REGULATORY

CONSULTING

IN ASIA

Focused on Financial Services

Duff & Phelps 2

About Us

Duff & Phelps is the premier global valuation and corporate finance advisor with expertise in complex valuation,

disputes and investigations, M&A, real estate, restructuring, and compliance and regulatory consulting. The

firm’s more than 2,000 employees serve a diverse range of clients from offices around the world.

As an award-winning provider of compliance and regulatory consulting services to the global financial services

industry, Duff & Phelps helps clients build, manage and protect their businesses. Based in key financial centres,

we are closely connected with regulators, industry participants and service providers so that our clients have the

best available information on regulatory requirements and trends. We operate seamlessly across borders to

provide clients with cross-jurisdictional advice and integrated expertise.

Clients appreciate Duff & Phelps’ approach which combines deep expertise, institutional knowledge of their

organizations and a senior team on the ground from day one through to completion of the engagement. Our

global regulatory consulting team advises financial services industry clients on regulatory commissioned

reviews, financial crime compliance, global markets and trading regulation, conduct risk, and assists with

governance, risk and compliance (GRC) related matters.

Our multidisciplinary team consists of former regulators (CIMA, FCA, JFSC, MAS, SEC, SFC, SWX) heads of

regulation at leading stock exchanges (LSE, CSX), law enforcement agents and heads of bureau (New York

District County Attorney’s Office Major Economic Crimes Bureau), and financial services industry experts in

investment banking, global markets, private banking and wealth management, asset management, and

insurance.

We work with client across the financial services industry including chief compliance officers (CCOs), chief risk

officers (CROs), heads of financial crime, heads of litigation, general counsels, chief operating officers (COOs),

chief technology officers (CTOs) or chief information security officers (CISOs) to assist with regulatory change,

as well as strengthening internal capabilities and controls to address global and local regulatory requirements.

In Hong Kong, our compliance and regulatory consulting team has been engaged by the Securities & Futures

Commission (SFC), the Hong Kong Monetary Authority (HKMA), Office of the Commissioner for Insurance

(OCI), and the Mandatory Provident Fund Schemes Authority (MPFA) on a broad range of projects including

regulatory commissioned reviews, strategic assessments of the future of the industry, target operating model

reviews, and innovation in financial services (FinTech).

Local regulatory and self-commissioned reviews in Hong Kong include two algorithmic trading reviews, an anti-

money laundering (AML) and conflicts of interests review, and a control room review focused on information

barriers.

Financial Crime

AML

Anti-Bribery &

Corruption (ABC)

Sanctions

FATCA / CRS

KYC / On boarding

Market Abuse

Global Markets & Trading

Algorithmic and

Electronic Trading

Unauthorized Trading

Best Execution

Cybersecurity

Dark Pools

Market Conduct

MiFID 2 / MAR

Conduct

Conduct of Business

Culture and Ethics

Information Barriers

Investment Suitability

Pre-trade Controls

Post-trade Controls

Governance, Risk and

Compliance

Conflicts of Interest

Individual Accountability and

Senior Manager Responsibilities

Management Information and

Reporting

Monitoring & Surveillance

Segregation of Duties

Regulatory or

self-commissioned reviews

Regulatory remediationTraining

Risk assessment

Policies and

procedures

Regulatory

change

program

management

Expert witness Regulatory due diligence

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Our clients’ feedback on our service reflects our strong focus on client management and high quality

deliverables, often produced in tight timeframes, which is the result of our:

a. Depth of expertise in Hong Kong and global financial markets and trading related areas;

b. Depth of Hong Kong and global expertise in financial crime and conduct related areas;

c. Institutional knowledge of the business model, governance structure, and relationship with business,

compliance and IT of a substantial number of financial institutions in Hong Kong;

d. Proven approach where Duff & Phelps mobilizes senior team members to work with clients on the

ground from day one and through the duration of the review to completion, where global subject

matter experts are brought in, as and when required.

