Competence requirements for asset managers

On 23 June 2017, the Securities and Futures Commission (SFC) issued a circular to clarify the competence requirements for Type 9 (asset management) licence applicants. 

The circular is a follow-on from, and has wider application than, the circular SFC Adopts a Pragmatic Approach to Licensing Fund Managers dated 11 June 2007 (2007 Circular). Whilst recapping the basic requirements for a Type 9 corporate applicant of maintaining (i) a proper business and governance structure; (ii) good compliance and internal controls systems; and (iii) qualified personnel, the SFC repackaged the following pragmatic measures for an individual applying to be a Type 9 responsible officer (Applicant): 

1. Recognition of experience 

   When considering the industry experience of the Applicant, in addition to experience in research, private equity and proprietary trading as stated in the 2007 Circular, the SFC recognises experience in discretionary account management activities undertaken wholly incidental to the conduct of securities dealing activity of an Applicant who is an existing Type 1 licensee.

2. Exemptions from passing local exams

• An Applicant intending to manage private investment funds may be exempted from passing local regulatory framework papers 1 and 6 (LRFPs) if the Applicant:
• has over eight years of industry experience in recognised local or overseas markets; or
• is registered or licensed in the United Kingdom or the United States for investment management or advisory business.

     The licensed corporation of the Applicant will be subject to restriction of providing services to
     professional investors only.

•  An Applicant intending to manage only discretionary accounts may be exempted from passing LRFPS if the Applicant is an existing Type 1 responsible officer and has five or more years of related experience in managing discretionary accounts over the past eight years.

  The LRFPs-exempted Applicant will only be allowed to engage in discretionary account management. If the Applicant also serves as a Manager-In-Charge of the Overall Management Oversight function of a licensed corporation, the licence corporation will be subject to the same restriction. 

An Applicant must complete an additional five continuous professional training hours on local regulatory knowledge of Type 9 regulated activity (and not general market knowledge) within 12 months after approval unless the applicant has already completed the same within six months preceding the application.