Circular to Licensed Corporations
Regulatory Compliance regarding Cross-border Business Activities

28 Jan 2014



Circular to Licensed Corporations 

Regulatory Compliance regarding Cross-border Business Activities 

The Commission reminds licensed corporations to maintain effective policies, procedures and controls to monitor and ensure regulatory compliance in relation to their cross-border business activities and to adhere to the legal and regulatory requirements of Hong Kong and any other relevant jurisdiction when opening accounts regardless of location.

Paragraph 12.1 of the Code of Conduct1 provides that a licensed person should comply with, and implement and maintain measures appropriate to ensuring compliance with the law and relevant regulatory requirements. This general obligation to observe legal and regulatory requirements applies to activities conducted by the licensed person whether in or outside Hong Kong, with respect to all applicable requirements of any relevant regulatory authority.

Furthermore, a licensed corporation having employees or agents conducting business activities on its behalf in other jurisdictions (irrespective of whether such persons are licensed under the Securities and Futures Ordinance), is likely to be regarded by the Commission as responsible for their conduct. If these persons are not licensed under the laws or regulations of such other jurisdictions when they should be, or they otherwise conduct themselves in an improper manner, this may constitute a breach of paragraph 12.1 of the Code of Conduct and may also call into question the fitness and properness of such a corporation and/or individual to be, or remain, licensed under the Securities and Futures Ordinance.

Therefore, before conducting any cross-border business activities, a licensed corporation should make proper enquiry as to how the law of the other jurisdiction applies to the particular activity. Activities which are likely to be regulated under the laws or regulations of other jurisdictions may include solicitation of opening of client accounts; signing of account agreements or mandates; marketing or selling of investment products; entering into transactions of investment products; and giving investment advice. These examples are not exhaustive.

When opening a new account, a licensed corporation should, regardless of the location of the client, comply with the “know your client” provisions of the Code of Conduct and the AML Guideline2. Where customers located outside Hong Kong are involved, a licensed corporation should in addition be mindful of the local laws and regulations of the jurisdictions that might apply to the solicitation of clients or the opening of client accounts in such locations. A licensed corporation should seek appropriate advice if in doubt.

Should you have any queries regarding the contents of this circular, please contact Ms Kiki Wong on 2231 1569.

Intermediaries Supervision Department
Intermediaries Division
Securities and Futures Commission

End

SFO/IS/004/2014

1 Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (“Code of Conduct”).

2 Guideline on Anti-Money Laundering and Counter-Terrorist Financing (“AML Guideline”).


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Page last updated : 28 Jan 2014