SFC License Requirements in Hong Kong

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Every company or individual that plans on carrying out regulated activities (RA) in Hong Kong is required to apply for the relevant type of RA license from the Securities and Futures Commission (SFC) under the Hong Kong regulatory regime.If your company fits this description, it needs to be licensed too. Additionally, if you are the individual supervising or carrying out these regulated activities, you too need to obtain a relevant SFC license under the SFO.

 

Keep reading to find out more about the SFC licensing regime and its requirements.

Why is the SFC license relevant to your business?

When a business owner wants to carry on regulated activities in Hong Kong, they need to seek license or registration with the Securities and Futures Commission (SFC) unless they fall within one of the specific exemption categories.

You will need a license unless you: 

  • are an authorized financial institution (bank or deposit-taking company) and you carry on a business in one or more regulated activities
  • actively market to the public any services that you provide that could constitute a regulated activity (if provided in Hong Kong)
  • are an individual performing a regulated function for your principal in relation to any regulated activity

SFC license types for regulated activities

A company (or an individual) should apply for one or more RA licenses to conduct the proposed regulated activities depending on the nature of their business. Regulated activities (RAs) have been defined in the SFO and comprise of 12 types of activities. 

These include:

  • Type 1 Dealing in securities
  • Type 2 Dealing in futures contracts
  • Type 3 Leveraged foreign exchange trading
  • Type 4 Advising on securities
  • Type 5 Advising on future contracts
  • Type 6 Advising on corporate finance
  • Type 7 Providing automated trading services
  • Type 8 Securities margin financing 
  • Type 9 Asset management
  • Type 10 Providing credit rating services
  • Type 11 Dealing or advising in OTC derivative products (not yet in operation)
  • Type 12 Providing clearing agency services for OTC derivatives transactions

The new Type 12, Part 1, Schedule 5 added by the Securities and Futures (Amendment)  Ordinance 2014 came into operation on 1 September 2016, in so far as it relates to paragraph (c) of the new definition of excluded services in Part 2 of Schedule 5. Please see paragraph (g) of the Securities and Futures (Amendment) Ordinance 2014 (Commencement) Notice 2016 (L. N. 27 of 2016). 

Exemptions

As specified by the SFC, there are various common situations where exemptions from licensing requirements may apply under the SFO.

For instance, if you have obtained a type 9 license (asset management) regulated activity and you wish to carry out type 2 (dealing in futures contracts) and/or type 5 (advising on futures contracts) regulated activity, you won’t need to be separately licensed for these activities provided that they are carried out solely for and incidental to the asset management business.

In other words, a fund manager who places orders to deal or provide investment advice/research reports would only require a type 9 license to manage their clients’ portfolios of securities and/or futures contracts. 

Other exemptions include the professional investor exemption and group company exemption.

How to apply for an SFC license?

In order to apply for an SFC license, a company has to be incorporated in Hong Kong or registered with the Companies Registry of Hong Kong (non-Hong Kong companies).

When assessing a licensing application (both for individuals and companies), the SFC examines if the licensing applicant is fit and proper for the purpose of licensing.

Some of the factors that affect the final decision include:

  • financial status or solvency
  • educational or other qualifications or experience related to the nature of work roles (of a given company)
  • capacity to execute the regulated activity competently, lawfully, and fairly
  • reputation, character, reliability, and financial integrity of the applicant and other relevant individuals

In addition, every licensed company needs to appoint two responsible officers to directly supervise the conduct of every regulated activity. 

At least one of the responsible officers has to be an executive director (a board member or an employee directly involved in the business supervision). Also, at least one of them has to be available at all times to supervise the business.

Required documents

In order to file an application, a licensing applicant is required to pay a prescribed fee with all the required supporting documents. 

These include:

  • business plans
  • compliance manuals
  • application forms
  • other supplements

All of the documentation has to be related to the licensed applicant and its proposed responsible officers and substantial shareholders. 

Timing

The time needed for the SFC to process the application depends on the quality and completeness of the application and supporting documents that are submitted.

Bear in mind that the SFC has a performance pledge for processing applications. The processing time from the date the application is formally accepted by the SFC can vary depending on various factors:

  1. types of service or product you provide
  2. quality and completeness of your application
  3. quality of the supporting documents
  4. subsequent changes made to your application
  5. time necessary for individual applicants to obtain Hong Kong employment visas
  6. time needed for a capital injection to meet the financial resources requirements
  7. time necessary for other regulatory bodies to respond to vetting requests where applicable
  8. your response time to provide any further information requested
  9. number of applications being processed at any particular time 

These are estimates provided by the SFC:

  • Licensed corporation application 15 weeks (expected processing time)
  • Responsible officer application 10 weeks
  • Normal licensed representative application 8 weeks
  • Provisional licensed representative application 7 business days

Final thoughts

If you plan on applying for the SFC license examination in Hong Kong, carefully consider this brief guide a few times before you file an application. It is important that you get everything right and thus minimise the processing time and potential mistakes.

 

View this guide as a part of your SFC license search where you will learn something useful about each SFC license type and requirement.

 

Maybe all of this seems too complicated to you, and we understand if that is the case. If you are uncertain about any aspect regarding the SFC license and requirements, feel free to contact us here!

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