Insights into the licensing process

The Process Review Panel (PRP) for the Securities and Futures Commission (SFC) published its annual report in January 2020 covering the work of the PRP in 2018-19. The PRP is an independent panel established to review the SFC’s operational procedures and to determine whether the SFC has followed its internal procedures and operational guidelines to ensure consistency and fairness in carrying out its work.

The report notes that the SFC has implemented some changes to smooth the licensing process. One of them is to flatten the hierarchy of the processing teams. Assistant managers (responsible for handling routine cases) and managers (responsible for handling complex cases) now report directly to senior managers, which should expedite the approval process. Another change is that the SFC now only conducts external vetting on persons licensed overseas who have a close link to the corporate applicant, which should avoid delays pending vetting replies from overseas regulators. However, the SFC still searches online databases of overseas regulators and other intelligence agencies to conduct external vetting, and if these reveal issues bearing on the fitness and properness of the applicant, the SFC will make enquiries of the relevant overseas regulator.

The report notes that where the SFC considers an applicant to be high risk (i.e. the SFC’s vetting process reveals information which gives rise to concerns that the licensee may be prone to be in non-compliance or involved in market misconduct), the case will be escalated to senior management for guidance and direction. Such intelligence is also shared with colleagues in the Intermediaries Supervision Department, and the licensee may be subject to closer monitoring.