Please be reminded that there is an updated BRMQ for year ends starting from 30th November 2023 with a number of new questions.
As we have highlighted before, the SFC has been adding questions to the BRMQ and following up when firms don't pay attention to telegraphed requirements. We have referred to it as regulation by questionnaire, but it is a method used in many jurisdictions and allows regulators to obtain useful risk data on their stakeholders on a dynamic basis (e.g. Annex IV, Form PF, PQR). Firms should consider the relevant circulars as indicative of expectations and their responses accordingly.
In any case, firms with December year ends will need to respond to these new questions as part of their next annual audit submission but we recommend that you consider the questions before quarter 1 commences.
In addition to more and reformatted questions regarding your BRMQ, they have posed a number of new questions. It is up to firms to determine whether they want to show that they have been listening. Some things can be addressed closer to the response time (i.e. 4 months after year end) but some might need some longer term consideration which is why we have put this out now.
New Questions
Section A: Section A consists of questions relating to operational functions and arrangements that are generally relevant to licensed corporations.
1) Section A3 – Interconnectedness with Group or Affiliated Companies or Other Related Parties
Further inquiries pertain to financial matters involving significant shareholders, as well as recurring operating expenditures covered by group entities, affiliates, or related parties.
Circular issued in March 2022, the SFC anticipates licensed enterprises to possess a suitable contingency strategy. Some firms have been requested to provide this information on an ad-hoc basis already this year.
2) Section A8 – Handling of Client Accounts and Client Assets Protection
Supplementary inquiries aim to gather details about online banking-related aspects and the associated security protocols concerning bank accounts. Additionally, information regarding authorized signatories for bank accounts is also being sought.
In accordance with the Circular issued in June 2021, the SFC anticipates licensed entities to have established proficient policies, procedures, and controls concerning the management of their bank accounts and this is just to confirm what the industry has done.
3) Section A9 – Risk Management
An additional question relates to exit plans in case of closure of business, regardless of its future business activities. Do you have an exit plan?
In accordance with the Circular issued in March 2022 which emphasizes the requirement for licensed companies to establish efficient protocols aimed at mitigating the risks and consequences arising from an abrupt cessation of operations. If you have not already done so, completing the exit plan analysis is something that will take a little bit of time to complete. Technically exit plans/wind down scenarios should already be incorporated into operational resilience but since the circular the SFC has indicated that it would expect firms to have conducted this par to the assessment as a basic expectation. You can see our various guides on operational resilience if you would like more detail or reach out to one of the team. It does not need to be overly laboured.
We presented our views on operational resilience last year and moderated a panel at the AIMA APAC Forum last year but in this case, we remind firms that in order to answer this question, they will need to follow the requirements of the specific circular. Please contact your consultant if you have not already made preparations here.
4) Section A9 – Information Technology (Type 1 Activity)
LCs providing internet trading services are required to reveal details regarding their deployment of monitoring and surveillance mechanisms aimed at identifying suspicious activities.
5) Section A12 – Anti-Money Laundering and Counter-Financing of Terrorism
This segment of the BRMQ has undergone significant revisions to align with the amended AML/CFT Guidelines. It previously consisted of 15 questions and three multi-part questions, has now expanded to 35 questions with 24 multi-part questions!
Additional inquiries are focused on obtaining comprehensive information across various domains, encompassing Institutional Risk Assessments, senior management supervision, independent AML assessments, compliance verification, staff training, outsourcing, customer data and due diligence, transaction monitoring, and reporting of suspicious transactions.
The SFC holds the expectation that all licensed corporations have established robust AML/CFT systems and controls.
We have adopted changes into our standard Institutional Risk Assessment to ensure the new questions are covered.
Section B of the BRMQ pertains to specific business operations and introduces amendments to certain subsections, such as brokerage enterprises, the distribution of investment products or investment advisory services, and discretionary account or fund management services.
Section B: Section B consists of questions relating to specific business lines, the below business lines have seen edits, if you are engaged with any of the following business lines, please contact us for more information.
B1 – Brokerage Businesses
B2 – Securities Margin Financing
B6 – Bookbuilding and/ or Placing Activities/ Underwriting Activities
B9 – Distribution of Investment Products and/ or Provision of Investment Advisory Services
B11 – Corporate Finance Advisory Services
B13 – Discretionary Management Services for Funds and/ or Discretionary Accounts
Here, you can find the blacklined version of the BRMQ.
Reach out to your consultant if you have any questions or speak to one of our team at info@cognitivegrc.com