Duff & Phelps’ “one team” approach and business model differentiates us from our competitors. Our worldwide

regulatory practice provides relevant expertise and deep insight to clients around the world with support from

other Duff & Phelps teams expertise such as cybersecurity, data analytics, disputes and investigations, valuation

and forensic accounting.

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Financial Crime

Financial Crime which encompasses AML, ABC, and economic sanctions remains high on the agenda of Asian

regulators including the HKMA, SFC and the MAS, partly as a result of the Panama Papers leakage, and the

Financial Action Task Force evaluations in China, Hong Kong, Macau, and Taiwan in the 2016-2018 period.

How Duff & Phelps Can Help

Our Financial Crime team works with you in your role as chief compliance officer, head of financial crime,

general counsel or head of IT to understand global and local financial crime trends and developments, and

support you to build and strengthen business and IT controls, governance, policies, processes and procedures

and innovative technology to address regulatory requirements.

Regulator and Law Enforcement

Engagement

• Conduct and support self-

commissioned reviews and

investigations to address

regulatory

• Conduct and support regulatory

commissioned reviews

• Asset Tracing and Flow of

Funds Analyses

Monitorships

• Serve as independent court/

regulator appointed consultant

and monitor under remediation

orders

• Assist institutions in complying

with monitor requirements

Independent Reviews –

AML, ABC and economic

sanctions

• Regulator mandated

independent program reviews

• Enterprise-wide assessments

and regulatory gap analyses

and reviews

• Develop and draft policies and

procedures for regulated and

non- regulated entities

Training, Education, and

Awareness Programs

• Customize AML, ABC and

economic sanctions training for

front, middle, and back office

employees and senior

management teams based on

role and responsibility, type of

financial crime industry,

products and services

Board of Directors Advisory

• Compliance governance

reviews

• Financial Crime Compliance

program remediation, reporting

and assurance

Customer Reviews and High

Risk Customer Management

• KYC and PEP remediation

• High-risk client enhanced due

diligence (EDD) reviews

Transaction Monitoring Reviews

• Historical transaction and

regulatory reporting look-backs

• Transaction monitoring and

Suspicious Activity Report

(SAR) filing systems and

process reviews

Analyse policies,

processes and

controls

Identify gaps in

AML, ABC and

economic

sanctions

governance

framework

Develop effective

control

environment

Collaborate with

senior

management to

ensure effective

oversight and a

strong culture of

compliance

Robust AML,

ABC and

economic

sanctions

programs

Duff & Phelps has a highly experienced team of Markets

specialists, with extensive experience working on a local

and cross-border basis within investment firms including

investment banks, private banks and brokers, inter dealer

brokers, fund managers as well as regulatory bodies and

investment exchanges.

We are well positioned to advise and support investment

firms in ensuring their full compliance with global market

conduct regimes and regulatory requirements through best

industry practice and bespoke, risk- based and cost efficient

solutions. Our global expertise spans across multiple

jurisdictions, including Asia Pacific, the UK and EU, the

Channel Islands, the U.S. and the Cayman Islands.

Regulations in Asia, as in Europe, continue to be more

principle based than in the U.S., and although these are

less prescriptive, they place the responsibility on the firms

themselves to understand and demonstrate that their

internal systems and controls follow the ‘spirit of the rules’

that govern market conduct.

Market Monitoring and SurveillanceFirms are expected to have strong internal systems and

processes in place to allow them to identify potentially

abusive market behaviour, whether conducted by their

clients or their own traders. Regulators globally have been

issuing fines not only for the act of committing market abuse

but also to firms for failing to detect abusive behaviour

through poor oversight and an inadequate internal control

environment.

