Legal briefing
More firms forecast to face SFC cases Dispute resolution, securities regulation, and capital markets work are seen as thriving areas.
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tiffer competition as well as legislation and regulatory changes are expected to shake up the Hong Kong legal industry this year. The Securities and Futures Commission is also likely to bring more cases against listed companies for failing to disclose pricesensitive information in a timely manner. Partners from different law firms share their thoughts on what 2017 presents. They cite amendments and how these will impact cases, as well as what areas of legal service law practitioners foresee thriving. More disputes cases Dispute resolution is expected to continue to thrive as a practice area in 2017, says Alfred Wu, partner, Norton Rose Fulbright Hong Kong. “Contentious financial services regulatory work will continue to be active as the SFC and HKMA are ramping up their enforcement efforts,” explains Wu. “Contentious construction work will be strong as many major infrastructure projects are nearing completion.” He also notes that the amendment of the Arbitration Ordinance to allow third-party funding will be a matter of major interest in 2017, particularly in the dispute resolution side. “A similar legislative change in Singapore has just taken place. The go signal for third-party funding is seen as a necessity to maintain Hong Kong’s position as an arbitration hub in the region,” says Wu. Alex Kaung, partner, Reed Smith Richards Butler Hong Kong, notes, “On the disputes side, we have seen an increase in the number of big money probate disputes and matrimonial cases in recent years and consider that
“Hong Kong is a highly competitive environment for law firms and this, coupled with uneven activity in the transactional markets, will continue to generate pressure for international firms operating here. this trend will also continue.” Regulatory changes Simon McConnell, managing partner, Hong Kong Clyde & Co, cites regulatory changes affecting the insurance sector. These include the revised GN10 on new corporate governance standard for authorised insurers and the GN16 taking effect on 1 January 2017 with respect to new and existing policies of current products. The new GN10 sets out the minimum standard of corporate governance that the Office of the Commissioner of Insurance expects of insurers authorised to carry on business in and from Hong Kong, including the composition, role, and responsibilities of 28 HONG KONG BUSINESS | MARCH 2017
Alex Kaung
Alfred Wu
Hayden Flinn
Simon McConnell
the board; internal controls; and compliance with laws and regulations. Further, McConnell notes that the Insurance Companies (Amendment) Ordinance 2015 continues to phase in changes in the regulatory regime of insurers and insurance intermediaries. “We also believe that the development of the Risk-based Capital Framework for the Insurance Industry in Hong Kong will continue to draw attention and discussions in 2017,” he says. Meanwhile Hayden Flinn, partner and co-chief executive, King & Wood Mallesons Hong Kong, says the regulation of cross-border flow of funds will be key this year. “China needs to achieve the right balance of crossborder capital flow and overseas investment to prevent financial risks. The yuan depreciation we witnessed in 2016, and its value through 2017 will impact how authorities manage capital flows,” he points out. Other growth areas Kaung says 2016 saw the first case brought by the Securities and Futures Commission before the Market Misconduct Tribunal for a Part XIVA (of the Securities and Futures Ordinance) offence and has resulted in a win for the SFC. “Our firm has acted in dozens of SFC investigations for possible breaches of Part XIVA since the inception of the new provisions, and we would expect the SFC to bring more cases in 2017 under Part XIVA against listed companies and/or their directors for failing to disclose price-sensitive information in a timely manner.” In terms of legal services that are projected to thrive, Kaung says securities regulation and professional negligence have been growth areas for a number of years and there is no reason why this trend should not continue. Flinn, on the other hand, believes equity capital markets work should continue with an emphasis on IPOs in Hong Kong. He also expects to see ongoing growth in debt capital markets with the increasing appetite for capital from Chinese entities. Flinn adds, “Hong Kong continues to be a China pathway, though more recently the path has been in relation to outbound. This role is critical for Hong Kong and Hong Kong needs to continue to adapt to remain relevant.” He says the impact of significant changes to global political environments and economic markets remains unknown and may present law firms with challenges or opportunities. Meanwhile, Kaung says, “Hong Kong is a highly competitive environment for law firms and this, coupled with uneven activity in the transactional markets, will continue to generate pressure for international firms operating in Hong Kong in the short term.” However, he notes that in the medium to long term, a bit of a shakeout and consolidation amongst the international firms should be seen, with those who are committed to remaining and succeeding in Hong Kong prevailing in the long term.