Published 10 January 2017 Category: Entrepreneurship

Compass Chats with Cordium on 2017 Market Predictions

Welcome to this week’s edition of #CompassEntrepreneurs, where entrepreneurs share their experiences and insight about operating a business in Asia.

In this edition, we speak to Derek McGibney, Managing Director, Cordium Asia. Cordium is a leading provider of regulatory compliance consulting services. They offer support to firms headquartered in the US/EU who are setting up in Hong Kong and provides assistance to local firms setting up for the first time in Hong Kong and in UK, USA and Malta.

In light of recent occurrences, it seems that the world waits with bated breath on potential shifts in regulations, making Cordium’s positioning ever more important. While meeting market regulatory demands can be a teeth-pulling effort for many companies, it can also drive a business towards excellence, turning a seemingly arduous task into a huge advantage. Cordium shares some predictions with Compass on what lies ahead in 2017, and the trends that will shape businesses in the coming year.

What challenges is the industry facing? What do you see in store for 2017?
Markets have experienced shifts and difficulty in the last couple of years, but we are still seeing activity (and growth) in Asia.  Following Brexit and the US elections, there has been uncertainty, which for some may turn into opportunity. It is anyone’s guess whether there will be a rumoured loosening of global compliance burdens, but if true, material change is not likely to come through until much later as we continue to deal with the financial crisis hangover. It is hard to predict the outcome in 2017 given what has happened in 2016. I think the key for 2017 is to be prepared for the unexpected.

What trends do you see in Asia’s markets?
The opening up of the Shenzhen-Hong Kong Stock Connect will be a key theme to the start of the year, followed by the changes to the Over The Counter (OTC) derivative licensing regime which are impending in Hong Kong. SFC’s timeline for The Introduction of Mandatory Clearing in Bilateral Contracts is due for establishment by March 2017. We are expecting SFC Audits on Best Execution and on Anti-Money Laundering Procedures in 2017 and a continuing focus on the internal control frameworks at SFC registered firms. More recently the SFC have started a consultation on the senior manager’s Code of Conduct and the Fund Manager’s Code will seek to introduce a wider scope of licensing regime similar to UK’s FCA.

For US/EU fund managers, what are key differences in operating in Asia compared to the rest of the world?
There are so many differences to consider, including structuring, speed to market, liquid capital requirements, local tax environment, public disclosures, visa requirements, labour laws, relocation issues, legal and regulatory culture and a uniquely unclear private equity and distribution regime. We can help firms arriving in Hong Kong for the first time.  We literally know where they are coming from!

How about the specifics in each market, say Hong Kong?
OK, so take Hong Kong as an example: start to finish, the registration process normally takes longer and is more involved than both the UK and the US, and we have experience in all three. Both the firm and the individual may need to obtain a visa beforehand, however, the firm will need a bank account to make the sponsorship application, so it can be difficult without a presence or in particular a regulatory license. Unlike the US, but similar to the UK, the SFC requires firms to demonstrate that they have sufficient financial liquidity to cover their costs.

Sounds complex. To navigate this, what is your expert advice to newcomers in Asia’s asset management industry?
Our advice is to seek experienced assistance. While it is something that you can attempt to do on your own, we support firms at different levels, from providing compliance manuals and support to managing the overall process. Our international experience of seeking licenses indicates that the timings advertised are less likely to be achieved unless the application fits the exact expectations of the regulators, and the case officers can be particular about their requirements.

To find out more please visit cordium.com 

Connect with Cordium!
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Twitter: https://twitter.com/cordiumgroup