Financial Reporting Council (Amendment) Bill gazetted
The Hong Kong government gazetted the Financial Reporting Council (Amendment) Ordinance 2019 on 15 February, enabling the Financial Reporting Council (FRC) to become an independent oversight body that regulates auditors of listed companies. The development comes after a decade of work by the Institute and the government, and brings Hong Kong’s regulatory regime for auditors of listed entities in line with international standards and practices. It will also enable Hong Kong to be eligible for joining the International Forum of Independent Audit Regulators. As part of the new audit regime, the Institute will continue to perform the statutory functions of registration, setting requirements for continuing professional development, and also setting standards on professional ethics, auditing and assurance in respect of relevant auditors, subject to oversight by the FRC. The date the FRC will take over is yet to be confirmed. “The Amendment Ordinance enhances the existing regulatory regime for auditors of listed entities, allowing it to be independent from the audit profession, thereby providing better protection to investors. This is crucial to strengthening Hong Kong’s status as an international financial centre and capital market. We are working closely with relevant parties on the preparations for implementing the new regulatory regime as soon as practicable,” said a government spokesperson.
U.S. delays tariff hike on Chinese imports
United States President Donald Trump said the U.S. would delay an increase in tariffs on US$200 billion of Chinese goods originally scheduled for 1 March. In a tweet, Trump said there had been “substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues.” He also said that if Washington and Beijing made additional progress, his administration would plan for a new summit with China’s President Xi Jinping, at the U.S. president’s Mar-a-Lago resort in Florida to conclude an agreement. Stocks in China and Hong Kong rose in early trading on 25 February following the news.
Beijing unveils Greater Bay Area blueprint
The central government of China published its long-anticipated document setting out its Greater Bay Area development plan to integrate Hong Kong and 10 cities around the Pearl River Delta. The 11-chapter document, released this month, confirms that Hong Kong, Macau, Shenzhen and Guangzhou would be the four key cities and the core engines for driving growth in nearby regions. It says the framework for the bay area should be defined by 2022, and realized by 2035. It also mentions goals and directions to push the development forward, such as improving infrastructural connectivity and quality of life, building a globally competitive commerce and industrial system, protecting the environment, and energy security, as well as supporting the Belt and Road Initiative.
BDO officially fifth-largest firm in U.K.
BDO is now the fifth-largest accounting firm in the United Kingdom after it completed its merger with Moore Stephens earlier this month. The merger gives BDO a combined workforce of 5,000 staff members and 350 partners working across the U.K. The firm is expected deliver revenues of £590 million, more than Grant Thornton. “This merger is one of growth and creates a new force in the market, enabling us to challenge our existing competition and deliver an increasingly impressive range of services to help our people and clients succeed,” said Simon Gallagher, former chief executive officer of Moore Stephens and now Head of Advisory at BDO.
HKEX to buy Shenzhen-based FinTech company
Hong Kong Exchanges and Clearing (HKEX) has signed a letter to buy a 51 percent stake in Shenzhen Ronghui Tongjin Technology, as part of its efforts to upgrade its technology capabilities, the South China Morning Post reported this month. Ronghui Tongjin is a subsidiary of Shanghai-listed Shenzhen Kingdom Sci-Tech, and specializes in financial exchanges, regulation technologies and data applications. “Technology capacities will be an important element for the HKEX to compete with other stock exchanges,” said lawmaker Christopher Cheung Wah-fung, who represents the financial services constituency in the Legislative Council. Brokers believe the deal, which is expected to be completed in the second quarter, will enable HKEX to become a depository and settlement company.
208
The total number of companies that went public in Hong Kong last year, according to the South China Morning Post. Together they raised HK$286 billion in funds, more than double the amount from the previous year, helping the city overtake New York and Shanghai as the world’s initial public offering capital.
US$678 billion
The value of Mainland China’s merger and acquisition activity in 2018. Chinese outbound M&A activity fell for the third straight year in 2018, dropping to less than half of the peak level recorded in 2016, according to a PwC Hong Kong report.
30%
The revenue growth rate that KPMG’s global legal branch reported in 2018. This is reportedly a result of a surge in multinational organizations demanding legal services. In January, the firm’s legal services network opened a new law firm in Hong Kong called SF Lawyers.
Gucci owner faces €1.4 billion tax claim
Kering S.A., the French luxury goods group (and owner of Gucci), owes €1.4 billion (HK$12.5 billion) to Italy in back taxes, according to the conclusions of a government audit. The probe scrutinized the business practices of Kering’s Swiss subsidiary, Luxury Goods International, from 2011 through to 2017. Italian tax authorities opened an investigation into the subsidiary in 2017 for allegedly avoiding tax on earnings generated elsewhere. The probe was largely centered on Gucci, Kering’s biggest revenue driver, Reuters reported. Kering said it contests the findings of the audit, and that the company does not have the necessary information to record an accounting provision for any potential bill for back taxes or penalties.
Sweden, Estonia jointly probe Swedbank
The financial supervisory authorities of Estonia and Sweden opened a joint investigation in response to a media report linking Swedbank to a Baltic money-laundering scandal involving Danske Bank, the watchdogs said on 21 February. A television documentary on Sweden’s public broadcaster SVT alleged at least 40 billion Swedish krona (US$4.3 billion) had been transferred between accounts at Swedbank and Danske in the Baltics between 2007 and 2015. Danske is being investigated in five countries over US$226 billion in payments found to have flowed through its Estonian branch from Russia, former Soviet states and elsewhere. Swedbank appointed EY to carry out an external investigation into the allegations, and the results will be reported to the bank by the end of March.
Kraft Heinz accounting investigated by SEC
Food giant Kraft Heinz announced that it received a subpoena in October last year from the United States’ Securities and Exchange Commission (SEC) in relation to its accounting policies. The SEC’s probe focuses on the company’s “accounting, policies, procedures and internal controls” in procurement. Kraft Heinz revealed the investigation in its annual results for 2018. In response to the document request, the company launched an internal investigation into its procurement practices, and increased the costs of its products sold by US$25 million as a result. “We should have recorded the US$25 million in prior periods, which we booked in Q4 2018,” the company said in a conference call. It also said it was fully cooperating with the SEC.
HKMA chief executive to retire
Norman Chan will retire as the Hong Kong Monetary Authority’s (HKMA) chief executive at the end of September upon the expiry of his contract, the Hong Kong government announced this month. Financial Secretary Paul Chan will head a selection panel to identify his successor. “Norman has been leading the HKMA since 2009 and has worked tirelessly over the years to strengthen the city’s mon- etary and banking systems and promote Hong Kong’s position as an international financial centre in Asia. I respect his wish and decision to retire upon completion of his second term as Chief Executive of the HKMA,” the secretary said. Norman Chan, aged 64, joined the government as an administrative officer in 1976, and was appointed as an executive director of the HKMA when it was established in 1993.
