Hong Kong SFC licensing and compliance hints

Alternative way of taking licensing exams

Individuals who seek licensing or registration with the Securities and Futures Commission (SFC) need to satisfy the SFC’s competence requirements, including passing the exams overseen by the Hong Kong Securities and Investment Institute (HKSI).

Other than taking the exams physically in Hong Kong, Mainland China and Taiwan (see our newsletters of October and November 2020), individuals who are subject to travel restrictions may now submit a request to the HKSI to sit the exams remotely. Such request should be sent to the HKSI at exam@hksi.org, with the following information:

  • Full name of the individual;
  • Name of the exam paper to be taken; and
  • Reasons why the individual cannot come to Hong Kong.

Common mistakes in licence applications

Making a licence application to the Securities and Futures Commission (SFC) is more than a “check-the-box” exercise, and requires the applicant’s full understanding of how the SFC licensing requirements apply to its proposed business activities. Below are some common mistakes, which applicants can easily make in their applications; and some tips to facilitate the filing process.

1. 

Wrong type of regulated activity

There are currently ten types of regulated activities, the conduct of which in Hong Kong will require an SFC licence. These regulated activities can be divided into the following categories, and each of them have their distinct features:  

  • dealing and trading types of regulated activities: Type 1 (Dealing in Securities), Type 2 (Dealing in Futures Contracts), Type 3 (Leveraged Foreign Exchange Trading), Type 7 (Providing Automated Trading Services) and Type 8 (Securities Margin Financing); 

  • advisory types of regulated activities: Type 4 (Advising on Securities), Type 5 (Advising on Futures Contracts) and Type 6 (Advising on Corporate Finance); and

  • other types of regulated activities: Type 9 (Asset Management) and Type 10 (Providing Credit Rating Services) 

Applicants need to ascertain the scope of their proposed business activities and match that with the licences they apply for. This often requires a detailed analysis of how the activities will be undertaken in their entirety and to what extent certain functions are ancillary and whether they can be undertaken in reliance on the main licence.

2.

Incomplete application forms and no supporting documents

Different application forms require different information and supporting documents. Applicant should first read the guidance notes of the application forms in order to figure out which sections and what documents they need to complete and provide for their applications.

3. 

No explanation for a fitness and properness disclosure

Applicants are usually required to answer questions (via a tick-the-box approach to various questions) relating to their fitness and properness in the forms. Where the answer to any of these questions is yes (e.g. have you ever been charged or convicted of a criminal offence other than a minor offence, such as traffic contraventions with a fixed plenty or littering), the applicants will need to explain why they remain fit and proper to be licensed. Please refer to the SFC’s Fit and Proper Guidelines for the SFC’s position in determining an applicant’s fitness and properness.

4. 

No employment visa

Where an applicant requires a visa to work in Hong Kong, the SFC will not grant a licence before the applicant obtains a work visa. Therefore, the applicant should submit a visa application before or at the same time as applying for an SFC licence.

5. 

Director applying for a representative licence

A director of a licensed corporation who actively participates in, or is responsible for directly, supervising the licensed corporation’s regulated business is considered to be an executive director for the purposes of the Securities and Futures Ordinance and will need to be approved by the SFC as a responsible officer of the licensed corporation. An executive director of a licensed corporation cannot seek to apply to be a representative of the licensed corporation and must assume the role of responsible officer.