The Hong Kong SFC (Securities and Futures Commission) license is a crucial requirement for businesses and individuals engaging in regulated financial activities in the region. This license grants permission to participate in specific financial activities, ensuring compliance and credibility in the industry.
This comprehensive guide will cover various aspects of the Hong Kong SFC license, including its regulated activities, exemptions, application procedures, essential requirements, and the typical processing time.
What is a Hong Kong SFC License?
The Hong Kong SFC license is necessary for organizations and individuals intending to engage in regulated financial activities within the city. The Securities and Futures Ordinance (SFO), which governs this license, certifies conformity with the strict rules established by the SFC.
In essence, this license grants formal permission to engage in specific financial activities, including trading securities and futures contracts, which fall under the watchful eye of the SFC. It is a testament to one’s commitment to upholding the industry’s integrity, transparency, and ethical conduct standards.
10 Types of Regulated Activities for a Hong Kong SFC License
The Hong Kong SFC license encompasses ten distinct types of regulated activities, each defined as the following:
Type 1 – Dealing with Securities
Type 2 – Dealing in Futures Contracts
Type 3 – Leveraged Foreign Exchange Trading
Type 4 – Advising on Securities
Type 5 – Advising on Futures 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
Why You Need a Hong Kong SFC License?
A Hong Kong SFC license signals to clients and investors that you are duly authorized to provide regulated financial services in Hong Kong. Failure to obtain these licenses can result in significant penalties and legal repercussions.
If your corporation is involved in a regulated financial activity in Hong Kong, obtaining a Hong Kong SFC license is a legal obligation. In addition, if your corporation actively promotes financial services to the public, whether within Hong Kong or from an international location, and these services would qualify as regulated activities in Hong Kong, acquiring an SFC license is mandatory.
You also need a Hong Kong SFC license if you’re an individual doing a regulated activity for a licensed company (not a financial institution) conducting a regulated business. If that’s the case, you must be a licensed representative for that company.
Exemptions from the Hong Kong SFC License
Exemptions from the Hong Kong SFC license can save businesses time and money, but it’s essential to understand the requirements before applying. Exemptions include the following:
- Incidental Exemption – If your business already holds a license for one regulated activity and wishes to conduct another closely related activity, you may not need an additional license if the latter is performed wholly incidental to the former.
- Margin Financing Exemption – If your business is licensed for securities dealing (Type 1), you do not need an additional license for securities margin financing (Type 8). However, meeting stricter financial resource requirements is necessary.
- Credit Rating Exemption – If your business creates credit scores for internal usage, these ratings might not be considered “providing credit rating services” under the SFO.
- Professional Investor Exemption – If you exclusively deal with experienced investors, you may not need a futures or securities dealing activities license.
- Group Company Exemption – If your company only works with other wholly owned subsidiaries, your holding company, or other wholly owned subsidiaries, it qualifies as a “Group Company Exemption”. It can offer advisory or asset management services.
- Professional Exemption – For professionals like solicitors, counsel, or accountants, the “Professional Exemption” allows them to provide certain incidental services to their primary practice without obtaining additional licenses.
- Broadcaster and Journalist Exemption – Broadcasters and journalists may not require licenses for specific regulated activities if they provide advice or reports through publicly available media.
- Trust Company Exemption – Trust companies have exemptions related to dealing in securities and investment advisory or asset management activities when these services are incidental to their trustee duties.
- Leveraged Foreign Exchange Trading Exemption – Approved financial institutions are exempt from registering for leveraged foreign exchange trading under particular conditions outlined in Schedule 5 of the SFO.
How to Apply for a Hong Kong SFC License?
The company must legally register in Hong Kong or overseas to apply for a Hong Kong SFC license. It must be registered with the Companies Registry if it is located overseas.
The application process includes a “fit and proper” assessment, which evaluates the applicant’s financial stability, educational qualifications, relevant experience, competence, reputation, character, reliability, and financial integrity.
All licensed companies must appoint responsible officers, including an executive director, a board member, or an employee directly involved in business supervision. The executive director oversees the company’s compliance with SFC regulations. At least one responsible officer must be on call to manage business operations.
Requirements for a Hong Kong SFC License
The application process is rigorous and requires careful attention to detail. The following supporting documents are required:
- The appropriate application form tailored to your business activities
- Comprehensive compliance manuals outlining your adherence to SFC regulations
- A well-structured business plan highlighting your understanding of the local market and growth strategies
- Any supplementary documents relevant to your business operations
Ensuring all submitted documentation pertains directly to the licensed applicant and any proposed responsible officers and substantial shareholders is essential. Depending on the license type and your intended business activities, a prescribed fee is also required as part of the application process. Timely payment of these fees is essential to prevent delays in processing.
How Long It Takes to Get a Hong Kong SFC License?
It takes about 15 weeks to get a Hong Kong SFC license. However, the processing time may still vary depending on your application’s complexity and the reviewing officer’s workload.
You can expedite the process by appointing a responsible officer, which takes about ten weeks, or by applying for a provisional license, which takes about seven business days.
To ensure a timely application, ensure your application is comprehensive and accurate. You can also consult with professionals who are familiar with SFC licensing procedures.
How We Can Help: Our Company Secretarial Service
To navigate these regulations effectively, seeking guidance from experts well-versed in Hong Kong’s regulatory landscape is advisable. At SJH Global, we offer the expertise needed to guide your business. Even though SJH Global may not provide Hong Kong SFC License service, we provide company secretary service ensuring your compliance and business success in Hong Kong.
Hong Kong SFC License - FAQs
Typically, businesses in Hong Kong that carry out regulated financial activities need an SFC license.
Yes, various types of SFC licenses are tailored to different financial activities, such as dealing in securities, futures contracts, and asset management.
In most cases, no. Engaging in regulated financial activities without the required license is illegal and subject to penalties.