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SFC Compliance & Licensing

As investment activities of securities and futures are governed by the SFC, it is important for stakeholders to operate with good support from a legal team which has good technical knowledge, good relationships with the regulatory bodies and an intuitive grasp of the application of regulations. Our Asset Management & Funds team has solid experience in providing compliance and regulatory requirements for licensed corporations or persons, fund management companies, hedge fund managers and different types of financial institutions in Hong Kong and the PRC.

We provide valuable input and offer proactive and practical compliance solutions and recommendations to fund managers, private equity firms and independent financial advisors so that they are able to meet with the regulatory obligations under local licensing and compliance requirements.

For licensing, we provide assistance, guidance and advice throughout the entire licensing process. As for compliance, we offer off-site and on-site evaluation on the effectiveness of the compliance system and control currently in place.

If you would like to know more about our Asset Management & Funds practice or how we can help your business, please contact us at (852) 2810 1212 or at cc@onc.hk.

Please refer to our articles in ‘Knowledge’

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SFC provides licensing guidance for private equity firms and family offices
In Hong Kong, there is a lack of specific licensing requirements for both private equity firms (“PE firms”) and family offices. The Securities and Futures Ordinance (Cap. 571, the “SFO”) provides for an activity-based licensing regime for entities and persons carrying on regulated activities (“RAs”). Whether specific licenses are required for carrying on the activities of any given PE firm or family office will depend on the scope of business and the power conferred on the management of the entity. In response to the enquiries from industry participants and their professional advisers, the Securities and Futures Commission (the “SFC”) has recently issued two circulars on the licensing obligations of PE firms and family offices, respectively, when conducting business in Hong Kong. Two separate email enquiry mailboxes have also been set up by the SFC to handle enquiries in relation to the licensing of PE firms (at enquiry.pefirm@sfc.hk) and family offices (at enquiry.familyoffice@sfc.hk). In the circular to PE firms, the SFC provides guidance on the licensing requirements for general partners of PE firms’, investment committee members and fund marketing activities. This circular also clarifies how the SFC assesses PE firms’ discretionary investment authority and investments in securities of private companies as well as the industry experience requirements for their responsible officers. On the other hand, in the circular to family offices, the SFC provides guidance on how its licensing regime applies to family offices carrying out asset management or other services in Hong Kong. Further, this circular explains the application of the SFC’s licensing regime for both single and multi-family offices.
SFC’s response to initial coin offerings in Hong Kong
On 19 March 2018, the Securities and Futures Commission (the “SFC”) published a press release in relation to its regulatory action taken against Black Cell Technology Limited (“Black Cell”), an Initial Coin Offerings (“ICO”) issuer. As a result of the action taken, Black Cell has halted its ICO and undertaken not to devise, set up or market any scheme that constitute collective investment scheme (“CIS”) as defined under the Securities and Futures Ordinance (Cap. 571) (the “SFO”) without complying with the relevant statutory requirements. The SFC has again reminded investors for the risk of investing in ICO and digital tokens.
SFC unveils new regulatory framework for investments in virtual assets
Under existing regulatory remits in Hong Kong, market for virtual assets is not subject to the oversight of the Securities and Futures Commission of Hong Kong (the “SFC”) if the virtual assets fall outside the ambit of the definition of “securities” or “futures contracts” under section 2 of the Securities and Futures Ordinance (“SFO”). On 1 November 2018, the SFC issued the “Statement on regulatory framework for virtual assets portfolios managers, fund distributors and trading platform operators” (the “Statement”) and the accompanying “Circular to intermediaries – Distribution of virtual asset funds” (the “Circular”) in light of a growing investor’s interest in virtual assets investment and the inadequacy of the existing regime under the SFO to protect the investors from risks associated with investing in virtual assets, namely valuation, volatility and liquidity risks, accounting risk, cybersecurity risk, risk of money laundering and fraud etc.. A more robust approach in dealing with regulations on virtual assets market is set out in the Statement and the Circular in the hope of providing the investors with stronger protections from the risks associated with virtual assets investment. The Statement delineates the regulatory standard expected of virtual asset portfolio managers and virtual assets fund distributors and outlines the conceptual framework for licensing and regulating virtual asset trading platform operators.
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