cap. Stored Value Facility (SVF) licensees and
112) to provide tax concessions for carried Authorised Institutions (AIs) are encouraged
interest distributed by eligible private equity to study the report and draw insights from the
(PE) funds which operate in Hong Kong. use of AML/CFT Regtech as a way to enhance
According to the Financial Services and effectiveness and efficiency in light of evolving
Treasury Bureau (FSTB), the proposed tax risks, and to develop appropriate approaches to
concessions for carried interest in the Bill are the wider use of technology in their conduct of
expected to attract more PE funds to operate business and risk management.
and be managed in Hong Kong, and at the same Click here to view the HKMA circular to SVF
time to boost more investment management licensees and here to view the HKMA circular
and related activities which will create business to AIs.
opportunities in relation to professional
services. Click here to view the report.
Broadly speaking, carried interest refers to a HKMA, 21 January 2021
return linked to the performance of an
investment of a PE fund, typically upon the Mutual recognition of funds (MRF)
disposal of the investment after it has been held between Thailand and Hong Kong
for a period of time. For tax concessions under
the Bill to apply, qualifying carried interest The Securities and Futures Commission (SFC)
recipients must provide investment and the Securities and Exchange Commission
management services in Hong Kong and fulfill of Thailand entered into the Memorandum of
substantial activities requirements, and carried Understanding concerning Mutual
interest must arise from eligible transactions in Recognition of Covered Funds and Covered
private companies and be distributed by a fund Management Companies and related
certified by the Hong Kong Monetary Authority cooperation (MOU) on 20 January 2021, which
(HKMA) or the Innovation and Technology is subject to amendment from time to time. The
Venture Fund Corporation set up by the MOU allows eligible Hong Kong and Thai
government. public funds to be distributed in each other's
market through a streamlined process.
Click here to view the FSTB news.
The MOU establishes a framework for
FSTB, 29 January 2021 exchange of information, regular dialogue, as
well as regulatory cooperation in relation to the
Report on "AML/CFT Regtech: Case cross-border offering of eligible Hong Kong
Studies and Insights" and Thai funds. The two regulators have also
agreed to expedite the approval process of local
The HKMA issued a report that promotes feeder funds which invest in MRF-eligible Thai
regulatory technology (Regtech) adoption in or Hong Kong master funds and to clarify how
the anti-money laundering and counter- they may be operated in a streamlined manner.
financing of terrorism (AML/CFT) area in the9 Hogan Lovells
The cooperation arrangements set out in the IA, 19 January 2021; FSTB, 15 January 2021
MOU have already come into effect since 20
January 2021, except for the mutual Profits tax concessions for insurance-
recognition of funds scheme which is expected related businesses to commence on 19
to be implemented within six to twelve months March 2021
from 20 January 2021.
The Inland Revenue (Amendment) (Profits Tax
Click here to view the SFC circular and here to Concessions for Insurance-related Business)
view the annex to the circular. Ordinance 2020 (the Ordinance), which was
SFC, 20 January 2021 enacted in July 2020, reduces the profits tax
rate by 50 percent for all general reinsurance
Consultation conclusions on the business of direct insurers, selected general
Insurance (Special Purpose Business) insurance business of direct insurers, and
selected insurance brokerage business. For the
Rules (SPB Rules) purpose of effecting the profits tax concessions,
the government gazetted the following
The Insurance Authority (IA) published
subsidiary legislations on 15 January 2021:
consultation conclusions on the draft SPB
Rules in respect of restrictions on the sale of • The Inland Revenue (Amendment)
insurance-linked securities (ILS) issued in (Profits Tax Concessions for Insurance-
Hong Kong. related Businesses) Ordinance 2020
(Commencement) Notice, which
The draft SPB Rules impose restrictions on the
appoints 19 March 2021 to be the date
sale of ILS, which are useful and effective risk
for the ordinance to become effective.
management tools that enable insurers and
reinsurers to offload insured risks to the capital • The Inland Revenue (Profits Tax
markets by way of securitization but unsuitable Concessions for Insurance-related
for ordinary retail investors. The said Businesses) (Threshold Requirements)
restrictions include the requirement to spell Notice, which prescribes threshold
out the scope of eligible ILS investors, a requirements for determining whether
minimum investment sum, and penalties for the relevant activities of the specified
contraventions of sales restrictions. insurance-related business are, or are
arranged to be, conducted in Hong
Respondents of the public consultation were
Kong.
generally supportive of the draft SPB Rules but
proposed a lower minimum investment sum to Click here to view the FSTB news.
facilitate market development, maintain
liquidity in the secondary market, and make FSTB, 15 January 2021
Hong Kong a competitive ILS domicile.
