Securities & Futures Commission of Hong Kong

Client Money Rules

Q1:

Must a segregated account be called “trust account” or “client account”?

A:

Preferably but not necessarily. Any designation that sufficiently identifies, signifies or characterizes the account as a client account or trust account would be acceptable. 

Section reference: 4(1)

Q2:

Is it necessary to obtain a client’s written direction or standing authority for payment of that client’s money into an overseas segregated account?

A:

The Rules require segregation of client money in a segregated account maintained in Hong Kong with an authorized financial institution. Client’s written direction or standing authority must be obtained if client money received or held in Hong Kong is to be transferred and segregated outside Hong Kong.

Section reference: 4(1) & (2)

Q3:

Can licensed corporations segregate all client money upon receipt regardless of whether the client money will be paid out for settlement within the following 2 business days?

A:

If a licensed corporation wishes to segregate all client money for operational convenience, it may do so as those funds will be client money.

Section reference: 4(3)(a)(ii)

Q4:

Can a licensed corporation remit client money overseas for settlement purposes?

A:

Yes, section 4(3)(a)(ii) specifically excludes from the application of the Rules client money required for settlement or meeting margin obligations in respect of securities or futures contracts dealing within the next two business days from the time of receipt. Under section 5(1)(d), client money held in a segregated account can be paid out for similar purposes.

Section reference: 4(3)(a)(ii) & 5(1)(d)

Q5:

Would it be necessary to segregate unknown receipts within one business day of receipt?

A:

As a matter of policy, unknown receipts in the bank account of the licensed corporation or associated entity would normally not be treated as receipt of client money except where there is evidence to the contrary. We expect licensed corporations to have adequate internal controls and procedures enabling them to take reasonable steps to track client deposits and reconcile unknown receipts promptly. 

Section reference: 4(3)(d)

Q6:

Would it be necessary to segregate dividends received on client stocks within one business day?

A:

Except where there is evidence to the contrary, dividends received on stocks held for clients are client money and must be treated in accordance with the rules despite the fact that each client’s entitlement may not have been ascertained. 

Section reference: 4(3)(d)

Q7:

Client money may be received after banking hours through bank transfer or otherwise, the licensed corporation will face an extremely tight segregation schedule in order to follow the Rules. Would such monies be treated as being received on the same day?

A:

As a matter of policy, money received after banking hours would not normally be regarded as money received on that day. However, the circumstances in which the money is received will be taken into consideration in considering compliance with the rules. 

Section reference: 4(4)(a)

Q8:

Is it necessary to obtain a client’s written direction or standing authority for payment of client money into the client’s designated bank account?

A:

No, but a written direction or standing authority will be required if the payment is made to a bank account not in the name of the client.

Section reference: 4(4)(b), (c) & (d), 5(1)(a), (b) & (c)

Q9:

Can a client instruct a securities broker or associated entity to transfer funds in his securities trading account to his futures trading account with an affiliated futures broker of the securities broker or vice versa?

A:

The client can instruct his broker to do so by giving it a written direction. He can also give the broker a standing authority for transfer of his money to the affiliated broker’s segregated account.

Section reference: 4(4)(c)& (d), 5(1)(b)& (c), 7 & 8

3.9433 s