SFC licensing and compliance hints

Do family offices need to obtain type 9 licences to manage family assets?

Under the Securities and Futures Ordinance (SFO), and in particular the definitions of the various activities regulated under the SFO, whether a family office requires a type 9 licence will simply depend on how the family office provides these asset management services. The SFC issued a “Circular on the licensing obligations of family offices” on 7 January 2020 to respond to enquiries it has received from industry participants and their professional advisors.

The circular makes it clear that a single family office would not need to obtain a type 9 licence in the following two scenarios:

(1) 

where a trustee is appointed to hold a family’s assets on trust for the family members and the trustee operates the family office as an internal unit; because the trustee is not providing asset management services to a third party; and

(2) 

where a family office is established as a separate legal entity which is owned by a trustee or another company that holds the family’s assets; because the “wholly-owned group company” licensing exemption will apply.

A multi-family office which manages the assets of more than one family would however need to obtain a type 9 licence because the “wholly owned group company” licensing exemption would not by definition apply. Similarly, a multi-family office providing pure investment advisory services or trading services, would usually require a type 4/5 or type 1/2 licence.

If you have a family office already, or are thinking of setting up a family office in Hong Kong, please feel free to contact us for a complimentary consultation as to whether an SFC licence is likely to be required.

Do itinerant professional licensees need to submit SFC notifications?

Some may be surprised to hear that the answer is yes, because the situation of an itinerant professional licensee is similar to that of a “normal” licensee. In other words, any overseas based staff for whom your firm has obtained an itinerant professional licence is subject to the ongoing SFC notification obligations under the Securities and Futures (Licensing and Registration)(Information) Rules.

Temporary licensees are also subject to the same obligations but because a temporary licence is only effective for the duration of the visit, changes triggering a notification obligation are less likely to occur.

In deciding whether colleagues who visit Hong Kong to do capital raising, etc., should take the itinerant professional licence or the temporary licence route, firms should also take this notification obligation into account because some people find full compliance relatively onerous.

Please let us know if you wish to obtain advice as to the different local individual licensing options available for overseas visitors.

The SFC is getting stricter with CPT. Do I need to do anything more than keep CPT attendance certificates to prove compliance with the Guidelines on CPT?

Yes, because CPT attendance certificates only show that you attended a training course. You also need to ensure that the subject matter of the course was relevant to the role/function you perform as a licensed individual. CPT course providers do not and cannot take account of each attendee’s job description in deciding whether or not to issue a CPT attendance certificate. The SFC Guidelines on Competence include in Section 7 a list of the topics which are relevant for CPT purposes. For more details on the CPT requirements, please refer to our August 2019 newsletter (SFC licensing and compliance hints: How are you getting with your CPT hours).

The SFC is now requiring licensed individuals to personally confirm in their annual returns that they have undertaken the required number of CPT hours and retained records of their CPT activities so if you are not sufficiently familiar with the CPT requirements, it would be timely for you to spend some time looking at these items.