Considering the response received, the IA Revised form for application for
proposes to change the threshold to approval to become an Executive
US$250,000. Officer (EO) of a Registered Institution
Click here to view the IA circular, here to view under section 71C of the Banking
the consultation conclusions, and here to view Ordinance (Cap. 155)
the consultation paper.
The HKMA has recently revised the application
Click here to view the FSTB news. form and supplemental forms (collectively,Hong Kong Corporate and Regulatory Insights January 2021 10
Application Form) for consent to become an the next ORSA Report and may revise some of
EO of a Registered Institution with a view to the scenarios in the future having regard to
enhance the efficiency of the application market conditions.
process.
The Prescribed Scenarios are designed for a
The information requested in the revised long term insurer to consider in its ORSA
Application Form remains largely the same as Report the risk to its capital position of
those in the old form. Major changes include: multiple severe events or stresses happening at
the same time, and the management actions it
• A new feature that requests applicants would take in such extreme events or stresses.
to indicate their acceptance of certain The IA may request insurers to test scenarios in
standard condition(s) which would be addition to the Prescribed Scenarios. Details of
attached to a consent being applied for the Prescribed Scenarios, namely the market
where given circumstances apply. risk scenario, life insurance risk scenario,
market risk with life insurance risk scenario
• A new requirement for applicants who
and compound scenario, together with the
intend to apply for conditional
reporting and other relevant requirements, are
exemption(s) from taking relevant local
set out in the appendix to the circular.
regulatory framework paper(s) under
paragraph 10 of Appendix E to the Click here to view the IA circular and here to
"Guidelines on Competence" issued by view the appendix to the circular.
the SFC to enclose a letter of
undertaking. IA, 11 January 2021
The HKMA also reminded AIs to provide Self-assessment of compliance with
complete, relevant, and accurate information, the Code of Banking Practice 2020
and specifically to refer to the relevant SFC
guidelines and statutes when completing the
(Code)
Application Form. The HKMA will continue to The HKMA published a circular on 11 January
accept the old form until 11 February 2021, 2021 to remind AIs to submit electronically the
after which any application will have to be annual self-assessment of compliance with the
made with the Application Form. Code by 30 April 2021, covering the period
Click here to view the HKMA circular. from 1 January 2020 to 31 December 2020.
The electronic file of the reporting template
IA, 12 January 2021 and submission instructions will be sent to AIs
via the HKMA's Submission Through
Prescribed scenarios for long term Electronic Transmission system (also known as
insurance business (Prescribed the STET system).
Scenarios) in relation to Guideline on The reporting requirements specified in the
Enterprise Risk Management (GL21) reporting template are the same as those from
last year. AIs are required to commission their
The Prescribed Scenarios in relation to GL21 internal audit department, compliance
were published on 11 January 2021, which shall department, or other equivalent unit to
be adopted for the first Own Risk and Solvency conduct the self-assessment and issue a self-
Assessment (ORSA) Report that is required for assessment report. The self-assessment report
the financial year ended 31 December 2021. should be approved and signed by the chief
The IA will review the Prescribed Scenarios for executive of the AI. Where an instance of11 Hogan Lovells
noncompliance is identified that is a The Process Review Panel in relation to
recurrence of similar instances identified in the regulation of Mandatory Provident
previous exercises, a full account should be
provided.
