Operation of House and Client Bank Accounts

On 28 Jun 2021, SFC issued a circular about operation of bank accounts.  This 7-page circular is quite clumsy and repetitive.  Its essentials can be summarized as follows:

• Authorised signers for effecting payments out of a LC's client bank accounts should only be RO, MIC or his / her delegate.
• Authorised signers for effecting payments out of a LC's house bank accounts should be:
• RO, MIC or his delegate; or
• Any other person, provided that such person can only effect payments jointly with RO, MIC or his delegate.

The "delegate" should be accountable to the RO or MIC, e.g. staff of the LC, staff of the LC's group companies, or a payment processing agent.

SFC issued this circular because it has noted cases of LC's unsatisfactory practices.  For example, a LC's house or client bank accounts were operated solely by a shareholder, a director or a nominee of a shareholder or director, and these were not RO, MIC or their delegates.  The authorised signers were not subject to appropriate oversight in relation to the operation of the LC's bank accounts and were not accountable to any RO or MIC.

SFC requires LC to critically review their existing policies and procedures to ensure full compliance with this circular.  To account for the time of making necessary changes, SFC leniently allows LC to implement the expected standards by 3 Jan 2022.  I wish no LC collapse during the transitional period due to lax operational controls over bank accounts.