Securities & Futures Commission of Hong Kong

SFC Regulatory Sandbox

The following circulars are relevant to Fintech businesses conducting regulated activities in Hong Kong.

Circular to announce the SFC Regulatory Sandbox  (September 29, 2017)

Circular to clarify the "relevant industry experience" requirement for Responsible Officers under the Guidelines on Competence (September 29, 2017)

The SFC Regulatory Sandbox (Sandbox) is established to provide a confined regulatory environment for qualified firms1 to operate regulated activities under the SFO before Fintech is used on a fuller scale. The Sandbox would enable qualified firms, through close dialogue with and supervision by the SFC under the licensing regime, to readily identify and address any risks or concerns relevant to their regulated activities.

Eligibility

The Sandbox is available to both licensed corporations and start-up firms that intend to carry on a regulated activity under the SFO. The qualified firm must be fit and proper, utilise innovative technologies and be able to demonstrate a genuine and serious commitment to carry on regulated activities through the use of Fintech. The establishment or activities of these firms should also increase the range and quality of products and services for investors and benefit the Hong Kong financial services industry.

Licensing conditions

The SFC may impose licensing conditions on qualified firms, which may include limiting the types of clients which the firm may serve or the maximum exposure of each client, so as to limit the scope and boundary of the firm's business in regulated activities. Licensing conditions may in some cases require the firm to put in place appropriate compensation schemes for investors, or to submit to periodic supervisory audits by the SFC. Qualified firms may be placed under closer monitoring and supervision by the SFC when they operate in the Sandbox.

Enquiry

The SFC expects the great majority of applicants applying for a corporate licence under the SFO, including firms which make use of Fintech in conducting their regulated activities, such as robo-advisors, to go through the normal licence application process without the need to enter the Sandbox.

The SFC will discuss with a corporate applicant if it considers that an applicant's case should enter the Sandbox.

1As defined in the "Eligibility" section.

 

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