HK SFC licensing and compliance hints

SFC moves to One Island East at Quarry Bay

The SFC started its relocation to 54/F, One Island East, 18 Westlands Road, Quarry Bay, Hong Kong on 30 June 2020 and as of 6 July 2020 this is the SFC’s official address. According to the SFC Annual Report 2019-2020, the SFC managed to secure an eight-year lease which should significantly reduce its rental expenses.

Is the SFC asking firms about their COVID-19 business contingency measures?

The answer is yes. As mentioned in our June article, the SFC’s Intermediaries Supervision Department seems to have embraced remote routine inspections and has been asking clients to describe the details of their alternative business and operational arrangements during the COVID-19 outbreak and the impact thereof on their business and operations. The relevant obligation is set out in paragraph 36 of the Appendix to the SFC’s Management, Supervision and Internal Control Guidelines For Persons Licensed by or Registered with the Securities and Futures Commission, pursuant to which all licensed firms are required to implement an effective business continuity plan appropriate to the size of the firm to reduce the risk of business interruption.

OTC derivative clearing – list of financial services providers updated

On 24 June 2020, the HKMA and the SFC issued a joint consultation conclusions paper on the annual update of the list of financial services providers which will be designated under the clearing obligation for over-the-counter (OTC) derivative transactions for the purpose of the Securities and Futures (OTC Derivative Transactions – Clearing and Record Keeping Obligations and Designation of Central Counterparties) Rules. This list will be gazetted for implementation on 1 January 2021 (see Appendix B to the paper).

Does a manager need to notify the SFC if a fund it manages is involved in court proceedings?

The answer will usually be no, unless the fund manager itself is also named in the proceedings. Licensed corporations are only subject to an SFC notification obligation if the firm itself or any of its substantial shareholders, directors, responsible officers, or SFC-licensed subsidiaries is engaged in judicial or other proceedings (section 4(3) Schedule 3 Part 1 Items 7 and 1(a), 1(b), 1(c) and 1(d), and Schedule 1 Part 2 Item 2(f) of the Securities and Futures (Licensing and Registration) (Information) Rules).