Securities and Futures Commission (SFC) Type 9 Asset Management Licence in Hong Kong
- a22162
- Jul 21
- 14 min read
SFC Type 9 License Details
Securities and Futures Commission (SFC) Type 9 Asset Management Licence in Hong Kong
The Securities and Futures Commission (SFC) Type 9 Asset Management Licence in Hong Kong is required for any corporation that wishes to engage in asset management and fund advisory business. This regulated activity primarily involves providing a service of managing a portfolio of securities or futures contracts for clients on a discretionary basis, or managing real estate investment schemes.
Here's a breakdown of the key aspects of the SFC Type 9 licence:
1. Regulated Activities Covered:
Real estate investment scheme management: Operating a collective investment scheme where the property managed primarily consists of immovable property, and the scheme is authorised under section 104 of the SFO.
Securities or futures contracts management: Managing a portfolio of securities or futures contracts for another person on a discretionary basis.
2. Key Requirements for a Type 9 Licence:
Corporate Structure: The applicant must be a company incorporated in Hong Kong or an overseas company registered with the Companies Registry of Hong Kong.
Capital Adequacy:
If the corporation is subject to the licensing condition that it shall not hold client assets: No minimum paid-up capital is required, but a minimum liquid capital of HK$100,000 is needed.
In any other cases (i.e., holding client assets): A minimum paid-up capital of HK5,000,000 and a minimum liquid capital of HK3,000,000 are required.
Applicants are expected to demonstrate financial readiness to cover operating expenses for the initial six months post-licensing.
Responsible Officers (ROs):
At least two Responsible Officers must be appointed and approved by the SFC for each regulated activity.
At least one of the ROs must be an executive director of the corporation.
At least one RO must be available at all times to supervise the business of the regulated activity and must reside in Hong Kong.
ROs must meet "fit and proper" requirements, including competency (industry experience, management experience, academic/industry qualifications, and regulatory knowledge).
Managers-In-Charge of Core Functions (MICs):
The SFC requires the appointment of MICs for various core functions, including Overall Management Oversight, Key Business Line, Operational Control and Review, Risk Management, Finance and Accounting, Information Technology, Compliance, and Anti-Money Laundering and Counter-Terrorist Financing.
Any MIC of the Overall Management Oversight function or the Key Business Line function must be approved as a Responsible Officer.
Office Premises: Secure, segregated office space in Hong Kong, accessible only to the company's directors and employees. The SFC may review the floor plan of the applicant's office.
Fit and Proper Requirements: This applies to the corporation, its substantial shareholders, directors, and key personnel (including ROs and MICs). Factors considered include financial status/solvency, educational/other qualifications or experience, ability to carry on the regulated activity competently, honestly, and fairly, and reputation, character, reliability, and financial integrity.
Proper Business Structure and Internal Controls: The SFC requires the applicant to demonstrate a proper business structure, good internal control systems, and qualified personnel to ensure proper management of risks associated with the proposed business. A comprehensive business plan and compliance manual are essential.
Auditor: An auditor who is a member of the Hong Kong Society of Accountants and holds a practicing certificate must be appointed.
3. Application Process:
The application is typically submitted online through the SFC's WINGS platform.
Required documents include application forms, supplements, questionnaires (e.g., business plan questionnaire, internal control system questionnaire), audited financial statements (for the company and holding companies), organizational charts, resumes, and proof of qualifications for key personnel.
Application fees apply for the licensed corporation, Responsible Officers, and licensed representatives.
Processing times:
Licensed corporation application: Approximately 15 weeks.
Responsible Officer application: Approximately 10 weeks.
Licensed Representative application: Approximately 8 weeks.
4. Ongoing Obligations:
Annual returns to the Companies Registry.
Annual audit of financial statements.
Monthly submission of financial resource declarations to the SFC.
Payment of annual licensing fees.
Compliance with all relevant laws, codes, and guidelines promulgated by the SFC (e.g., Code of Conduct for Persons Licensed by or Registered with the SFC, Fund Manager Code of Conduct).
Notification to the SFC of any changes in appointed MICs or other particulars within seven business days.
5. Exemptions:
Certain exemptions may apply where other regulated activities are carried out wholly incidental to the Type 9 asset management business, or vice versa. For example, a Type 9 licensed corporation may conduct Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), and/or Type 5 (advising on futures contracts) regulated activities if carried out solely for the purposes of its asset management business (for Types 4 and 5, this must involve the management of a portfolio under a collective investment scheme).
Fees
When applying for and maintaining an SFC Type 9 Asset Management Licence in Hong Kong, you'll encounter various fees charged by the Securities and Futures Commission (SFC). These fees cover both the application process and ongoing annual maintenance.
