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If you’re looking to conduct SFC regulated activities in Hong Kong and thinking of travelling through the ever-growing financial sector, the SFC licensing process can seem daunting. It’s therefore important for those wanting to capitalise on financial opportunities in the region to fully grasp the details of this process, staying compliant and setting themselves up for a successful future.
What are the major requirements for an SFC licensing application?
The key licensing requirements for obtaining an SFC license include:
Fitness and properness
Demonstrating to the SFC that it’s fit and proper in the following criteria:
- Financial status or solvency.
- Relevant educational or other qualifications or experience.
- Competent, honest, and fair.
- Reputation, character, reliability, and financial integrity.
Legal structure
To become licensed with the SFC, the legal structure must be in the form of a company incorporated in Hong Kong or an overseas company registered with the Registrar of Companies in Hong Kong under Part 16 of the Companies Ordinance. Sole proprietorships or partnerships will not be acceptable.
Office premises
You must have a suitable office premises from which to conduct a regulated activity (RA). In assessing whether office premises are appropriate, the SFC will mainly consider whether:
- the security of the premises is fit for purpose and there’s a proper segregated office area
- essential office equipment and telecommunication systems are situated in an area accessible only by the corporation’s personnel
- the corporation has taken sufficient actions / measures to avoid confusion to its clients due to the co-existence of other companies in the same premises
- confidential or non-public information and client privacy will be sufficiently safeguarded against unauthorised access or leakage
- the premises are always accessible for visit by regulators.
Responsible Officer (RO)
You need to appoint at least two ROs to directly supervise the conduct of each RA being applied for. For each RA, at least one RO must always be available to supervise the business and be an executive director of the corporation.
If the corporation has more than one executive director, all executive directors must be appointed as ROs.
All ROs are subject to fit and proper requirements.
Licensed representative (LR)
All personnel carrying on regulated activities need to be licensed as an LR. All LRs are subject to fit and proper requirements.
Senior management
Senior management of the corporation should hold the primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures. Senior management must include directors, ROs and Managers-In-Charge (MIC) of core functions.
Manager-in-Charge (MIC)
Designate one MIC for each of the eight core functions. MICs of overall management oversight function and the key business line function must be ROs.
The remaining MICs are appointed individual(s) who are responsible for operational control and review, risk management, finance and accounting, information technology, compliance, or AML / CTF.
An MIC can oversee more than one core function or appoint two or more individuals as MICs to jointly manage it.
Staffing resources
Appoint one compliance officer and / or operations manager with a finance, accounting, compliance, or risk management background.
An RO shouldn’t take up the compliance function of the corporation as the SFC expects for segregation of duties.
Financial resources
Maintain paid-up share capital and liquid capital at all times. These should be no less than the specified amounts according to the Securities and Futures (Financial Resources) Rules.
Compliance framework
Implement adequate and effective internal control procedures to protect operation and clients from financial loss caused by theft, fraud, and other misconduct.
It’s also important to design and implement anti-money laundering and counter-financing of terrorism policies, procedures, and controls to meet the relevant legal and regulatory requirements.
Exemptions
In the following cases, you may not be required to be licensed for certain RA(s) if such activities are performed wholly incidental to your carrying out of another regulated activity for which you are already licensed:
- Licensed for Type 1 RA and carry out Types 4, 6, and / or 9 RA provided that these activities are carried out wholly incidental to your Type 1 RA.
- Licensed for Type 2 RA and carry out Types 5 and / or 9 RA provided that these activities are carried out wholly incidental to your Type 2 RA.
- Licensed for Type 9 RA and carry out Types 1, 2, 4 and / or 5 RA provided that these activities are carried out wholly incidental to your Type 9 RA.
You may be exempted from requiring a Type 4, 5, 6 or 9 licence(s) when providing the:
- relevant advice or service solely to your wholly owned subsidiaries
- holding company which holds all your issued shares, or
- other wholly owned subsidiaries of that holding company, given that you only provide the relevant services to your group company in respect of their own assets.
What steps do I need to take to obtain an SFC license?
The licensing application process would commence following the submission of a written application together with completed prescribed forms and supporting documents as well as a prescribed fee. The SFC would examine, inter alia, the business plan, compliance functions, and financial status as well as other aspects of the corporation and its proposed regulated activity. It would then need to be satisfied that the substantial shareholders and ROs are fit and proper persons.
The SFC may also require submission of additional information and / or clarification of certain key issues identified during the process.
The regulator’s performance pledge for processing a licensing application for corporations is 15 weeks from formal acceptance. Depending on the completeness of the information provided and whether the SFC has concerns regarding the application, the licensing process would take approximately four to six months. This timeline may vary depending on several factors such as the complexity of the issues raised and the number of applications the SFC is processing at any particular time.
Major preparation items
- Determine the type of licence needed.
- Set up the corporation and ensure its eligibility.
- Open a bank account and secure suitable premises.
- Source suitable RO candidates and assess their fitness and properness.
- Prepare all relevant materials for the licensing application. This should include forms and supplements regarding proposed responsible officers and substantial shareholders.
Submit the licensing application to the SFC, including the application for approval of the proposed ROs.
Are the requirements different for a Type 1, 4, and / or 9 license?
When applying for a Type 1, 4 and / or 9 licence, all the key licensing requirements mentioned above should be fulfilled.
The following table outlines details of the respective financial resource requirements for type 1, 4 and 9 licences, respectively:
Table 3: Summary of financial resources requirements for Type 1, 4 and 9 licences
| SFC Licence | Minimum paid-up share capital | Minimum liquid capital
 |
| Type 1 | ||
| (a)Â Â Â in the case where the corporation is an approved introducing agent or a trader | N/A | HK$500,000 |
| (b)Â Â Â in the case where the corporation provides securities margin financing | HK$10,000,000 | HK$3,000,000 |
| (c)Â Â Â in any other case | HK$5,000,000 | HK$3,000,000 |
| Type 4 | ||
| (a)Â Â Â in the case where in relation to Type 4 regulated activity, the corporation is subject to the licensing condition that it shall not hold client assets | N/A | HK$100,000 |
| (b)Â Â Â in any other case | HK$5,000,000 | HK$3,000,000 |
| Type 9 | ||
| (a)Â Â Â in the case where in relation to Type 9 regulated activity, the corporation is subject to the licensing condition that it shall not hold client assets | N/A | HK$100,000 |
| (b)Â Â Â in any other case | HK$5,000,000 | HK$3,000,000 |
How can Bovill Newgate help you get licensed by the SFC?
If you’re looking to be licensed for the first time, or if you need to change your license, add a Licensed Representative, or Responsible Officer – we can help.
Our team of specialists can help you agree the scope and timetable of your regulated activities and determine which of these require licensing and financial criteria.
We’ll prepare and support your application by reviewing or drafting your financial projections and all the standard forms required for the pack and offer full quality assurance before you submit any documentation to the SFC.
While the SFC considers your application, we’ll review or prepare tailored policies, procedures, and a compliance monitoring plan. We can also train your staff to make sure everyone understands their responsibilities.
Get in touch if you’d like to get licensed for the first time, need to change your current license, or want to find out more about the licensing process.
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