Securities & Futures Commission of Hong Kong

Financial resources rules and financial return

Q1:

If a licensed corporation is required to submit a monthly financial return, is the licensed corporation required to submit another set of semi-annual financial return for other regulated activities, say, for its advisory or asset management services?

A:

There are 12 forms in the Financial Return.  A licensed corporation which is required to submit monthly financial return does not need to submit a separate set on a semi-annual basis.

Please note that Forms 10 to 12 of the Financial Return are to be submitted only on a quarterly basis (for the quarters ended March, June, September and December) and are to be submitted together with other forms due on a monthly basis.

Section reference: General

Q2:

Can those forms due on quarterly and semi-annual basis be made up to the licensed corporation’s fiscal quarter-end and fiscal semi-annual end?

A:

Yes.  Please refer to section 56(4) of the Securities and Futures (Financial Resources) Rules for details.  Yet, please be reminded that the submission deadline remains the same (i.e. no later than 3 weeks after the month concerned) even though the return is made up to the licensed corporation’s own fiscal period.

Section reference: General

Q3:

Is there any grace period provided for using the old Financial Return as our computer system is still under enhancement?

A:

A licensed corporation is required to use the new Financial Return for accounting periods ending on or after 1 April 2003.  Please refer to the Answer to Question #2 of first round FAQ for respective submission due dates of the licensed corporations with different types of regulated activities, whereby certain grace period has been provided.  A submission will be rejected if a wrong return format is used.

Section reference: General

Section reference: General

Q4:

Does a licensed corporation have to submit Financial Return if he has applied for cessation of trading?

A:

A licensed corporation is obliged to comply with all requirements under the Securities and Futures (Financial Resources) Rules (including submission of financial return at a specified interval) as long as it is still licensed with the Commission (that is, until revocation of its licence).  

Section reference: General

Q5:

When will the new Excel template of the Financial Return and data specification be available for download by a licensed corporation?

A:

The Excel template of the financial return under the Securities and Futures (Financial Resources) Rules and the Print CheckSum template are available for download from the SFC’s website (http://www.sfc.hkForms ⇒ Intermediaries ⇒ Financial Return).

Section reference: General

Q6:

Where can I obtain a hard copy of the Financial Return?

A:

You can obtain a facsimile copy by calling the SFC’s “InfoLine fax on-demand” service at 28409393-246163.

Section reference: General

Q7:

Does a licensed corporation have to use the Print CheckSum program in submitting the Financial Return via diskette or via FinNet without digital signature?

A:

A licensed corporation will still need to use Print CheckSum template for submitting Financial Return for accounting periods ending after 31 March 2003.  A new Print CheckSum template applicable for the new financial return is available for download from the SFC’s website (http://sfc2.butter.com.hk/EN/forms/intermediaries/financial-returns.html)

Section reference: General

Q8:

Should the amount drawn or utilized by the licensed corporation be reported based on the bank statements or its internal ledgers and records?

A:

While a licensed corporation normally completes its Financial Return (including Form 3) based on its internal ledgers and records, it is obliged to perform regular reconciliation of the firm's internal ledgers and records to those issued by third parties, i.e. banks, counterparties and custodians, and to ensure that its internal ledgers and records are regularly updated and free of material errors or omissions in order to properly reflect its financial position. Such reconciliations should be checked/reviewed and approved by appropriate senior staff member(s) of the firm on a regular basis.

Section reference: Form 3

Q9:

If a licensed corporation has elected to calculate its amounts receivable from cash clients on gross basis, does it have to submit Form 6? Is the form applicable for licensed corporation providing securities margin financing?

A:

No.  Rolling balance cash clients analysis is only applicable for a licensed corporation who has elected to report its amounts receivable from cash clients on set-off basis as provided in section 21(2) of the Securities and Futures (Financial Resources) Rules.

A licensed corporation providing securities margin financing should report the required information in Form 4 in respect of its securities margin financing business.

Section reference: Form 6

Q10:

Does commission income include front end load charges?

A:

Since the front end load charges are derived from transactions executed on behalf of clients, they constitute commission in substance and thus these charges should be included as commission income. 

Section reference: Form 7

Q11:

How should client securities held in the entitlement account in CCASS be reported?

A:

Client securities held in the entitlement account of CCASS can be reported in Cell 8013 (Form 8 Table 1) with appropriate description.

Section reference: Form 8 Table 1

Q12:

How should client securities deposited in safe custody with overseas securities dealers be reported in Form 8 Table 1?

A:

Client securities deposited in safe custody with overseas securities dealers can be reported under cell 8021 (“held in other locations”), specifying the locations and purpose of the disposition.

Section reference: Form 8 Table 1

Q13:

How should amounts deposited with a recognized clearing house be reported in the column of “Analysis of client segregated funds”?

Besides, does the deficiency in segregated funds have any impact on the computation of liquid capital?

A:

With reference to section 4(3)(a)(ii) and section 5(1)(d) of the Securities and Futures (Client Money) Rules ("Rules"), the amounts deposited with any recognized clearing house for meeting the client's obligations to meet settlement or margin requirements in respect of dealing in securities or futures contracts carried out by the licensed corporation on behalf of the client are not required to be segregated for the purpose of the Rules.  

We do not envisage any deficiency in segregated funds as reported in Cell 8124 would have any impact on the computation of liquid capital position.

Section reference: Form 8 Table 2

4.2362 s