Fund Intermediaries (PRP) publishes
2020 Annual Report
Click here to view the HKMA circular and here
to view the annex to the circular. The PRP published its 2020 Annual Report
which covered work of the PRP from 1 May
HKMA, 11 January 2021 2019 to 30 April 2020. The PRP is an
independent panel established by the Chief
Applications for new insurance Executive of Hong Kong, which is tasked to
intermediaries licenses by deemed review and advise the Mandatory Provident
licensees Fund Schemes Authority (MPFA) on the
adequacy and consistency of its internal
Since 23 September 2019, the IA has taken over procedures and operational guidelines
the regulation of insurance intermediaries. governing the actions taken and operational
Under the new regime, all insurance agents and decisions made by the MPFA and its staff in the
brokers are required to be licensed with the IA. performance of its regulatory functions in
Insurance agents and brokers who were relation to the regulation of Mandatory
previously registered with the self-regulatory Provident Fund (MPF) intermediaries and
bodies prior to 23 September 2019 are associated matters. Its work focuses on
considered "deemed licensees" for a period of procedural propriety in the regulatory regime
three years, until 22 September 2022 rather than the merits of the MPFA's decisions
(Transitional Period). During the Transitional and actions.
Period, each deemed licensee needs to apply
for a new license from the IA if they wish to The PRP reviewed the follow-up actions
continue to carry on regulated activities after undertaken by the MPFA in light of the PRP's
22 September 2022. Further details can be recommendations made in the previous year. It
found in our August issue of the Hong Kong also reviewed 5 out of 13 closed conduct cases
Corporate Insights. relating to allegations against MPF
intermediaries including inadequate internal
On 8 January 2021, the IA officially announced control, failure to provide necessary
in a circular the launch of the licence information clearly and accurately to the client,
application process for deemed licensees. The and unauthorized transfer of MPF account
IA explained in the circular that it expects information or collection of such information
significant progress to be made in processing by impersonating a client. The PRP made
licence applications during the course of 2021. observations and recommendations to the
It is expected that in early 2022, the IA will MPFA as follows:
announce a cut-off date and if an application is
not submitted by an intermediary by the cut-off • To set up and make available to the
date, the IA will not be able to guarantee the industry a defined set of guidelines to
processing of such licence application before determine the type of actions and level of
22 September 2022. penalties based on the severity and nature
of the substantiated allegations, and to list
Click here to view the IA circular. the relevant factors that will be considered
when making decisions in relation to these
IA, 8 January 2021 actions and penalties.Hong Kong Corporate and Regulatory Insights January 2021 12
• To streamline the clearance process for
revising draft reports and issuing reminder
letters and closure letters to improve
overall efficiency in case handling.
• To devise ways to speed up investigation
findings, devote further efforts to
improving key performance indicators
(KPIs) by developing internal operating
protocols and special communication
protocols, and to keep a formal record of
reasons why KPIs were not met in cases.
Click here to view the FSTB news and here to
view the 2020 Annual Report.
FSTB, 6 January 202113 Hogan Lovells
Data Protection
Privacy Commissioner reports on work inadvertent disclosure, and accidental erasure
of the PCPD in 2020 of personal data, etc.
Survey results
The Privacy Commissioner for Personal Data
(PCPD) reported on work of the office of the The PCPD commissioned the Social Science
PCPD in 2020 and released the results of a Research Centre of the University of Hong
survey to gauge attitudes and views of the Kong to conduct a survey to gauge public
public and organizations on the protection of awareness on the protection of personal data
personal data privacy in a media briefing held privacy.
on 28 January 2021. The survey found that:
Summing up 2020, the PCPD said "2020 was a • The public were prudent in protecting
year fraught with challenges. To address the their personal data, 80 percent of
personal data privacy issues arising from the respondents are aware of their privacy
COVID-19 pandemic, the PCPD had striven to settings on social media accounts, of
provide comprehensive views, opinions or which 80 percent checks their privacy
guidance to our stakeholders in a timely settings.
manner."
Doxxing • Out of the population that installs
instant messaging apps on their mobile
The handling of doxxing cases continued to be
phones, a large majority were aware
an important task for the PCPD in 2020. Over
that the apps had access to the contact
1,190 cases were handled, of which around
information on their phone, a large
1,000 cases were discovered in 2020. The
majority of this population considers
PCPD stresses, "It is saddening to see the harm
this privacy invasive, and 34 percent
caused by doxxing. Other than being morally
considers this a serious invasion of
wrong, doxxing acts may also lead to serious
privacy.
legal consequences." In 2020, five defendants
were convicted of doxxing offenses, two of • Respondents show support for
whom were sentenced to immediate amendments to the PDPO to introduce
imprisonment for contravention of the administrative fines and a mandatory
Personal Data (Privacy) Ordinance (Cap. 486) data breach notification.
