Hong KongObtaining an SFC License in Hong Kong: Everything You Need to Know

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SFC License in Hong Kong is a crucial permit for individuals and businesses seeking to engage in regulated financial activities within the region. Under the oversight of the Securities and Futures Commission (SFC), obtaining this license is a necessary step to operate legally in Hong Kong’s fast-paced financial services industry. Whether you are an individual or a company planning to conduct regulated activities such as asset management, securities trading, or advisory services, acquiring the relevant license ensures compliance with local regulations. As you register company in Hong Kong, securing an SFC license will be key to establishing a solid foundation for your financial operations. 

What is SFC license in Hong Kong? 

  • An SFC license in Hong Kong is an essential official permit issued by the Securities and Futures Commission (SFC) that authorizes entities to engage in regulated activities within the securities and futures industry in Hong Kong. This legal requirement applies to both local and foreign companies operating in the region. Business owners seeking to conduct regulated activities must obtain a license from the SFC unless they qualify for one of the specific exemptions. These exceptions include being an authorized financial institution such as a bank or deposit-taking company, actively marketing to the public in Hong Kong, or being an individual performing regulated functions for a principal engaged in a regulated activity. 

What are the types of SFC license in Hong Kong? 

  • The SFC offers different types of licenses based on the specific regulated activities an entity plans to perform. Companies engaged in various activities may need multiple licenses to comply with the regulatory standards in place. 
  • Identifying the appropriate license for your company’s specific operations is crucial to meet Hong Kong’s securities and futures regulations. 

Some common types of SFC licenses and the regulated activities they cover include: 

Type 1: Dealing with securities 

  • This license is necessary for entities participating in the purchase or sale of securities, which encompass financial instruments such as stocks, bonds, and debentures, whether on behalf of clients or for their own trading purposes. 

Type 2: Dealing in futures contracts 

  • Entities aiming to engage in trading futures contracts in Hong Kong must acquire this license. Futures contracts can involve various underlying assets such as agricultural products, energy commodities, metals, or currencies. 

Type 3: Leveraged foreign exchange trading 

  • This license is essential for those involved in leveraged foreign exchange trading activities, such as forex (foreign exchange) brokerage or offering a platform for leveraged forex trading. 

Type 4: Advising on securities 

  • Entities offering guidance on securities investments to clients, including financial advisory firms or investment advisory companies, require this license. 

Type 5: Advising on futures contracts 

  • Entities providing advice on futures contracts, including research, analysis, and customized trading strategies for various asset classes such as commodities, currencies, or equity index futures, must secure this license. 

Type 6: Advising on corporate finance 

  • Entities providing strategic advice and support for complex financial activities such as mergers and acquisitions (M&A), capital raising, and restructuring for corporations, investors, and other entities need this license. 

Type 7: Providing automated trading services 

  • Entities delivering automated trading services, such as algorithmic trading or electronic trading platforms, must obtain a Type 7 license. 

Type 8: Securities margin financing 

  • This license is needed for entities involved in securities margin financing, which includes offering loans or credit facilities to clients for securities trading. 

Type 9: Asset management 

  • Entities managing portfolios of securities or futures contracts on behalf of clients must acquire this license. It encompasses activities related to asset management and investment. 

Type 10: Providing credit rating services 

  • Entities engaged in providing credit rating services, which evaluate the creditworthiness of issuers of financial instruments, need a Type 10 license. 

Key requirements for SFC license in Hong Kong 

  • Entities seeking an SFC license in Hong Kong must fulfil several requirements, including: 

Fit-and-proper criteria 

  • Before applying for an SFC license, a company’s directors, substantial shareholders, and key personnel must prove they are “fit and proper” to carry out regulated activities. This includes evaluating financial stability, integrity, competence, and experience. The SFC also conducts comprehensive background checks, including reviews of criminal records, credit histories, and past regulatory or legal issues. 