Below are some examples of how our experts can help your

firm with your market monitoring and surveillance

arrangements:

• Develop a Market Abuse Risk Assessment (MARA)

• Design a surveillance processes for trading activities

• Review and draft market abuse policies and procedures

• Draft and deliver market abuse training including

coaching on the reporting of suspicions

• Review and assess the effectiveness of e-

communication surveillance

• Work with both first and second line of defence to

develop and enhance controls

Control Room Information BarriersWith global regulators continuing to place a keen focus on

control rooms and information barriers, a firm must manage

conflicts of interest and the flow of information within its own

walls, between itself and clients and between one client and

another client. Taking into consideration global standards,

local requirements and best practices, we can assist with:

• Review and draft Control Room policies and procedures

• Conduct a gap analysis between a firm’s current Control

Room arrangements and regulatory expectations and

best practice guidelines

• Review of the management and oversight infrastructure

of a Control Room

• Design and implement effective wall crossing and

market sounding processes and the associated systems

and controls

Electronic / Algorithmic Trading Strategies and

Systems and Alternative Liquidity PoolsTo keep pace with the increased level of sophistication of

trading strategies and technological advances, global

regulators are deepening their focus, supervision and

stringent regulatory reach around electronic, algorithmic and

High Frequency Trading (HFT) in both lit and dark markets

to minimize the risk of unfair and disorderly markets.

We can assist with:

• Assessing the design, development, deployment and

operation process of an electronic or algorithmic trading

strategy / system as well as that of an alternative

liquidity pool (ALP)

• Testing and assessing the appropriateness and

adequacy of pre trade controls

• Assessing the ability and speed to automatically block or

cancel orders that breach pre-trade control parameters

• Reviewing the process for determining and calibrating

parameter values

• Evaluating the business continuity and capacity

arrangements relative to business model

Best ExecutionRegulators place significant importance on firms to act in

the best interests of their customers, as well as the best

execution. To assist firms in meeting regulator and

client/investor expectations, we can:

• Review the adequacy of a firm’s best execution

arrangements, policies and procedures and monitoring

• Assess a firm’s execution venue and broker selection

process

• Review the Management Information (MI) produced and

collated by the firm.

• Identify and assess conflicts of interest flowing from intra

group reliance

• Review the Trading Desk ‘s dealing process including

order routing policy, pricing and best execution

CybersecurityOur team of specialists can assist you in establishing a

sound and effective cybersecurity control framework to

ensure alignment with internal and external stakeholder

expectations. We assist firms in the application of our

proven methodology which includes identifying and

categorizing data, performing a threat and vulnerability

assessment, enhancing controls where necessary to protect

against any weaknesses, assessing threats posed by

service providers and introducing adequate event

management policies and procedures.

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Markets Services Offering

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Governance, Risk and Compliance

Duff & Phelps understands the importance of

governance structures and further that the setting of

an appropriate control framework is critical to

underpinning the ability of any firm to meet its

regulatory and client related obligations.

In virtually every regulatory finding, systems and

control failures is a phrase that features prominently.

Getting the right framework in place remains a key

challenge, whether the firm is large or small, new or

old.

Our expert team is well practiced in assessing

business models and providing insights and advice

into appropriate regulatory frameworks to enable

senior management to be comfortable that their

businesses are not exposed to unidentified or

unexpected risks.

Working for firms, regulators and investors, we are

well versed in what is expected as well as what is

appropriate for the nature and scale of a firm’s

operations.

In a world where individual responsibility and

accountability is on the rise, we are skilled in providing

firms and individuals alike with the required tools to

enable them to effectively and efficiently monitor and

control their businesses.

Examples of our services include the following

Governance

• Assisting with the development of reporting

structures, including devising of appropriate and

tailored metrics and indicators

• Assessment of business structures and the design

of appropriate governance frameworks, including

both functional effectiveness reviews where we

review the design and workings of a specific

function as well as wider committee and reporting

line assessments and reviews.

Risk

• The performance of risk assessments and the

subsequent design of monitoring programs in

response to the risks identified. Such a risk based

program allows firms to consider an appropriate

resource allocation, in response to the regulatory

and operational risks that they face.

Compliance

• Providing the assurance individuals require when

being asked to sign attestations or take

responsibility for certain business practices and

can assist in providing considered solutions for

reviews.

• Our expert team are specialized in assisting firms

in the design of an appropriate control framework

across the lines of defence; ensuring that there are

appropriate controls in place for both those that

own the risk and for those with responsibility for the

oversight of the risk.

