HKMA Exam on Relevant Individuals

I understand last year HKMA had conducted thematic exam on selected banks which are active in SFC regulated activities and have employed a large number of relevant individuals (ReIs). Recently HKMA has published a report of deficiencies identified, some of which are remarkable:

• Policies and procedures do not describe the division of duties among different units involved in the fit & proper assessment of proposed ReIs. (Comment: Some banks have involved both Compliance and HR in the assessment process, but the ultimate responsible unit is never made clear.)
• There is incomplete coverage of background checks of proposed ReIs (e.g. on transferees from group entity), no documentary evidence to support the performance of background checks and follow up actions on adverse results. (Comment: The bank staff performing the background checks should be adequately trained.)
• The documentation for competence assessment is insufficient in such areas as eligibility for grandfathering and 6-month grace period arrangement. (Comment: Many bank staff are quite confused with grandfathering if they don't know the history of this system. They don't understand the importance of post-registration monitoring during the 6-month grace period.)
• Some banks have erroneously included the attendance in meetings or irrelevant training courses as CPT hours. (Comment: Some banks' Training Departments have a misconception that all kinds of group activities, including team building, are eligible as CPT.)
• The job duties of some ReIs (e.g. mortgage business) are not relevant to any regulated activity. (Comment: Some bank staff often think once a day they may be transferred to a unit engaging in regulated activity. So they take advantage of grandfathering a few years ago to "park" their registrations first.)
• There are difficulties in obtaining timely and satisfactory employment reference and confirmation on grandfathering and registration details from other banks (as previous employers). (Comment: HKMA is not user-friendly enough to provide the previous registration records of ReIs to the banks.)

While large banks have already put in place adequate policies and procedures for ReIs assessment and registration, many small-to-medium sized have not yet met the standards.