US, Hong Kong cross-border reg MoU revealed

The respective US and Hong Kong financial services regulators have agreed a new memorandum of understanding that they say will facilitate their cooperation in overseeing those regulated entities “that operate on a cross-border basis” in both jurisdictions.

The MoU, which took effect on 9 May, “covers financial market participants or other entities that are regulated by the [Hong Kong] Securities & Futures Commission (SFC) or the [US] Financial Industry Regulatory Authority”, according to a joint statement issued on Friday, and indicates their “willingness to cooperate with each other in the interest of fulfilling their respective regulatory mandates”.

The MoU says the two regulatory organisations decided to draw up the document in view of “the growing globalisation of the world’s financial markets and the increase in cross-border operations and activities of regulated entities”.

The MoU covers such areas as investor protection, promoting the competence and integrity of cross-border regulated entities; fostering market and financial integrity; reducing systemic risk, and maintaining financial stability.

It wasn’t immediately clear whether an MoU like the one agreed last week – had it been signed a decade earlier – would have enabled Hong Kong investors who lost money during the global financial crisis in such US-based products as what were known as “Lehman Brothers mini bonds” to have been able to see redress through the American regulatory system.

Tens of thousands of Hong Kong retail investors  spent some HK$20bn (£1.8bn, US$2.6bn) on these credit-linked derivatives issued by Lehman Brothers, which became worthless with the collapse of the New York-based investment bank in 2008, the South China Morning Post has reported.

To see and download a copy of the 16-page MOU, click here. 

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