(PDPO).
Looking forward, the PCPD will continue to
Going forward, the PCPD will step up its take a multi-pronged approach, to enhance
publicity and educational efforts, and continue enforcement and strengthen cooperation with
to conduct proactive online patrols and educational institutions. The PCPD will also
collaborate with the Hong Kong police to work with the Hong Kong government to
combat doxxing behavior. The PCPD has set up formulate concrete proposals in amending the
a hotline to answer enquiries and complaints PDPO, and will strive to provide necessary
relating to doxxing. input to the government in the legislative
Data breach incidents amendment exercise.
In 2020, the PCPD received 103 personal data Click here to read the media statement.
breach notifications from organizations. These
PCPD, 28 January 2021
involved hacking, system misconfiguration,
unauthorized access, loss of documents,Hong Kong Corporate and Regulatory Insights January 2021 14
Privacy Commissioner urges users to with the messaging app's parent company and
carefully consider new terms of use in its subsidiary to help operate, provide,
improve, understand, customize, support and
instant messaging apps market its services and related products.
The PCPD noted that a widely used instant According to the messaging app's
messaging app in Hong Kong had recently announcement, the information which will be
announced changes to its Terms of Service and shared include:
Privacy Policy (the Terms). Users will need to • Account registration information (i.e.
agree to share certain information with the users' phone number).
parent company of the messaging app and its
subsidiaries, otherwise they cannot continue • Transaction data.
using the app.
• Service-related data.
The PCPD is concerned that the data to be
shared includes a substantial amount of
• Information on how users interact with
personal data, and urges users to be aware of
others (including businesses) when
the changes in the Terms. The PCPD reminds
using their services.
users to carefully consider the new Terms and
take note of the type of data which will be • Users' mobile device information.
shared and how they will be used.
The PCPD said users should "consider, in • Users' IP address.
particular, whether they are willing to transfer
• Other information to be collected as
their personal data to companies associated
identified in the Privacy Policy or
with the messaging app for storage and use. If
obtained upon notice to users or based
users choose not to give their consent, they
on users' consent.
should make preparations to back up their
data." • Information about users provided by
Given the wide usage of the messaging app by third parties, third party service
the general public in Hong Kong, the PCPD providers and/or other associated
appeals to the messaging app to, amongst other companies.
things: Following the original media statement
• Clearly explain to users the released by the PDPO on 11 January 2021, the
arrangement for sharing of personal PCPD released a follow-up statement on 16
data, the type of personal data involved, January 2021 noting that the instant
and how the data will be used. messaging app had announced to extend the
deadline for users to accept to its new Terms
• Extend the period for to allow users from 8 February 2021 to 15 May 2021. The
ample time to consider the new Terms. PCPD welcome the new arrangement as it
allows users more time to consider the new
• Consider providing practical alternative Terms.
to users who do not agree to the new
Click here to view the media statement dated 11
Terms so they can continue using the
January 2021, and click here to view the media
service of the messaging app.
statement dated 16 January 2021.
According to the updates announced by the
PCPD, 16 January 2021
messaging app, user information will be shared15 Hogan Lovells
Contacts
Mark Parsons Laurence Davidson
Partner, Hong Kong Partner, Hong Kong
T +852 2840 5033 T +852 2840 5034
mark.parsons@hoganlovells.com laurence.davidson@hoganlovells.com
Sammy Li Andrew McGinty
Partner, Hong Kong Partner, Hong Kong
T +852 2840 5656 T +852 2840 5004
sammy.li@hoganlovells.com andrew.mcginty@hoganlovells.com
Stephanie Tang
Nelson Tang Head of Private Equity – Greater China,
Partner, Hong Kong Hong Kong
T +852 2840 5621 T +852 2840 5026
nelson.tang@hoganlovells.com stephanie.tang@hoganlovells.com
www.hoganlovells.com
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