It's important to note that the SFC sometimes issues waivers for annual licensing fees for certain periods. However, assuming normal circumstances, here's a breakdown of the typical fees:
I. Application Fees (One-off)
Licensed Corporation (LC) Application (for Type 9):
HK$4,740 per regulated activity.
Since Type 9 is a single regulated activity, the fee for the corporation itself is HK$4,740.
Responsible Officer (RO) Application (for Type 9):
HK$2,950 per regulated activity.
You need at least two ROs for Type 9. So, for two ROs, this would be HK$5,900 (2 x HK$2,950).
Licensed Representative (LR) Application (for Type 9):
HK$1,790 per regulated activity.
This applies to any individual who will perform regulated functions but is not an RO.
Important Notes on Application Fees:
These fees are payable upon the SFC's acceptance of your application and are typically paid through the online payment facility on WINGS.
Application fees are generally non-refundable, even if your application is withdrawn or refused.
II. Annual Licensing Fees (Recurring)
Licensed Corporation (LC) Annual Fee (for Type 9):
HK$4,740 per regulated activity.
So, the annual fee for the corporation for Type 9 is HK$4,740.
Responsible Officer (RO) Annual Fee (for Type 9):
HK$4,740 per regulated activity.
For two ROs, this would be HK$9,480 (2 x HK$4,740).
Licensed Representative (LR) Annual Fee (for Type 9):
HK$1,790 per regulated activity.
Important Notes on Annual Fees:
Annual licensing fees are payable within one month after each anniversary date of the licence or registration.
The SFC sends payment notifications and reminders via WINGS Mail.
Penalties for late payment: Failure to pay on time will incur surcharges:
Less than 1 month overdue: 10% surcharge
Over 1 month but less than 2 months overdue: 30% surcharge
Over 2 months but less than 3 months overdue: 50% surcharge
Over 3 months but less than 4 months overdue: Suspension of licence/registration
Over 4 months overdue: Revocation of licence/registration
III. Other Potential Costs (Not SFC Direct Fees):
Beyond the SFC's direct licensing fees, you must also budget for significant operational and professional service costs:
Company Incorporation and Registration Fees: Costs associated with setting up your Hong Kong company with the Companies Registry.
Professional Fees (Professional & Compliance Consultancy): This is a substantial cost but highly recommended. Experts will charge for:
Initial consultation and feasibility assessment.
Drafting the business plan, compliance manual, and other policies.
Assisting with application form completion and supporting documentation.
Liaising with the SFC and responding to requisitions.
Ongoing compliance support, training, and regulatory updates.
Fees can vary widely based on the complexity of your business and the firm you engage (e.g., initial setup fees could range significantly, potentially in the tens of thousands of USD or more, excluding ongoing retainers).
Auditor Fees: Annual audit of your financial statements by a Hong Kong CPA firm.
Office Premises: Rent, utilities, and setup costs for your dedicated office space in Hong Kong.
Staff Salaries: Salaries for your ROs, MICs, compliance personnel, and other operational staff.
Technology and Systems: Costs for IT infrastructure, trading systems (if applicable), compliance software, and data security.
Insurance: Professional indemnity insurance and other relevant business insurance policies.
Bank Charges: Fees for opening and maintaining bank accounts in Hong Kong.
Capital Requirements: While not a "fee," you must meet and maintain the minimum paid-up and liquid capital requirements (e.g., HK100,000 liquid capital if not holding client assets, or HK5 million paid-up capital and HK$3 million liquid capital if holding client assets). This is a significant financial commitment.
It's crucial to prepare a comprehensive budget that includes both the SFC's direct fees and these broader operational and professional expenses to ensure you are adequately capitalized for the licensing process and ongoing operations.
Bestar Professional Fees
Professional fees for professional and compliance consultancy in Hong Kong for an SFC Type 9 Asset Management Licence can vary significantly based on several factors:
Complexity of the Application: A straightforward application for a small firm with experienced Responsible Officers (ROs) and a clear business model will be less costly than a complex application involving multiple regulated activities, novel business models (e.g., virtual assets), or challenging RO profiles.
Scope of Services: The more comprehensive the support, the higher the cost. This includes everything from initial feasibility to full application drafting, ongoing liaison, and post-licensing support.
Client Preparedness: If the client already has a well-defined business plan, clear internal processes, and organized documentation, Bestar's work will be less intensive, potentially reducing fees.
Given the range of services outlined, here's an estimated breakdown of costs in Hong Kong Dollars (HKD):
I. Initial Setup / Licensing Application Phase (Upfront cost)
This phase covers everything from initial assessment to licence approval.
