The proposals aim to strengthen investor protection through restricting the use or taking of certain titles by any person, where doing so may:

1. give the impression that a business or operation carried on by the person is regulated or licensed by the SFC, when it is not in fact so regulated or licensed; or
2. imply that a business or operation carried on by the person is associated with an established or well-known exchange, clearing house, virtual asset trading platform (VATP), or other similar operation (whether located in Hong Kong or elsewhere, and whether regulated or not), when it is not in fact so associated.

The proposals are as follows:

1. to expand section 34 of the SFO to include titles that: (i) are now more commonly used instead of “exchange”; (ii) better describe some of the financial products regulated under the SFO; (iii) refer more specifically to clearing operations; and (iv) include names or acronyms of well-known or established operations; and
2. to introduce a new provision under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) along the lines of the expanded section 34 of the SFO but focusing on VATPs and products that may be traded or cleared through VATPs.

Section 34 of the SFO only covers operations providing services in respect of securities and futures contracts, including virtual assets that constitute securities or futures contracts. Operations that provide services in respect of other virtual assets are regulated under the AMLO. A provision equivalent to section 34 of the SFO is therefore needed under the AMLO.

We propose to restrict the use or taking of any title that is, or that closely resembles, a combination of: (i) any of the titles set out in Table A; and (ii) any of the titles set out in Table B below.

Under the proposals, a title is restricted if it is, or closely resembles a title that is, a combination of: (i) any title from Table A; and (ii) any title from Table B, referred to in Q4. Examples include:

Titles that are a combination of titles in Tables A and B

• crypto clearing centre
• crypto exchange
• derivatives clearing centre
• derivatives clearing company
• digital asset market
• digital currency trading platform
• futures market
• stock trading platform

Titles that closely resemble a title that is a combination of titles in Tables A and B

• digital assets information exchange
• tokenised securities trading centre
• 股票清算所

The SFC will take into account all relevant facts and circumstances, including in particular:

1. whether the name includes any of the titles listed under Tables A or B referred to in Q4, or any title closely resembling one or more of those titles;
2. the nature of the businesses and activities carried out by the person using the name or proposing to use the title in question;
3. whether any licence, authorisation or other approval from the SFC is required in respect of such businesses or activities (or any part of them), and if so, whether such licence, authorisation or approval has been, or is to be, obtained; and
4. taking into account the above, the implications that may flow from the use of the name, eg, whether such use may give the impression that the businesses or activities are overseen or regulated by the SFC when in fact they are not.

The SFC will keep the list under review, and update it as necessary, taking into account market developments and practices. However, we do not expect to update the list too frequently, as that may lead to unnecessary operational or regulatory burden, as well as potential confusion for the market.

The SFO only covers the regulation of activities relating to securities or futures contracts, including virtual assets that constitute securities or futures contracts. Correspondingly, the AMLO covers the regulation of activities relating to other virtual assets. Against this background:

1. Titles that imply a connection solely to securities or futures contracts (eg, “stock”, “derivatives”, etc) will fall outside the scope of the AMLO, and are therefore proposed to be restricted under the SFO only.
2. However, titles that imply a connection to virtual assets but without any indication as to whether they are securities/futures related or not (eg, “digital asset”, “token”, etc), will fall within the scope of both the SFO and AMLO. Such titles are proposed to be restricted under both ordinances.