⦿ Executive Snapshot

• What: Hong Kong's banking and insurance sectors are implementing a cross-sector reference checking arrangement to address misconduct in financial professionals.
• Who: Hong Kong Monetary Authority (HKMA) and Insurance Authority (IA).
• Why it matters: This initiative aims to mitigate the risks associated with professionals concealing past misconduct, enhancing the integrity of the financial services sector.

⦿ Key Developments

• The Mandatory Reference Checking Scheme for the banking sector was introduced in May 2023 and expanded in September 2025.
• The insurance sector launched its reference checking scheme in September 2024, broadening its scope in early 2026.
• Phase 3A of the cross-sector arrangement will commence on July 1, 2026, requiring reference checks for individual insurance intermediaries.
• Standardized templates will be used to request conduct-related reference information from the past seven years.
• Banks must respond to reference requests within one month, while insurance entities must respond within 15 calendar days.

⦿ Strategic Context

• The initiative addresses the “rolling bad apples” phenomenon, where financial professionals move between sectors without disclosing past misconduct.
• Both sectors have operated independent reference checking frameworks, which are now being integrated for more comprehensive oversight.

⦿ Strategic Implications

• Immediate consequences include enhanced scrutiny of financial professionals during transitions between sectors, potentially reducing instances of misconduct.
• Long-term implications may lead to a cultural shift in the financial services industry towards greater accountability and transparency.

⦿ Risks & Constraints

• Potential risks include regulatory compliance challenges for institutions in implementing the new procedures effectively.
• There may be concerns regarding the reliability and completeness of conduct records accessible across sectors.

⦿ Watchlist / Forward Signals

• Implementation of Phase 3A on July 1, 2026, will be a critical milestone for assessing the effectiveness of the arrangement.
• The review of the implementation at the end of 2026 will inform the development of Phase 3B, potentially expanding the scope of reference checks further.