Circular to announce new licensing forms and mandatory electronic submission of annual returns and notifications

1 Feb 2019



The Securities and Futures Commission (SFC) has revamped its licensing processes to enhance the efficiency and transparency of its gatekeeping function.

New licensing forms will be introduced on 11 February 2019. They should be used after that date. To allow time for the industry to adapt, the current forms will be accepted during a two-month transition period. From 11 April 2019, only the new forms will be accepted, and any old forms received by the SFC will be returned.

The SFC has also published two new self-assessment questionnaires for corporate applicants to match their business profiles with the types of regulated activities and evaluate the soundness of their risk management and internal control measures. The questionnaires enable the SFC to identify regulatory issues at an early stage by obtaining information about corporate applicants’ business profiles and confirmation of the internal control policies and procedures they have in place. One questionnaire pertains to all types of business and the second to specific activities, namely asset management, dealing in securities or futures, securities margin financing and electronic or automated trading services1.

Also with effect from 11 April 2019, all intermediaries will be required to submit their annual returns and notifications electronically through the SFC Online Portal2. In addition, individual and corporate licensees will be required to confirm their compliance with the continuous professional training (CPT) requirements for the previous calendar year when they electronically submit their annual returns. For example, in their portal submission made with an annual return in 2019, they would confirm their compliance (or non-compliance) with the CPT requirements for calendar year 2018.

The new forms and questionnaires can now be viewed on the SFC website. To provide additional guidance on these enhancements as well as recent policy updates, the SFC has released a new edition of the Licensing Handbook and updated the licensing section of the SFC website3.

New licensing forms

The SFC’s licensing forms have remained largely unchanged since the Securities and Futures Ordinance (SFO) became effective in 2003. The forms have been standardised for ease of use. Clear instructions and navigation guides will be provided.

Each of the new forms is designed for a specific purpose as set out in the table below.

Forms

Designed for

A

Corporate licence applicants

B

Existing licensed corporations

C

Registered institution applicants and existing registered institutions

D

Substantial shareholder applicants

E

Approved substantial shareholders

F

Associated entities of intermediaries

The information collected in the new forms will help the SFC assess the fitness and properness of applicants. The revamp focused on four major areas: (i) business profile and clientele, (ii) financial strength and sustainability of substantial shareholders, (iii) management (including corporate governance, responsible officers and managers-in-charge of core functions), and (iv) risk management and internal control measures.

Financial soundness

For example, the new forms seek additional information to assess the financial soundness of a corporate applicant. When some newly-licensed corporations commence operations, they may accrue financial losses and fail to meet the regulatory capital requirements. To mitigate this risk and demonstrate the ability to comply with such requirements, the new forms require a corporate applicant to provide a projection of its operating expenses to be incurred in the first six months after having been licensed. If its excess liquid capital cannot cover the projected expenses, the applicant would have to provide a plan demonstrating that additional funding would be forthcoming when needed.

Streamlined requirements

The new forms have also streamlined the information required for applicants. Relationships between some substantial shareholders4 and related licensed corporations (or corporate applicants) can be remote, particularly for firms belonging to a group with a complex shareholding structure. To rationalise the application process, these substantial shareholders may be allowed to provide the SFC with only basic information about their identity when applying for approval5.

In addition, the SFC has refined the questions requiring applicants to disclose investigations, disciplinary actions and civil litigation against them. The new requirement places a particular emphasis on matters which are more recent (i.e., within the past five years) or significant.

Workshops for the industry

The SFC will organise three workshops in February and March 2019 to allow the industry to better understand the changes to the licensing process. The workshops are open for registration until 15 February 2019 on a first-come-first-served basis:

Date

Time

Language

28 February 2019

11:00 am

Cantonese

4 March 2019

10:00 am

Cantonese

4 March 2019

4:00 pm

English

The workshops will take place at the SFC office, 35/F Cheung Kong Center, 2 Queen’s Road Central, Hong Kong.  Interested parties may enrol via the hyperlink below:

https://www.sfc.hk/web/EN/enrolment-for-workshop-on-new-licensing-process/

Should you have any queries regarding the contents of this circular, please contact your case officer.

Licensing Department
Intermediaries Division
Securities and Futures Commission

End

Notes: 

  1. The second questionnaire should be completed by corporate applicants engaging in one or more of these activities.
  2. Currently, only individuals are required to submit this information via the SFC Online Portal.
  3. The SFC hosted consultation sessions to discuss the new measures with industry participants including fund managers, brokers, investment banks, financial planners and professional advisors. Some were also invited to comment on the new forms during the development stage.
  4. As defined in section 6 of Schedule 1 of the SFO.
  5. Under section 132 of the SFO.

Click here to download the document


Page last updated : 1 Feb 2019