Licensing related matters in light of the COVID-19 pandemic
The SFC is aware that intermediaries or licensing applicants faced with restrictions on travel, public gatherings and lockdowns due to the COVID-19 pandemic locally and overseas may encounter difficulties in fulfilling their obligations in licensing matters. The SFC would continue ongoing dialogue with the industry and provide regulatory flexibility to help intermediaries cope with the COVID-19 pandemic while ensuring that market integrity and investor protection principles are maintained. The examples provided in the following FAQs are not exhaustive and licensed corporations (LCs) are encouraged to contact our case officers in case of specific issues.
The Hong Kong Securities and Investment Institute recently announced that all regulatory examinations are suspended for two weeks up to 11 April 2020. Given that the suspension period may be extended due to the uncertain situation, will the SFC grant any extension for licensed individuals who are required to pass the regulatory examinations within a prescribed timeframe?
Yes. The SFC decided that all licensed individuals who are originally required, by way of licensing conditions or otherwise, to pass post-licensing regulatory examinations within a prescribed timeframe which falls due on or before 30 September 2020, will be allowed an extended period of three calendar months after the original due date to meet the requirement. For avoidance of doubt, the licensees are not required to submit any application for time extension to the SFC in this respect.
For example, if a licensed individual is required to pass local regulatory framework papers on or before 30 April 2020, the deadline to fulfil this condition will be automatically extended to 31 July 2020.
If a licensed individual undertakes to complete additional Continuous Professional Training (CPT) hours within a prescribed timeframe, but he or she is not able to attend CPT courses in person, or the CPT courses have become unavailable temporarily, will the SFC grant any extension of time to fulfil the undertaking?
Similar to the treatment described in Question 1, a licensed individual who undertakes to complete additional CPT hours on or before 30 September 2020 will be granted a three-month extension to fulfil his or her undertaking. Again, licensees are not required to submit any application to the SFC.
For example, a licensed individual provided an undertaking to complete additional CPT hours on or before 31 May 2020. Under this arrangement, he or she is allowed to complete the additional CPT hours on or before 31 August 2020.
In light of the COVID-19 pandemic, many CPT courses have been suspended or cancelled. Will the SFC provide more time for licensed individuals who have difficulty in fulfilling the annual CPT hours for the calendar year of 2020?
Yes. The SFC decided to allow all licensed individuals who are unable to fulfil the annual CPT hours by 31 December 2020 to carry forward any unfulfilled CPT hours for the calendar year of 2020 to 2021.
It is, however, noteworthy that online courses, considered as self-study, are acceptable for the purpose of meeting the CPT requirement. Licensees may also refer to paragraph 6.2 of the Guidelines on Continuous Professional Training which sets out other acceptable means of achieving CPT apart from attending face-to-face training courses, workshops, lectures and seminars.
What are the situations which would require an LC to notify the SFC of changes implemented by the LC, to its organisational structure, operations, contingency plans or otherwise, as a result of the COVID-19 pandemic?
Under section 4 of and paragraph 9 of section 1 of Schedule 3 to the Securities and Futures (Licensing and Registration) (Information) Rules (collectively as Notification Requirement), an LC is required to notify the SFC of significant changes in its business plan covering internal controls, organisational structure, contingency plans and related matters.
In view of the substantial disruptions caused by the COVID-19 pandemic, an LC is expected to notify the SFC immediately of the following situations (these examples are non-exhaustive):
Confirmation of staff infection which may have an impact on the LC’s operations
Closing of office premises as a result of staff infection or government lockdown, including overseas office premises, if the closure has implications for the LC’s operations or the carrying on of its regulated activities (eg, temporary closing of overseas office premises which handles back and middle office functions)
Changes to its organisational resources (eg, split team arrangements, staff relocation to overseas offices)
The triggering of the LC’s business continuity plan
If as a contingency measure an LC deploys a licensed individual to work in an overseas office to provide trading services to its clients, is it acceptable to the SFC? Likewise, is it acceptable if a licensed individual who is unable to come back to Hong Kong due to quarantines or airport closures conducts regulated activities for Hong Kong clients at an overseas location?
