The Securities and Futures Commission (SFC) is an independent statutory body set up in 1989 to regulate Hong Kong's securities and futures markets.
We derive our investigative, remedial and disciplinary powers from the Securities and Futures Ordinance (SFO) and subsidiary legislation. Operationally independent of the Government of the Hong Kong Special Administrative Region, we are funded mainly by transaction levies and licensing fees.
Our mission statement
As a financial regulator in an international financial centre, the SFC strives to strengthen and protect the integrity and soundness of Hong Kong's securities and futures markets for the benefit of investors and the industry.
The SFO vested us with multiple roles. Our principal responsibilities include maintaining and promoting the fairness, efficiency, competitiveness, transparency and orderliness of the securities and futures industry. The scope of our work includes:
- Setting and enforcing market regulations, including investigating breaches of rules and market misconduct;
- Licensing and supervising intermediaries1 that conduct activities under the SFC's regulatory responsibility;
- Supervising market operators, including exchanges, clearing houses, share registrars and alternative trading platforms, and helping to enhance market infrastructure;
- Authorizing investment products and offering documents prior to their distribution to retail investors;
- Exercising oversight of regulations governing takeovers and mergers of public companies and of The Stock Exchange of Hong Kong Limited's regulation of listing matters;
- Cooperating with and providing assistance to local and overseas regulatory authorities; and
- Helping investors understand market operations, the risks of investing and their rights and responsibilities2.
Our regulatory counterparts
We are one of four financial regulators in Hong Kong charged with oversight of finance and investing. The four regulators cooperate with each other to ensure proper conduct in the markets and to forestall financial crime and misconduct.
|Banking||The Hong Kong Monetary Authority||Regulates financial institutions3, conducts monetary policy operations and manages the Exchange Fund|
|Insurance||The Office of the Commissioner of Insurance||Regulates insurers and insurance intermediaries|
|Mandatory provident fund system||The Mandatory Provident Fund Schemes Authority||Regulates and supervises provident fund schemes|
|Securities and futures||SFC||Regulates the securities and futures markets|
1 Such as brokers, investment advisers and fund managers.
2 Since November 2012, the SFC has delegated its investor education function to a subsidiary, the Investor Education Centre.
3 Including banks and deposit-taking companies.
Hong Kong's stock and commodities markets were largely unregulated until 1974 when legislation came into effect introducing a new system to govern the industry following the stock market crash of the previous year. Another market crash in 1987 resulted in the formation of the six-member Securities Review Committee, which examined Hong Kong's regulatory regime. In May 1988, the Committee recommended the establishment of a single, independent statutory body with broad investigative and disciplinary powers to regulate the markets.
The SFC was set up in May 1989 following the enactment of the Securities and Futures Commission Ordinance (SFCO), which created a new regulatory framework for Hong Kong's markets. Further steps to improve the regulatory regime were taken after the Asian Financial Crisis of 1997. Over the next few years, the SFCO and nine other securities and futures-related ordinances were consolidated into the Securities and Futures Ordinance (SFO), which took effect on 1 April 2003. The SFO, together with subsidiary legislation, expanded our functions and powers and enabled us to increase the scope and depth of our regulatory work.
The SFO also introduced external checks and balances through the Process Review Panel and the Securities and Futures Appeals Tribunal. These help ensure fairness in our decision making, observance of due process, and proper use of our regulatory powers. The roles of our Chairman and Chief Executive Officer were split after the enactment of the Securities and Futures (Amendment) Ordinance 2006.
In the aftermath of the Global Financial Crisis that began in 2008, regulators around the world responded with measures to overhaul the regulation of the financial system. As a member of the International Organization of Securities Commissions (IOSCO) Board, we play a leading role in examining the impact of international reforms both globally and in the Asia Pacific region, and seek to identify common interests and foster cross-border collaboration.
In recent years, our collaboration with mainland China on such initiatives as the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme broadened investors' product choices and strengthened Hong Kong's position as a primary offshore renminbi centre as well as a global asset management hub. In light of the introduction of Shanghai-Hong Kong Stock Connect, a pilot programme enabling mutual stock market access between the Shanghai and Hong Kong stock exchanges, we are also enhancing our collaboration with Mainland authorities on enforcement matters.
Our operations evolved over the years in response to market needs and to keep pace with global regulatory standards. Hong Kong's market capitalisation grew dramatically after the SFC's inception. The number of listed companies grew from 290 in 1989 to more than 1,700 while the number of licensees rose from about 1,900 to nearly 39,000. Growth on this scale called for more proactive oversight of corporate conduct and intermediaries, and active and open dialogue to address emerging and systemic risks.
In 2012, we set up a centralised Risk and Strategy unit to identify and evaluate significant risks facing the financial sector. In addition, we established our International and China team in the same year to facilitate cross-border and global regulatory developments and cooperation. A dedicated Corporate Regulation team was formed in 2013 to focus on listed companies' conduct and activities with an aim of promoting improved corporate behaviour and more meaningful disclosures, as well as to detect potential corporate misconduct. Our Intermediaries Supervision and Licensing departments were also combined in 2013 to create the Intermediaries Division.