Hong Kong: HKIA's Guideline On Exercising Power To Impose Pecuniary Penalty On Regulated Persons

The Hong Kong Insurance Authority has published consultation conclusions (Consultation Conclusions) on the draft Guideline on Exercising Power to Impose Pecuniary Penalty in Respect of Regulated Persons under the Insurance Ordinance (Cap. 41) (the Guideline). A two-month public consultation on the draft Guideline was conducted in late 2018.

The Guideline will come into operation on 23 September 2019, the date the new statutory regulatory regime for insurance intermediaries comes into operation.

On that date, the Insurance Authority will take over the direct regulation of insurance intermediaries from the Insurance Agents Registration Board, Professional Insurance Brokers Association and the Hong Kong Confederation of Insurance Brokers (the self-regulatory organisations (SROs)). Intermediaries will be subject to statutory licensing and conduct requirements, supplemented by rules, codes, guidelines and circulars issued by the Insurance Authority.

Power to impose pecuniary penalties

Under section 81 of the Insurance Ordinance (the IO), which will come into effect on 23 September 2019, the Insurance Authority has a range of disciplinary powers it can take against regulated persons for misconduct or if they are not fit or proper, including imposing pecuniary penalties of up to the greater of HK$10 million or three times the amount of the profit gained or loss avoided.

Before the Insurance Authority can exercise its power to impose a pecuniary penalty against a regulated person, it is required to publish guidelines to indicate the way in which it proposes to exercise that power and to have regard to those guidelines in exercising that power.

Key Features of the Guideline

The draft Guideline is largely modelled on the existing Guideline on Exercising Power to Impose Pecuniary Penalty in Respect of Authorized Insurers under the Insurance Ordinance (Cap. 41) (GL18) which applies in respect of insurers.

The Guideline applies to "regulated persons", being licensed insurance intermediaries and responsible officers and persons concerned in the management of the regulated activities carried on by licensed insurance agencies/ licensed insurance broker companies.

According to the Guideline, the Insurance Authority considers a pecuniary penalty to be a more severe sanction than a reprimand, and the more serious the conduct or reason why a regulated person is determined not to be fit and proper, the more likely the Insurance Authority will impose a pecuniary penalty, and the higher it is likely to be.

The Guideline sets out the non-exhaustive factors that the Insurance Authority will consider when determining whether to impose a pecuniary penalty and the amount of the penalty, including, broadly:

  • the nature, seriousness and impact of the conduct
  • the behaviour of the regulated person since the conduct was identified
  • the previous disciplinary record and compliance history of the regulated person
  • other factors, such as the financial resources of the regulated person or the result of any civil or criminal actions against the regulated person.

To provide further guidance, the Guideline sets out non-exhaustive constituent elements of each of the above factors.

Consultation Conclusions

The SROs currently use a tariff-based approach; publishing types of misconduct and the corresponding maximum fine, and some respondents to the public consultation suggested this approach be taken under the new regime. The Insurance Authority had in the consultation paper proposed to adopt a non-tariff based approach in imposing pecuniary penalties and in the Consultation Conclusions stated that this continues to be its approach, and that the Guideline sets out overarching fining principles so individual circumstances can be taken into account.

Respondents to the public consultation generally agreed that it is important to introduce a set of unified penalty standards across the industry for the protection of policyholders, and supported the Insurance Authority's policy that it may publicise its decisions to impose pecuniary penalties, as this would allow the industry to discern the kinds of penalties imposed on regulated persons for various types of non-compliance or misconduct, including acting as a deterrent for misconduct by other regulated persons.

In relation to the nature, seriousness and impact of the relevant conduct to be considered by the Insurance Authority, taking on board feedback to the public consultation, the Insurance Authority has included dishonesty as one of the factors relating to the nature of conduct to be considered by the Insurance Authority. In relation to loss or risk of loss caused to others, the Insurance Authority removed the proposed qualifying language "where the risk was known or ought to have been known by the regulated person". This limb now focuses on the end result of the conduct, not whether the risk of loss was, or should have been, known. This approach is to protect existing and potential policyholders.

The Insurance Authority noted that there were various queries relating to investigation/disciplinary proceedings and requesting more details about the review and appeal process/proceedings and in respect of checks and balances. According to the Consultation Conclusions, the Insurance Authority considers these to be procedural matters and that it will address many of them separately rather than in the Consultation Conclusions.

The Consultation Conclusions confirm that the Guideline will not have retrospective effect. Alleged breaches of applicable requirements prior to 23 September 2019 will be considered and followed up by the Insurance Authority according to the applicable requirements in force at the time the breach occurred, and the Insurance Authority will be able to use the range of sanctions available to the SROs under the pre-23 September 2019 regime.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions