A Comprehensive Guide to SFC Licences in Hong Kong
The Lanturn Team
Hong Kong SAR was ranked fourth globally in the recent
If you are interested in the recent updates on the fund industry in Hong Kong. You can check out Lanturn’s article: the
Types of SFC Licences
The Securities and Futures Ordinance (SFO) granted the SFC the power and authority to be the regulator of the securities and futures markets of Hong Kong. Every company or individual that doesn’t fall under the category of an authorised financial institution and plans on carrying out regulated activities (RA) in Hong Kong, is
Any firm or corporation that carries out a business in a “regulated activity” in Hong Kong must first be licensed by the SFC unless deemed exempted. An individual must first be registered as a licensed representative in order to perform a
The following are the different licences and what are considered regulated activities, under the
SFC Licence Type 1 - Relating to securities
SFC Licence Type 2 - Dealing in futures contracts
SFC Licence Type 3 - Leveraged foreign exchange trading
SFC Licence Type 4 - Advising on securities
SFC Licence Type 5 - Advising on futures contracts
SFC Licence Type 6 - Advising on corporate finance
SFC Licence Type 7 - Providing automated trading services
SFC Licence Type 8 - Securities margin financing
SFC Licence Type 9 - Asset management
SFC Licence Type 10 - Providing credit rating services
Common types of Regulated Activities and their licences
Dealing in Securities - SFC Licence Type 1
According to the SFO, to “deal in securities” is to create an agreement with another person, for the main purpose of the acquisition of securities or to gain the profit from the securities. A securities brokerage firm usually falls under Licence Type 1, while its brokers and dealers must become licensed representatives accredited to it.
Dealing in Futures Contracts - SFC Licence Type 2
The SFO defines “dealing in
Advising on Securities - SFC Licence Type 4 and Advising on futures contracts - SFC Licence Type 5
According to the SFO, to “advising on securities” is to provide advice or a suggestion in relation to the acquired or disposed securities. While “advising on futures contracts” pertains to providing advice or a suggestion to enter into a futures contracts, to issue analyses or reports, that will influence the parties decision to acquire or dispose of securities and to enter into a futures contract.
Asset Management - SFC Licence Type 9
As per SFO standards, real estate investment scheme management falls under “asset management”. Securities or futures contracts management also falls under “asset management”, services pertaining to the management of securities portfolio and futures contracts must acquire an SFC Licence Type 9. Hedge fund managers carrying investment responsibility on behalf of the hedge fund, will be required to obtain an SFC Licence Type 9. A hedge fund’s portfolio managers will have to be licensed representatives accredited to it, in order to perform the regulated activity.
SFC Licence Criteria
Most of the general public and investors in particular, would prefer to enter into a business agreement with people and organisations that are competent, fair and honest. In the financial sector, an entity that has been specially authorised by the regulating body of the government will inspire confidence that their investments are in good hands. Oftentimes, individuals and organisations licenced or registered with the government carry an assurance that they are financially sound, reputable and reliable.
Any applicant or individual wishing to obtain an SFC licence in Hong Kong, must be considered
1. Financial Status or Solvency
The SFC will find it unlikely to consider an individual as fit and proper, should they have any exposure to Receivership, Bankruptcy or any other similar proceedings. In relation to this, any individual who has failed to settle a judgement debt, is also unlikely to be considered fit and proper.
In the case of a corporation or an authorised financial institution that is subject to receivership, liquidation or other similar proceedings; or has failed to meet any judgement debt will also find it hard to be judged by the SFC as fit and proper. This ruling also extends to those who are unable to meet any financial or capital requirements applicable to it.
2. Educational, Experience and Other Qualifications
The SFC will take into account the education, experience and other related qualifications of the applicant against the nature of the regulated functions. Under the Fit and Proper Guidelines, an individual must be more than 18 years of age in order to enter the register maintained by the Hong Kong Monetary Authority (HKMA) or to apply to the SFC to become a licenced representative. An individual must also be able to demonstrate that he/she is able to perform the regulated activities efficiently and effectively while adhering to the
If you wish to know if you are qualified in regards to education, experience and other requirements in regards to this criteria. You may
3. Competency and Honesty
The applicant must be able to perform the regulated activities in compliance with all relevant laws, codes and guidelines promulgated by the SFC and other applicable Hong Kong regulators. A person must possess the ability to carry on the regulated activity honestly, fairly and in accordance with the Guidelines on Competence.
For individuals the SFC is not likely to be satisfied that a person is a fit and proper person if:
They had been a patient as defined in section 2 of the Mental Health Ordinance and assessed by the SFC as unable to carry out the inherent requirements of the regulated activity. The SFC takes into account the person’s past training, experience and qualifications, in the process of assessing the individual.
Has a history of being disciplined by a regulatory body, dismissed or requested to resign from any position for the reason of negligence, incompetence or mismanagement.
In the case of a corporation or an authorised financial institution. They shall not be deemed as fit and proper if the non-executive directors, key personnel (such as manager, officer, director, chief executive), substantial shareholders or other controllers are:
Unable to meet the Fit and Proper Guidelines.
Unable to demonstrate that it is competent to perform the regulated activities efficiently and effectively.
Its organisational structure and personnel are unable to comply with the legislative or regulatory requirements accordingly.
Its infrastructure and internal control systems are unable to avoid conflict of interest, manage risk effectively, and provide a proper audit trail.
4. Reputation, Reliability, Character and Financial Integrity
The SFC will find it unlikely to consider an individual as fit and proper if has been a party to an arrangement with a creditor involving a considerable amount. Similarly, an individual that was found to be of poor reputation, character or reliability, and dishonest shall also be deemed as unfit and improper.
In the case of a corporation or an authorised financial institution if they are found to have been served with a
The four aspects above are the fundamental basis for the SFC to consider upon each licence or registration application received. Once an applicant acquires the licence, they must continue to adhere to the Fit and Proper Guidelines together with the Guidelines of Competence. If you want more information regarding the licence exam that will be needed, our Lanturn Hong Kong fund specialists would be pleased to assist you with that.
Are you wondering if there is an SFC licence exam in Hong Kong? The Licensing Examination for Securities and Futures Intermediaries (LE) has been approved by the SFC. The purpose of the LE is to meet the competence requirements for individuals applying for the SFC licence as Representatives and/or Responsible Officers.
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SFC Licence Application Procedure
Applications are submitted to the SFC online through the
For individual accounts, their online application must be under the “Individual Account” category while for corporate applicants it shall be under the “sub-account of an Advisory Firm Account”. In regards to the applications by licensed corporations, registered institutions or responsible officers, they must be able to provide a resolution bearing the approval of the application to the SFC. The resolution must bear the approval directly from the board of directors or from their authorised person.
The status of your application through the account that you submitted your application on WINGS. Once your application is accepted, you will be required to pay the required application fee through the online payment facility on WINGS.
Here is the table for the required application fee on the more common regulated activities:
Type of application
Type of RA
Application fee amount
Licensed corporation (LC)
Types 1, 2, 4, 5, 9
HKD $4,740 per RA
Registered institution (RI)
Types 1, 2, 4, 5, 9
HKD $23,500 per RA
Types 1, 2, 4, 5, 9
HKD $1,790 per RA
Approval to become responsible officer
Types 1, 2, 4, 5, 9
HKD $2,950 per RA
The SFC processing of new applications take about 8 weeks for a standard licenced representative application. On the other hand, it will take around 10 weeks for a responsible officer application, while 15 weeks for a licenced corporation application.
Hong Kong SAR is one of the best countries to enter into the asset and fund management industry. Hong Kong is also ranked fifth globally in the
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