Business plan and financial resources 

  • The company must submit a detailed business plan outlining its proposed activities, organizational structure, and business model, including the regulated activities it plans to undertake. Additionally, the company must meet the SFC’s minimum financial requirements, demonstrating sufficient capital and resources for responsible and sustainable operations. 

Compliance policies and responsible officers 

  • The company must implement robust compliance policies and procedures outlining how it will adhere to all SFC regulations and obligations. Additionally, the company must appoint at least one Responsible Officer (RO) with an SFC license. The RO oversees the licensed activities and must meet fit-and-proper criteria with relevant experience. 

Record-keeping and regulatory reporting 

  • The company must keep accurate and comprehensive records of its business activities, transactions, and client information in compliance with SFC regulations. It must also provide regular reports to the SFC, such as financial statements, regulatory filings, and notifications of significant events, as mandated by the regulatory framework. 

Ongoing compliance 

  • The company is responsible for ensuring ongoing compliance with all relevant SFC regulations, which include the following aspects: 
  • Disclosure and transparency: The company must be transparent in its interactions with clients and investors, offering precise and prompt information as mandated by SFC rules. 
  • Anti-Money Laundering (AML) measures: The company is required to establish effective AML measures in line with SFC guidelines to combat financial crime. 
  • Annual inspection and examination: The SFC may perform annual inspections and examinations of the company to assess adherence to regulatory standards and the conditions of the SFC license. 
  • Steps to obtain SFC license in Hong Kong 

Step 1: Determine the type of license needed 

  • Determine the necessary license type by identifying the regulated activities (RA) your company plans to perform. Choose from the 12 defined activities, such as dealing in securities, asset management, or advising on securities, to apply for the appropriate SFC license. Tetra Consultants’ experts can assist you in deciding which license your company requires. 

Step 2: Ensure eligibility 

Step 3: Prepare required documents 

  • To obtain an SFC license in Hong Kong, gather the necessary documentation such as business plans, compliance manuals, application forms, and other supplements. These documents must relate to the licensed applicant, proposed responsible officers, and substantial shareholders. 
  • Tetra Consultants can assist you by drafting the required legal documents for your application. We offer various other services including offshore financial licenses and more, ensuring a smooth and comprehensive approach to the licensing process. 

Step 4: Appoint responsible officers 

  • Tetra Consultants will further proceed to assist your company in appointing two responsible officers to supervise regulated activities. At least one of them must be an executive director and available at all times to oversee the business. We will guide you through this process to ensure compliance with SFC requirements and support your company’s smooth operations. 

Step 5: Submit application 

  • Further, Tetra Consultants will help you submit your application to the SFC, ensuring it includes the prescribed fee and all necessary supporting documents. We streamline the process for you, facilitating a smooth and efficient application submission to meet SFC requirements. 

Step 6: Undergo fit-and-proper assessment 

  • Tetra Consultants will assist you during the SFC’s fit-and-proper assessment by evaluating factors such as your financial status, qualifications, integrity, and ability to conduct regulated activities competently and fairly. We guide you through this process to ensure your compliance and increase your chances of a successful assessment. 

Step 7: Wait for approval 

  • The time it takes to process an SFC license application can vary depending on the completeness of the submission and the nature of the services offered. 

Conclusion 

  • Obtaining an SFC license in Hong Kong is a crucial step for any company looking to operate in the securities and futures industry. Tetra Consultants streamlines the process by guiding you through each step, from gathering required documents to ensuring compliance. With our expertise, you can secure your license efficiently and confidently. 
  • Contact us to know more about SFC license in Hong Kong. Our experts will revert back in 24 hours. 

Tetra Consultants

Tetra Consultants is the consulting firm that works as your advisor and trusted partner in your business expansion. We tell our clients what they need to know, instead of what they want to hear. Most importantly, we are known for being a one-stop solution for our valued clients. Contact us now at enquiry@tetraconsultants.com for a non-obligatory free consultation. Our team of experts will be in touch with you within the next 24 hours.

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