We have assisted clients in assessing their

arrangements for conflicts of interest management,

including for instance information barriers and

segregation of duties between the three lines of

defence.

Identifying and establishing both risk ownership and

risk oversight is of critical importance and we have

vast experience in assisting firms in delineating areas

of responsibility and defining appropriate monitoring

and control testing programs to ensure established

protocols are both sufficient and working as intended.

Lastly, no control framework can stay static. Our

regulatory expertise enables us to assist firms in

assessing the impact of regulatory change on their

businesses and to devise appropriate amendments or

enhancements in response.

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Conduct Risk

Conduct risk, which includes mis-selling of products and services, fraudulent behaviour by employees,

excessive charging of fees and margins, and market manipulation, resulting in a poor outcome for customers,

remains a focus area for regulators with ongoing cases of misconduct in Asia in an industry where trust is the

cornerstone.

In recent years, Conduct Risk in the financial services industry has become an area of significant regulatory

focus, with an increasing onus on firms to define and manage Conduct Risk explicitly as part of their risk

management framework. Duff & Phelps identified the following three key drivers of Conduct Risk:

1. Inherent factors – these factors interact to produce poor choices and outcomes in financial markets.

These drivers are a combination of supply-side market failures (e.g. information problems) and demand-

side weaknesses (e.g. inbuilt biases)

2. Structures and behaviours – structures, processes and management (including culture and incentives)

that have been designed into and become embedded in the financial sector, allowing firms to profit from

systematic consumer shortcomings and from market failures

3. Environmental factors – long-running and current economic, regulatory and technological trends and

developments. The inherent factors, along with the structures and behaviours that become embedded in

financial markets, affect the manner in which firms and consumers respond to environmental conditions

Culture & Corporate

Governance

Remuneration

Sales Practices

Conflicts of Interest

Technological Influences

Continued Product

Suitability

Information Security

How Duff & Phelps Can Help

Our Conduct Risk team will work with you to advise, review and

strengthen your Conduct Risk framework by focusing on the

following key areas:

• Determine the inherent Conduct Risk considering the business

model and scope, client focus, distribution channels, products and

services

• Undertake a review and assessment of your firm’s existing

Conduct Risk strategy

• Enhance your Conduct Risk strategy and arrangements to reflect

the evolving Conduct Risk landscape, taking into account local

and global regulatory requirements

• Build and document your firm’s Conduct Risk framework

• Create Conduct Risk policies and procedures and update existing

policies where relevant

• Develop a Conduct Risk Appetite framework

• Consider the most effective means for monitoring Conduct Risk

• Improve senior management oversight and mitigation of potential risk exposure

• Assist with embedding Conduct Risk within the organization, including awareness training

• Creating an effective Conduct Risk framework will assist towards mitigating the risk of regulatory

investigations or subsequent sanctions and enforcement

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Selected Engagements: Regulatory Reviews

Regulatory and self-commissioned review engagements are one of our specialized services. We leverage our deep subject

expertise in financial crime, global markets and trading (e.g. algorithmic trading, cybersecurity, ALP), conduct, and

institutional knowledge of our clients’ organization. We along bring our philosophy in having our senior team not only on day

one for the pitch and preparation, but throughout the review process to obtain insights and senior stakeholder buy-in to each

and every review engagement.

Our clients’ feedback confirms that our differentiating factor is key to arrive at more accelerated and effective resolution,

where the overall time and effort for the review itself did not increase. By having greater stakeholder buy-in resulted in a

more swift and less resource-consuming remediation process for the client.

