Do you need a licence or registration?
Schedule 5 to the SFO stipulates leveraged foreign exchange trading is regulated.
You need a licence if you are a corporation carrying on a business in a regulated activity in Hong Kong (section 114(1) and (2) of the SFO).
Sole proprietorship or partnership is not an acceptable form of business structure for the purposes of licensing.
A corporation which is granted a licence to carry on one or more regulated activities under section 116 of the SFO.
General fit and proper requirement
The SFC is obliged to refuse to grant a licence or registration if the applicant fails to satisfy the SFC that it is fit and proper. Pursuant to section 129 of the SFO, in considering whether a person is fit and proper for the purposes of licensing or registration, the SFC shall, in addition to any other matter that the SFC may consider relevant, have regard to the following:
financial status or solvency;
educational or other qualifications or experience having regard to the nature of the functions to be performed;
ability to carry on the regulated activity concerned competently, honestly and fairly; and
reputation, character, reliability and financial integrity
of the applicant and other relevant persons as appropriate.
The above criteria serve as the fundamental basis when the SFC considers each licence or registration application. For further elaboration of these attributes, you may wish to refer to the “Fit and Proper Guidelines” and “Guidelines on Competence”.
We set out below the specific criteria that different types of applicant normally need to satisfy to get a licence or registration.
Specific approval criteria
You must be a company incorporated in Hong Kong or an overseas company registered with the Companies Registry of Hong Kong.
You have to satisfy the SFC that you have proper business structure, good internal control systems and qualified personnel to ensure the proper management of risks that you will encounter in carrying on your proposed business as detailed in your business plan. Please refer to the following publications of the SFC for more information:
You should appoint not less than two responsible officers to directly supervise the conduct of each regulated activity you apply for.
For each regulated activity you apply for, you should have at least one responsible officer available at all times to supervise the business. The same individual may be appointed to be a responsible officer for more than one regulated activity provided s/he is fit and proper to be so appointed and there is no conflict in the roles assumed.
At least one of your proposed responsible officers must be an executive director as defined under the SFO.
The SFC generally expects that the Managers-In-Charge of the Overall Management Oversight function and the Key Business Line function described in the section of “Senior Management” of this page should seek the SFC’s approval as responsible officers in respect of the regulated activities they oversee. For details, please refer to the “Circular to Licensed Corporations Regarding Measures for Augmenting the Accountability of Senior Management” and FAQ (Measures for augmenting senior management accountability in licensed corporations).
All your executive directors must seek the SFC’s approval as responsible officers accredited to your corporation.
All applications for approval as responsible officers should be lodged with the SFC for consideration together with your licence application.
The senior management of your corporation should bear primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures by you.
The SFC is of the view that senior management of a licensed corporation includes, among others:
directors of the corporation,
responsible officers of the corporation, and
individuals whom we call the Managers-In-Charge of Core Functions (MICs).
These three categories are not mutually exclusive. For instance, an individual can simultaneously be a director, responsible officer and MIC of a licensed corporation.
When applying for a licence under section 116(1) of the SFO, you are required to provide information regarding your MICs and your organisational chart.
The management structure of a licensed corporation (including its appointment of MICs) should be approved by the Board of the corporation. Furthermore, the Board should ensure that each of the corporation’s MICs has acknowledged her/his appointment as MIC and the particular Core Function(s) for which s/he is principally responsible.
After being licensed, you are required to notify the SFC of any changes in your appointment of MICs or any changes in certain particulars of your MICs within seven business days of the changes. In some situations, you are also required to submit an updated organisational chart in your notification of that change.
For details of the requirements, please refer to the “Circular to Licensed Corporations Regarding Measures for Augmenting the Accountability of Senior Management” and FAQ (Measures for augmenting senior management accountability in licensed corporations).
Substantial shareholders, officers and other related persons to be fit and proper
Your substantial shareholders, officers and any other person who is or is to be employed by, or associated with, you for the purposes of the regulated activity for which the application is made shall be fit and proper. Please refer to section 129 of the SFO for details.
A substantial shareholder not having a “close link” with the corporate licence applicant may be allowed to provide less information in the application form, although the SFC may subsequently require additional information to be submitted if deemed necessary.