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SFC Licensing for Fund Managers

Charltons has broad experience in assisting fund managers on SFC licensing approval criteria and application procedures. Our multi-disciplinary lawyers have a deep understanding of the business environment in which fund managers operate. We can advise on whether (and what type of) SFC licence is required in a particular case, capital requirements, whether the experience and qualifications of proposed “responsible officers” are sufficient, and identify other issues that may arise during the application process. We will also coordinate the licensing application process, including assisting corporations to draft business plans and compliance and operations manuals, working with clients to respond to queries raised by the SFC, and preparing applications for exemptions or waivers from particular licensing requirements. We have particular experience of the SFC’s expedited licensing procedures for hedge fund managers serving only professional investors.

Charltons also offers practical advice on day-to-day SFO and SFC compliance and regulatory issues as well as assisting licensed corporations by preparing or reviewing compliance manuals, developing compliance programmes and training personnel. We also offer compliance retainer services.

Charltons also assist clients in relation to SFC investigations, enforcement and disciplinary matters. Our experience includes advising SFC licensed corporations on misconduct by employees and advising distributors and other financial intermediaries on potential unauthorized selling of investment products and carrying on “regulated activities” without proper licensing.

Charltons regularly drafts submissions on proposed changes to securities laws in Hong Kong on behalf of interested parties and industry groups. Julia Charlton also serves on a number of committees of regulatory and industry bodies, and was appointed to the SFC’s Takeovers Panel and Takeover Appeals Panel on 1 October 2005 and continues to serve on these panels.

 

We set out below some relevant facts relating to the licensing of Hong Kong fund managers:

  • Hong Kong fund managers are required to obtain a type 9 (asset management) licence from the SFC.

  • type 9 Hong Kong fund managers are exempt from the requirement from obtaining a type 1 (dealing in securities) and/or type 2 (dealing in futures contracts) regulated activity provided that these activities are carried out wholly incidental to its asset management business, i.e. it would be applicable to Hong Kong fund managers who place trade orders to dealers in the course of managing their clients’ portfolios of securities and/or futures contracts.

  • an entity is not required to be licensed to carry out type 9 regulated activity if the relevant services are wholly owned subsidiaries of that holding company, provided that relevant services to such group companies are provided in respect of their own assets and not assets of their clients.

  • in terms of capital requirements, the paid-up share capital and minimum liquid capital that must be maintained in respect of Hong Kong fund managers which holds client assets is HK$5 million and HK$3 million respectively. If the fund manager does not hold client assets, only liquid capital of HK$100,000 is required.

  • the fund manager must have at least two responsible officers who are fit and proper and has the requisite competence to supervise the asset management activities of the fund manager.

  • in terms of competence, a proposed responsible officer would be assessed from the perspective of his/her academic or industry qualifications, industry experience, management experience and local regulatory knowledge

  • in terms of fit and properness, a proposed responsible officer would be assessed from the perspectives of financial status or solvency, ability to supervise the regulated activities competently, honestly and fairly as well as his reputation, character, reliability and financial integrity

Charltons has extensive experience in advising and assisting Hong Kong fund managers on fund structures as well as obtaining of license to carry out asset management activities in Hong Kong. We can assist with SFC licensing advice and on issues regarding SFC compliance. The SFC is the Hong Kong securities regulator.

 

CH-004882
DM-96434
20200520

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