HKSI Paper 6 Asset management regulations question: compliance requirements of the Fund Manager Code of Conduct

HKSI Paper 6Asset management regulations

Lantau Peak Capital Ltd has four staff: two directors, who form its senior management, and two portfolio managers. It cannot reasonably separate compliance from its other functions. How should it meet the compliance requirements of the Fund Manager Code of Conduct?

A Senior management should act as compliance officer; it may delegate compliance tasks but not responsibility
B It may hire an outside compliance consultant, who then bears the firm's compliance responsibility to the SFC
C It must hire a full-time compliance officer independent of all other functions, whatever the size of the firm
D A portfolio manager may act as compliance officer if he reviews his own dealing every month

Show the answer and explanation

Answer: A. Senior management should act as compliance officer; it may delegate compliance tasks but not responsibility

Paragraph 1.8.1 requires an effective compliance function, including a compliance officer. Under para 1.8.2 the function should be independent and report directly to senior management unless this is not reasonably practicable given the firm's size. Where there is no separation of functions, senior management should assume the role of compliance officer. Compliance activities may be delegated to an appropriately qualified professional, but the responsibility and obligations may not. So an outside consultant does not take over the responsibility, a full-time independent officer is not demanded where impracticable, and a portfolio manager checking himself is not what the Code provides. Source: SFC Fund Manager Code of Conduct (October 2024), paras 1.8.1-1.8.2 (as at October 2026).

Common mistake

Thinking outsourcing compliance outsources the liability. Only the activities can be delegated.

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