AML and conflicts of interests review at a leading Chinese investment bank

Duff & Phelps was commissioned by the SFC to conduct a review of the AML controls relating to investment banking sponsorship work. The scope included:

• An assessment of the governance framework in place

• A review of policies and procedures across the Front Office, Compliance and Operations

• A review and assessment of the adequacy of client files against local regulatory requirements

• A review of margin finance and third party payment oversight and controls

• A review of the training arrangements in place to ensure understanding and awareness of both internal policy and the regulatory environment

Control room review at a leading US investment bank in Hong Kong

Duff & Phelps was commissioned by the SFC to conduct a review of a U.S. investment bank’s control room related internal processes, procedures and operation in regard to wall crossing and personal account dealing. The scope included:

• A review of the organisational structure including segregation of staff duties, reporting lines and whether management and supervisory functions were performed by qualified and experienced staff

• An assessment of whether there was sufficient supervision of the wall crossing, approval and monitoring of employee personal trading process

• An assessment of the adequacy of the policies, procedures, compliance system, training, documentation, audit trails and lines of communication. in relation to wall crossings

• An assessment of the approval process for employee trading and the adequacy and effectiveness of the bank’s systems for monitoring employee personal account trading

Algorithmic trading review at a European investment bank in Hong Kong

Duff & Phelps was engaged by the bank at the request of the regulator to conduct an independent review of the electronic trading systems, assessing compliance with the SFC’s Code of Conduct (the “Code”) and the electronic trading regulations that came into force on 1 January 2014. The key focus areas for the review included:

• Governance, including management and supervision

• Risk management

• Testing of algorithms

• Client on-boarding suitability process

• System adequacy and record keeping

Subsequent to review engagements, Duff & Phelps is well positioned to support the remediation, regulatory change program

management, regulatory due diligence, risk assessments, expert witness, work related to policies and procedures, and to

conduct customized training to embed the control framework in the organization.

Algorithmic trading review at a leading global investment bank in Hong Kong

Duff & Phelps was commissioned by the SFC to conduct a review of a global investment bank’s algorithmic trading system (ATS) and trading algorithms. The scope included:

• A deep-dive evaluation of the algorithmic trading systems and related controls at the Bank

• Assessment and testing of the bank’s pre- and post-trade controls to ascertain whether they were adequate to help maintain a fair and orderly market

• Assessment as to whether the Bank’s algorithmic trading operation was in compliance with the SFC’s Code of Conduct and 2014 electronic trading regulation including the design, development, deployment and operation of the algorithmic trading system

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What Our Clients Say

“We engaged Duff & Phelps to document the typical roles

and responsibilities performed by the Control Room in order

for us to ascertain our compliance with global regulations

and best practices adopted by other investment firms. I was

impressed that their specialist Markets team was able to

produce a clear, comprehensive report to a tight deadline

due to their experience in the area of Market Conduct and

related ability to conduct peer group analysis.”

Head of Control Room

Global Investment Bank

“[Duff & Phelps] provided exceptional support and guidance

when introducing an effective Compliance Risk Assessment

process, which has been used to focus and drive our

Compliance framework and monitoring arrangements. They

provided invaluable insight on how to structure and escalate

key compliance risks and MI to the business. Overall we

find [Duff & Phelps] are able to provide highly experienced

staff who are pragmatic and able to deliver output of a very

high quality. We would have no hesitation in recommending

them.”

Head of Compliance

European Investment Bank

“I’d like to thank you and your team for the hard work your

Partnership has done to enable the executive to sign an

attestation in relation to our transaction reporting systems.

We recognize the work was comprehensively designed and

executed to a high standard within a very aggressive time

scale. We are particularly grateful to the team for the

extended length of time they spent each day on the task and

the patience and professionalism they expressed to all our

staff throughout the process. We will now review, consider

and implement the recommendations you have made as

appropriate, but wanted to take this opportunity to express

our thanks for the support and assistance you’ve provided

to us.”

European Head of Regulatory Group

Global Investment Bank

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Our Hong Kong Team

Nick Inman

Managing Director

t: +852 2281 0130

e: nick.inman@

duffandphelps.com

Nick Inman joined Duff & Phelps in January 2015 from Kinetic Partners. As a result of Duff

& Phelps’ acquisition of Kinetic Partners, Duff & Phelps created a dedicated Compliance

and Regulatory Consulting Practice.

