Investor compensation

Q1: I have a trading dispute with my brokerage. Who should I approach? Can the SFC help get my money back?

A:

You should first approach the brokerage’s complaint officer to handle the matter. Contact details of complaint officers can be found via our Public Register of Licensed Persons and Registered Institutions.

The SFC may take disciplinary action against a licensee or prosecute a wrongdoer. However, the SFC has neither the legal power to make an order for compensation, nor arbitrate a dispute between an investor and a third party.

You may also approach the Financial Dispute Resolution Centre for mediation. The Centre requires relevant financial institutions to resolve monetary disputes with their customers first through mediation, followed by arbitration, if needed.

Q2: My brokerage has violated the SFC’s rules or defaulted, and I cannot recover my investment. Who should I approach?

A:

You can approach the Investor Compensation Company Ltd (ICC), a wholly-owned SFC subsidiary, which compensates investors who suffer monetary losses as a result of a licensed intermediary or authorised financial institution defaulting in relation to exchange-traded products in Hong Kong. For defaults occurring on or after 1 January 2020, the Investor Compensation Fund also covers investors’ losses in relation to securities traded on the Shanghai Stock Exchange or the Shenzhen Stock Exchange and in respect of which an order for sale or purchase is permitted to be routed through the northbound link of a Stock Connect arrangement. For more information on investor compensation arrangements, please check out the “How to claim” section on the ICC website or the “Compensation fund” section on the Investor and Financial Education Council’s website.

Q3: What is the maximum compensation I can receive from the Investor Compensation Fund?

A:

If you sustained losses in relation to exchange-traded products in Hong Kong, and/or securities traded on the Shanghai Stock Exchange or the Shenzhen Stock Exchange and in respect of which an order for sale or purchase is permitted to be routed through the northbound link of a Stock Connect arrangement, the maximum compensation you will receive is raised from HK$150,000 to HK$500,000 (per claimant) for defaults occurring on or after 1 January 2020; for joint accounts, each of the account holders will be subject to a maximum compensation limit of HK$500,000.

For details, please visit the “Compensation limits” section on the ICC website.

Q4: What are the investor compensation arrangements under the SFO?

A:

The SFO provided for the establishment of the Investor Compensation Fund to compensate investors who suffer pecuniary losses as a result of defaults of licensed intermediaries or authorized financial institutions occurring on or after 1 April 2003 in relation to exchange-traded products in Hong Kong. For defaults occurring on or after 1 January 2020, the Investor Compensation Fund also covers investors’ losses in relation to securities traded on the Shanghai Stock Exchange or the Shenzhen Stock Exchange and in respect of which an order for sale or purchase is permitted to be routed through the northbound link of a Stock Connect arrangement. The Fund is administered by the Investor Compensation Company Limited (ICC), an independent company responsible for receiving, assessing and determining claims against the Investor Compensation Fund, making payments to claimants and pursuing recoveries against defaulting licensed intermediaries or authorized financial institutions.

For defaults occurring on or after 1 January 2020, the compensation limit is raised from HK$150,000 to HK$500,000 per investor for trading exchange-traded products in Hong Kong and/or securities traded on the Shanghai Stock Exchange or the Shenzhen Stock Exchange and in respect of which an order for sale or purchase is permitted to be routed through the northbound link of a Stock Connect arrangement. For joint accounts, each account holder is subject to a maximum compensation limit of HK$500,000.

Q5: Who is eligible to make a claim for compensation?

A:

The Investor Compensation Fund aims to provide a safety net for retail investors who suffer pecuniary losses as a result of defaults of licensed intermediaries or authorized financial institutions in relation to exchange-traded products in Hong Kong. For defaults occurring on or after 1 January 2020, the Investor Compensation Fund also covers investors’ losses in relation to securities traded on the Shanghai Stock Exchange or the Shenzhen Stock Exchange and in respect of which an order for sale or purchase is permitted to be routed through the northbound link of a Stock Connect arrangement. Defaults cover insolvency, bankruptcy or winding up, breach of trust, defalcation, fraud or misfeasance.

The following investors are not eligible to claim against the Fund:

  • a licensed corporation;
  • an authorized financial institution;
  • a recognized exchange company, a recognized exchange controller, or a recognized clearing house;
  • an authorized automated trading services provider;
  • an authorized insurer;
  • a manager or operator of an authorized collective investment scheme;
  • an associate of the defaulting intermediary which is a corporation;
  • an employee of the defaulting intermediary who has committed breach of trust, defalcation, fraud or misfeasance;
  • the Government or an overseas government; and
  • a person acting as a trustee or custodian of the above persons, schemes or arrangement.

The ICC will determine whether there has been a default and whether the claimant is entitled to compensation from the compensation fund.

Q6: How does the per-investor compensation limit work?

A:

Example 1: If Mr A holds shares of $600,000 with Blue Securities Company and has deposited $100,000 with the firm for trading futures contracts, what is the compensation limit for Mr A if Blue Securities Company defaults?

Based on the per-investor compensation limit of $500,000 for trading in securities and futures contracts respectively, the maximum payments for Mr A’s claim would be $500,000 for shares and $100,000 for futures contracts, totalling $600,000.


Example 2: If Ms B has two accounts with White Securities Company holding shares of $400,000 and $500,000 respectively, what is the maximum compensation for Ms B if White Securities Company defaults?

Ms B would be entitled to a maximum payment of $500,000 as the compensation limit is applied on a per-investor basis regardless of how many accounts a person has at the defaulting intermediary.


Example 3: If Mr and Mrs C have a joint account with Red Securities Company holding shares of $1.2 million, what is the maximum compensation for each of them if Red Securities Company defaults?

Mr and Mrs C could each claim a maximum of $500,000 compensation as the compensation limit is applied on a per-investor, rather than a per-account, basis.

Q7: How can I make a claim?

A:

You may lodge a claim with the ICC by completing a relevant claim form, which can be downloaded from the ICC’s website or obtained from the venues specified in the Notice Inviting Claims published in local newspapers pursuant to a default, or from the offices of the ICC or the SFC. The completed form should be submitted to the offices of the ICC or the SFC or, if applicable, to the address as specified in the Notice Inviting Claims published in local newspapers pursuant to a default.

To substantiate your claim initially, you have to submit copies of documents that the defaulting intermediary has given or sent you about your investments and account position. These might include your:

  • account agreement;
  • monthly account statements;
  • contract notes;
  • proof of payment such as pay-in slips and bank statements; 
  • deposit receipts for securities;
  • dishonoured cheque;  
  • Hong Kong identity card or passport, or business registration; and
  • agreement relating to trading Stock Connect securities.

You can lodge your claim with the ICC by the deadline (usually three months from the date of the notice calling for claims) published by the ICC. If no such notice is issued, you may lodge your claim within six months after the day you first became aware of the default. The ICC will issue a notice of determination to you. If the claim is disallowed, the reasons will be given in the notice.

Q8: What if I disagree with the determination of claim?

A:

If you are dissatisfied with the determination of claim, you may resubmit your case to the ICC for further consideration either in writing or in person to explain any further evidence it should consider. If you are still not satisfied with the revised amount of compensation, you have the right to lodge an appeal with the Securities and Futures Appeals Tribunal within 21 days after the service of the revised Notice of Determination.

Last update: 27 May 2020

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