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  2. When Do You Need an SFC License for Your Company?

Author Melissa YeoMelissa Yeo

6 min read
Running My Business

When Do You Need an SFC License for Your Company?

When Do You Need an SFC License for Your Company?

Hong Kong enjoys a thriving economy and business-friendly tax regime, so it’s no wonder that many entrepreneurs are attracted to starting a business there.

If you’re one of them, and you’re thinking about carrying out regulated activities in Hong Kong, you’ll have to apply to the Securities and Futures Commission (SFC) for an SFC licence to make sure you’re compliant. Of course, you’ll need to register company in Hong Kong. If you need assistance with that, we’re always happy to help. Otherwise, do read on.

What Is an SFC Licence?

An SFC licence allows businesses or individuals to carry out regulated activities in Hong Kong. The licence is issued by the Securities and Futures Ordinance (SFO).

What Is Meant by a ‘Regulated Activity’?

If your company actively markets certain services in Hong Kong as listed below, it will be considered to be running a business in a regulated activity. There are 10 types of activities that are regulated. Depending on the nature of your business, you or your company may need to apply for one or more SFC licences.

The types of SFC licence required are as:

  • Type 1: Dealing in 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

Do I Need an SFC Licence?

Anyone carrying out regulated activities has to be licensed or registered with the SFC, unless exempted. We will elaborate more on this later.

In general, you will need an SFC licence unless:

  • you’re an authorised financial institution
  • you actively market your provided services (which constitutes a regulated activity if provided in Hong Kong) to the public, whether on behalf of another person or by yourself
  • you’re an individual carrying out a regulated function for your licenced corporation

Are There any Exemptions?

There are instances where it’s not necessary for your company to hold an SFC licence. This can depend on whether the SFO-governed activities are entirely incidental to the activities you’re carrying out, and for which you already hold a licence . The key word here is ‘incidental’: a number of factors will play a part in deciding whether an incidental exemption is applicable to a specific activity. Examples include an activity that is supplementary to the performance of the other regulated activity in which the corporation is licenced or will be licenced; if the activity contributes to a major portion of your business; and if discrete fees are charged for the activity.

Find out more about other situations that may involve exemptions here.

If it’s still as unclear as mud, chat with us and we can advise whether you’ll need an SFO licence.

How Much Capital Do I Need To Apply for an SFC Licence?

According to Hong Kong’s Securities and Futures (Financial Resources) Rules (FRR), every licenced corporation must fulfil two different capital requirements -- one for liquid capital, the other for paid-up capital -- unless exempted. The latter is a balance sheet item.

SFC Licence Type Minimum Paid-Up Share Capital (HKD) Minimum Liquid Capital (HKD)
Type 1 – Dealing in securities
(a) the corporation is a trader or an approved introducing agent NA $500,000
(b) the corporation offers securities margin financing $10,000,000 $3,000,000
(c) any other scenario $5,000,000 $3,000,000
Type 2 – Dealing in futures contracts
(a) the corporation is a trader, an approved introducing agent, or a futures non-clearing dealer NA $500,000
(b) any other scenario $5,000,000 $3,000,000
Type 3 – Leveraged foreign exchange trading
(a) the corporation is an approved introducing agent $5,000,000 $3,000,000
b) any other scenario $30,000,000 $15,000,000
Type 4 – Advising on securities
(a) in relation to Type 4 regulated activity, the corporation is subject to the licensing condition that it shall not hold client assets NA $100,000
(b) any other scenario $5,000,000 $3,000,000
Type 5 – Advising on futures contracts
1. in relation to Type 5 regulated activity, the corporation is subject to the licencing condition that it shall not hold client assets NA $100,000
2. any other scenario $5,000,000 $3,000,000
Type 6 – Advising on corporate finance
1. the corporation functions as a sponsor:
- holds client assets $10,000,000 $3,000,000
- doesn’t hold client assets $10,000,000 $100,000
2. in the scenario where the corporation does not function as a sponsor:
- hold client assets $5,000,000 $3,000,000
- not hold client assets NA $100,000
Type 7 – Providing automated trading services $5,000,000 $3,000,000
Type 8 – Securities margin financing $10,000,000 $3,000,000
Type 9 – Asset management
1. in relation to Type 9 regulated activity, the corporation is subject to the licencing condition that it shall not hold client assets NA $100,000
2. any other scenario $5,000,000 $3,000,000
Type 10 – Providing credit rating services
1. in relation to Type 10 regulated activity, the corporation is subject to the licencing condition that it shall not hold client assets NA $100,000
2. any other scenario $5,000,000 $3,000,000

How Do I Apply for an SFC Licence?

To apply for an SFC licence, your company has to be incorporated in Hong Kong. If your company isn’t based in Hong Kong, it will have to be registered with the Companies Registry of Hong Kong. If you have yet to register your company, leave it to us to prepare everything for you - we’re highly experienced and can turn this around quickly for you.

General fit and proper requirement

For individuals and companies alike, the SFC decides whether the applicant can be given a licence. Some factors that could affect the final outcome include:

  • your competence and honesty to carry out the regulated activity competently, fairly, and lawfully
  • the reputation, reliability, character, and financial integrity of yourself and any other individuals involved
  • whether your financial status and solvency will allow you to meet the applicable financial or capital requirements
  • your education, experience, or other qualifications related to the nature of work roles (of a given corporation)

Specific approval criteria

As a component of the fit and proper requirement, your competence criteria should fulfil the following:

  • academic or industry qualification
  • local regulatory framework paper
  • management experience
  • relevant industry experience

Additionally, each licenced company will have to appoint two responsible officers to directly supervise each regulated activity. One of the responsible officers must be an executive director (a member of the board of directors or an employee directly involved in the business supervision).

There should be at least one responsible officer providing supervision at all times. This same individual may be appointed as a responsible officer for more than one regulated activity, on the grounds that this individual is proper and fit for each of the roles assumed.

What Are the Required Documents?

To file an application for your SFC licence, you’ll have to pay a fee and send in the following supporting documents:

  • Application forms
  • Compliance manuals
  • Business plans
  • Other supplements

The full application procedures can be viewed here.

Make sure that everything you submit is relevant to you as the licenced applicant, as well as your proposed responsible officers and substantial shareholders.

How Long Does It Take To Get an SFC Licence?

The amount of time it takes for the SFC to process your application will depend on the quality and completeness of the application itself.

Nonetheless, the SFC has pledged a target of 15 weeks to process a licensing application. Of course, the exact time required is difficult to predict and will depend on the caseload of the officer handling the application, as well as your background as the licenced applicant.

The SFC has also provided the following estimates:

  • Responsible officer application: 10 weeks
  • Regular licenced representative application: 8 weeks
  • Provisional licenced representative application: 7 business days

Stay on top of things

All this admin can be confusing, time consuming and an interruption to driving real business growth where it matters.

We’re the experts when it comes to accounting, tax optimisation and everything needed to set up your business in Hong Kong, Singapore and the UK. We can advise on tax exemptions and tax reliefs. Our experienced corporate secretaries in Hong Kong can help you organise your reports so that they’re compliant and ready for submission and file them to the authorities on time.

Don’t take our word for it though, try us out for yourself today! Book a demo with our team, and let’s get your business growing!

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