Licensing and Registration of Intermediaries and Individuals
This domain tests who needs which permission to carry on a regulated activity in Hong Kong, how the SFC and HKMA divide that work, and the continuing obligations that follow licensing.
Two routes, one standard
- Corporations and individuals are licensed by the SFC; authorized institutions are registered with the HKMA and their staff approved as relevant individuals.
- There are 13 regulated activities. Core examples: Type 1 dealing in securities, Type 2 dealing in futures contracts, Type 4 advising on securities, Type 6 advising on corporate finance, Type 8 securities margin financing, Type 9 asset management, Types 11 and 12 for OTC derivative products and client clearing.
- A licence is activity-specific and may carry conditions. Dealing includes actively marketing to the Hong Kong public, so a licence can be triggered without an office in Hong Kong.
Corporate applicants
- Must be incorporated in Hong Kong, satisfy the fit and proper test in s.129 (financial status, education and experience, competence, reputation, and adequate resources and controls) and meet the capital requirements in the Financial Resources Rules.
- Must have at least two Responsible Officers for each regulated activity, at least one of whom is an executive director, and at least one RO available at all times to supervise the business.
- Substantial shareholders (10% or more of shares or voting power) must be approved.
Individuals
- Responsible Officers are approved under s.125; Licensed Representatives under s.120. Competence means qualifications, industry experience and passing a recognised examination, not the examination alone.
- Continuing Professional Training under the SFC Guidelines is 10 hours per calendar year for representatives and 12 for Responsible Officers.
Worked example
A new firm applies for Types 1 and 4 and appoints one individual, who is an executive director, as RO for both activities. That is not enough: two ROs are needed for each regulated activity. The same person may act as RO for both Types 1 and 4, but the firm still needs a second approved RO, and at least one RO must be available at all times to supervise.
Traps
- Assuming one licence covers every activity a firm undertakes.
- Forgetting that an RO is approved for particular regulated activities, not the firm as a whole.
- Confusing the 10% substantial shareholder approval with SFC approval of every director.
- Treating examination passes as sufficient competence without experience.