Open letter to HKMA and the SFC on matter concerns JP Morgan summer camp internship program

To:
Mr. Norman Chan, Chief Executive of Hong Kong Monetary Authority
Mr. Carlson Tong, Chairman of the SFC
Mr. Ashley Alder, Chief Executive Officer of the SFC

On Nov 17, 2016 the U.S. Securities and Exchange Commission (SEC) reached a settlement agreement with JP Morgan Chase & Co and its Hong Kong subsidiary JPMorgan APAC regarding the scandalous hiring of Chinese 'princelings'. The SEC's summary findings report, also dated Nov 17, 2016, disclosed the existence of a 'summer camp' internship program (Program) in 2009-2010 within JPMorgan APAC. Candidates for this Program were selected based on client relationships. To successfully refer a candidate to the Program, a client should generate at least USD3mil of fee income for JPMorgan APAC. JPMorgan allows the participants to list the Program on their resumes. 

Recently the local media revealed that, back in 2010, Ms Chung-Yan Leung (Ms Leung), youngest daughter of the current Chief Executive of Hong Kong, Mr CY Leung (CE), who was then the Covenor of the Executive Council of Hong Kong, has participated in the Program. Ms Leung was at that time a secondary school student. 

On Nov 23, 2016, the CE's Office, in response to the media's enquiries, stated that Ms Leung's internship with JPMorgan did not involve money, and was not related to the CE's public services or his acquaintance with Mr Fang Fang, the then Managing Director at JPMorgan Securities Asia.

Financier Conscience, as a group of financial services professionals, is concerned with Ms Leung's internship. As Ms Leung's father is the CE, we believe the various relevant regulatory bodies in Hong Kong should investigate and be thoroughly acquainted with the details of the hiring. This is to ensure JPMorgan's admittance of Ms Leung to the Program was in line with the firm's stated compliance requirements as well as the local legal requirements.

The SEC's summary findings report disclosed that a minimum fee income of USD3mil is required for clients who refer participants to the Program.  Conservatively assuming a fee rate at 1% or below of the size of investments or other types of investment banking deals, this would imply the referee should bring in deals of at least hundred millions of USD. Such deal amount is significant.  This incident also involved a senior public service personnel. Therefore, we believe, based on the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance, the Securities & Futures Ordinance, and the Banking Ordinance, the SFC and HKMA is obliged to investigate the following areas:

1. Was JPMorgan APAC fully compliant with its internal regulations in hiring Ms Leung? Did JPMorgan APAC breach any relevant Hong Kong law during the process?
2. Did the CE attempt to influence JPMorgan APAC's hiring decision-making process, on the back of his position authority premised upon his being the then Covenor of the Executive Council of Hong Kong?
3. Did the CE or Ms Leung provide any monetary or non-monetary return to JPMorgan APAC in relation to the Program admittance? Was there any breach of banking or securities related laws, or anti-corruption laws?
4. Did any senior management member of JPMorgan APAC, including Mr Fang Fang, the firm's ex-Vice Chairman for Asia and CEO for China, breach any relevant Hong Kong law?

A fair and un-corrupt environment is absolutely crucial for a healthy financial and banking sector, and is critical for the finance professionals' and investors' interests. Financier Conscience sincerely urges the SFC and the HKMA to investigate JPMorgan APAC's internship hiring process of Ms Leung to ensure such an environment is properly upheld.

Yours sincerely,

Financier Conscience