Nick is a managing director in the Compliance and Regulatory Consulting Practice, based

in Hong Kong and is responsible for all services in Asia Pacific. Nick specializes in the

provision of ad hoc regulatory advice as well as larger project-based consultancy work

including the assessment of firms’ processes and procedures, the identification of any

weaknesses and the design of appropriate regulatory and risk management frameworks.

Nick has been a consultant with Duff & Phelps for almost 10 years, during which time he

has gained significant experience across multiple jurisdictions and regulatory regimes for a

wide variety of firms. Nick has been working with investment banks, brokers, asset

managers and custodians, through a mixture of on-going relationships, long term

secondments and standalone projects, typically thematic in nature. Nick has worked on

projects across the regulatory spectrum including market conduct and electronic trading

reviews, AML and financial crime, conduct of business issues, governance and risk

management frameworks. Most recently, from 2012 to 2015, Nick co-led the governance,

risk and compliance consulting service offering based in London.

Nick has gained extensive experience in assisting clients with their control frameworks and

risk assessments, in particular in relation to measuring the adequacy and effectiveness of

existing internal controls relative to business activity and profile.

Lapman Lee

Managing Director

t: +852 2281 0105

e: lapman.lee@

duffandphelps.com

Lapman is a Managing Director at Duff & Phelps where he leads the Regulatory Consulting

practice in Hong Kong.

He has eighteen years of experience in the financial services industry, both as a banker

specialized in structured finance and a consultant specialized in compliance, regulatory and

risk advisory for investment banking, private banking and insurance clients. Lapman

focuses on financial crime (AML, ABC, sanctions), conduct & investment suitability,

cybersecurity, markets regulation, global structural reform and RegTech.

Since he relocated to Hong Kong, Lapman has worked closely with the HKMA, SFC, OCI

and MPFA on regulatory commissioned reviews, remediation, training and FinTech.

With respect to financial crime, Lapman advised and was seconded to manage the flagship

Financial Crime Compliance program for a leading international bank under a Deferred

Prosecution Agreement. In his role as APAC lead, Lapman was overseeing the data

readiness activities across the investment bank, private bank, retail bank, and commercial

bank in 23 countries in APAC to arrive at a financial crime risk rating for the Asian customer

base of the bank’s 50 million customers.

In addition, he worked with international banks to conduct Bank Secrecy Act/AML reviews,

develop line of business specific AML, AB&C, and sanctions policies and procedures, and

design and execute training for customer due diligence and financial crime compliance.

Prior to his transfer to Hong Kong in 2007, Lapman was the head of Basel, credit risk, and

debt advisory for a Big 4 firm.

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Global Contacts

United Kingdom

The Shard

32 London Bridge Street

London

SE1 9SG

United States

55 East 52nd Street

Floor 31

10055

New York, NY

Monique Melis

Global Head of Regulatory Consulting

London

Monique.melis@duffandphelps.com

+44 207 089 0820

Polly Greenberg

Managing Director

New York

Polly.greenberg@duffandphelps.com

+1 212 871 1979

Nick Bayley

Managing Director

London

Nick.bayley@duffandphelps.com

+44 207 089 4933

Jason Elmer

Managing Director

New York

Jason.elmer@duffandphelps.com

+1 212 871 6366

For more information about our global locations and services, please visit:www.duffandphelps.hk

About Duff & Phelps

Duff & Phelps is the premier global valuation and corporate finance advisor with expertise in complex valuation, disputes andinvestigations, M&A, real estate, restructuring, and compliance and regulatory consulting. The firm’s more than 2,000 employees serve a diverse range of clients from offices around the world. For more information, visit www.duffandphelps.com.

M&A advisory, capital raising and secondary market advisory services in the United States are provided by Duff & Phelps Securities, LLC. Member FINRA/SIPC. Pagemill Partners is a Division of Duff & Phelps Securities, LLC. M&A advisory and capital raising advisory services are provided in a number of European countries through Duff & Phelps Securities Ltd, UK, which includes branches in Ireland and Germany. Duff & Phelps Securities Ltd, UK, is regulated by the Financial Conduct Authority.