Yes. These contingency measures to cope with the COVID-19 pandemic are acceptable as temporary arrangements. As these measures would affect the resources of the LCs, an LC is expected to notify SFC as set out in Question 4. When a licensed individual conducts activities for an LC in a jurisdiction outside Hong Kong, it is important that both the LC and the licensed individual are able to comply with the relevant legal and regulatory requirements in that jurisdiction. Furthermore, notwithstanding that the licensed individual is overseas, the LC remains responsible for the regulated activities performed by that individual for the LC. The LC should, therefore, exercise adequate oversight over the licensed individual’s conduct.
An LC initially planned to obtain a temporary representative licence for a staff of its overseas affiliate, who intended to come to Hong Kong to carry on regulated activities when meeting with Hong Kong clients of the LC. However, due to the COVID-19 pandemic, he or she would instead like to hold teleconferences or video conferences with Hong Kong clients from overseas. Does this overseas individual still need to obtain a temporary representative licence before interacting with the Hong Kong clients?
As this overseas individual intends to conduct regulated activities servicing Hong Kong clients, he or she should consider obtaining a temporary representativelicence even though he or she will not come to Hong Kong to perform such activities. The SFC will be pragmatic in considering the grant of such licence to him or her in view of the current exceptional circumstances.
If the trading desk of an LC has to be temporarily shut down due to the COVID-19 pandemic, can the traders of its overseas affiliate, who are based outside Hong Kong and not licensed by the SFC, cover the trading functions of the LC such that the LC could continue to serve its existing clients?
An LC is normally expected to maintain a back-up office and have remote access to trading facilities so that it can continue to provide trading services if the main dealing office is shut down. However, in the event that the back-up facilities fail and orders need to be routed to an overseas affiliate for execution, the LC is required to notify the SFC immediately, as with any exceptional contingency arrangement (see Question 4 above), and seek approvals from the SFC and overseas authorities for trading offshore where necessary. Under these exceptional circumstances, the SFC would provide flexibility and assistance to ensure continued service to clients.
In view of the COVID-19 pandemic, if an LC has arranged for its staff to work from home, its overseas offices or the overseas offices of its affiliates, does the LC have to seek approval of those premises which are being used by its staff to conduct its business or regulated activities?
An LC is required to keep records and documents under the Securities and Futures Ordinance (Cap 571) (SFO) and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap 615). It is also required to seek the SFC’s prior written approval under section 130 of the SFO for using any premises for the keeping of records or documents relating to the carrying on of the regulated activities for which it is licensed.
In view of the COVID-19 pandemic, the SFC understands that an LC may arrange for its staff to work from home or from its overseas offices which are not premises approved under section 130 of the SFO. In such circumstances, the LC should ensure that the staff will be able to remotely access the LC’s trading or other systems, and that the activities conducted by the staff will be captured in the records and documents generated by these systems. If certain records and documents need to be kept in unapproved premises on a temporary basis, the LC should send them back to the approved premises of the LC as soon as practicable.
An overseas licence applicant encounters difficulties in submitting the signed pages of his or her temporary licence application due to the COVID-19 pandemic. Will the SFC accept a copy of the signature pages sent electronically instead?
Under current procedures, an individual licence applicant is required to submit to the SFC a printed copy of the cover page, duly signed declaration pages and duly signed vetting authorisation form (if necessary) of the application pack (collectively as Signature Pages) together with his or her application form submitted through the SFC Online Portal. The SFC understands that some overseas jurisdictions may have suspended postal services or enforced “stay-at-home” restrictions, causing delays in delivering the Signature Pages to the SFC. Under such circumstances, an individual licence applicant can electronically send a copy of the Signature Pages of his or her temporary licence application to the SFC, stating the reasons why printed copies cannot be delivered. He or she is then expected to post the Signature Pages to the SFC once the situation returns to normal.
Owing to the COVID-19 pandemic, certain LCs or associated entities (AEs) may encounter operational difficulties in making the required submission of their audited accounts within four months after the end of the financial year. Will the SFC grant any extension to these LCs or AEs for submitting their audited accounts?
If an LC or AE anticipates delays in preparing its audited accounts or other documents, it may apply for an extension of the submission period by using Form B (LCs) or Form E (AEs) published on the SFC’s website or via the SFC Online Portal as soon as practicable. The SFC will consider these applications pragmatically.
Last update: 31 Mar 2020