Member Article

The Hong Kong Securities and Futures Commission (SFC) has recently updated its Licensing Related Frequently Asked Questions (FAQs) on its website regarding Topic 2 - Competence and Topic 6 - Licensing Conditions. In relation to Competence, the updated FAQs focus on under what circumstances the SFC would consider granting an exemption from the local regulatory framework examination requirement to compliance officers and existing responsible officers who will be responsible officers of another type of regulated activity. The SFC has reiterated in the FAQs that if a licensed individual is granted a conditional exemption from the local regulatory framework examination requirement, the additional CPT hours (in addition to the annual requirement) that the individual is required to complete must be in local regulatory knowledge in the relevant regulated activity. If an existing licensed representative wishes to apply for approval to become a responsible officer for the same regulated activity and a conditional exemption from the local regulatory framework examination requirement on the basis that he has an extra 3 years of relevant industry experience, the SFC requires the extra experience must be gained in Hong Kong and must be recent and relevant in order to qualify. The SFC also emphasised that responsible officers are expected to occupy full-time positions in order to properly discharge their supervisory functions. The SFC is of the view that itinerant professionals should not be responsible officers except under very extraordinary circumstances. As for the Licensing Conditions, the updated FAQ states that if an existing responsible officer resigns and takes up the role as a responsible officer of the same regulated activity for another licensed corporation, the SFC will assess the applicant's fitness and properness, his competency and whether he will have sufficient authority within the new principal. It may then impose various licensing conditions on the applicant accordingly. The updated FAQ lists some common licensing conditions for different regulated activities that may be imposed on a responsible officer for the transfer of accreditation application. For example, for Type 1 regulated activity, the licensee shall only perform a distribution function for collective investment schemes. For Type 9 regulated activity, the licensee: • shall not provide a service of managing a portfolio of futures contracts for another person unless it is for hedging purpose only. • shall only provide services to professional investors (as defined in Part 1 of Schedule 1 to the Securities and Futures Ordinance). • shall not conduct business involving the discretionary management of any collective investment scheme (as defined in the Securities and Futures Ordinance).