Hong Kong SFC licensing and compliance hints

Compliance with SFC circular on the use of external electronic data storage

Intermediaries who store regulatory records exclusively with overseas affiliates and/or with an electronic data service provider (EDSP) must take action to ensure compliance with the SFC’s circular of 31 October 2019 and subsequent FAQs issued on 10 December 2020. A delay in notifying the SFC of such arrangements without reasonable excuse and seeking its approval under Section 130 of the Securities and Futures Ordinance risks potential regulatory sanction going forward.

Review of arrangements where Responsible Officers and Licensed Representatives continue to work from overseas due to Covid-19

Where a licensed entity has previously notified the SFC of the implementation of contingency measures to enable Responsible Officers or Licensed Representatives to work from home overseas, any changes to such arrangements should be kept under review as well as the requirement to keep the SFC updated if the situation changes. For example, if a Responsible Officer has decided not to return to live and work in Hong Kong then the SFC should be notified and their regulatory status updated to that of an overseas Responsible Officer. Should this occur, licensed entities need to ensure that they can continue to comply with the Responsible Officer requirements.

SFC routine inspections

The SFC continues to carry out routine inspections of licensed entities although since Covid-19, these are being conducted predominantly on a remote basis. The SFC issues a letter stating its intention to commence a routine inspection on a specified date. If the proposed date for commencement of an inspection is genuinely not feasible for such licensed entity then we recommend you immediately contact the SFC to discuss the position. The fact that senior management are working remotely is not a sufficient reason for seeking to delay an inspection.