Initial Consultation and Feasibility Assessment:
Cost: HKD 10,000 - HKD 50,000+
What it includes: A preliminary review of your business model, assessment of licensing requirements, initial "fit and proper" evaluation of key personnel, high-level discussion of capital requirements, and outlining the application process and timeline.
Drafting the Business Plan, Compliance Manual, and Other Policies:
Cost: HKD 100,000 - HKD 400,000+
What it includes: This is a substantial component. The compliance manual alone is a comprehensive document that often needs to be tailored to your specific operations, risk profile, and the SFC's expectations. The business plan also requires significant detail and strategic input. Other policies include AML/CTF, risk management, data privacy, conflicts of interest, etc.
Assisting with Application Form Completion and Supporting Documentation:
Cost: HKD 80,000 - HKD 300,000+
What it includes: Populating the numerous SFC forms (Form 1, Form 3, Form 5, etc.), gathering and organizing all required supporting documents (resumes, academic certificates, financial statements, corporate documents, office lease, etc.), and ensuring everything is correctly formatted and submitted. This also involves guiding the client on what specific information and documents are needed.
Liaising with the SFC and Responding to Requisitions:
Cost: Often integrated into the overall application fee, but for very complex cases with many rounds of requisitions, it might be an additional hourly charge.
What it includes: This is where Bestar's experience truly shines. It involves interpreting SFC queries, drafting comprehensive and legally sound responses, providing strategic advice on how to address concerns, and managing communication with the SFC case officer. This often continues for weeks or months after initial submission.
Initial Setup/Licensing Fees (Combined for the above, excluding ongoing):
For a relatively straightforward SFC Type 9 application (e.g., small firm, no client asset holding, experienced ROs): HKD 250,000 - HKD 600,000+
For a more complex or larger setup (e.g., holding client assets, more complex structure, less straightforward RO backgrounds, multiple regulated activities): HKD 600,000 - HKD 1,500,000+
These figures are for the professional services alone and do not include the SFC's direct application fees or your minimum capital requirements.
II. Ongoing Compliance Support, Training, and Regulatory Updates (Recurring Costs)
Once licensed, ongoing compliance is crucial, and Bestar offers various models for this:
Retainer Model:
Cost: HKD 20,000 - HKD 100,000+ per month, depending on the scope.
What it includes: This is common for continuous support, including regular compliance reviews, answering ad-hoc queries, reviewing marketing materials, assisting with regulatory reporting, monitoring for new regulations, and providing updates. Some firms may offer a part-time secondment of a compliance officer.
Ad-hoc / Project-Based Consulting:
Cost: Varies widely based on the project. Hourly rates for Bestar can range from HKD 1,500 - HKD 5,000+ per hour.
What it includes: Engaging Bestar for specific tasks like an annual compliance health check, preparing for an SFC inspection, developing a new policy for a new business line, or providing specific training sessions.
Training and Awareness Programs:
Cost: HKD 20,000 - HKD 80,000+ per session/program, depending on customization and duration.
What it includes: Tailored training for your team on specific compliance topics, regulatory updates, or general conduct requirements.
Factors Affecting Ongoing Fees:
The frequency and depth of support required.
The number of licensed individuals and regulated activities.
The overall complexity and volume of the firm's business.
Auditor Fees
All limited companies in Hong Kong are required to have their financial statements audited annually by a Certified Public Accountant (CPA) firm holding a practicing certificate in Hong Kong. This is a statutory requirement for all Hong Kong companies, regardless of whether they are SFC-licensed or not.
For an SFC Type 9 Asset Management Licence holder, the audit is particularly important as the SFC expects robust financial controls and reporting. While the audit itself primarily focuses on financial statements and compliance with accounting standards (Hong Kong Financial Reporting Standards or HKFRS), the auditor's work can also indirectly provide assurance on the firm's financial health and capital adequacy, which are critical for SFC compliance.
Here's a breakdown of factors influencing auditor fees for an SFC Type 9 firm and estimated costs:
Factors Affecting Auditor Fees:
Size and Complexity of the Business:
Revenue and Assets: The higher the revenue and asset base of your asset management firm, the more extensive the audit procedures will likely be, leading to higher fees.
Number of Transactions: A large volume of transactions (e.g., numerous trades, client subscriptions/redemptions) increases the audit effort.
Complexity of Financial Instruments: If your firm deals with complex or illiquid financial instruments, the valuation and accounting for these will require more specialized audit expertise and time.
Number of Funds/Client Accounts Managed: More funds or client accounts, especially if they have diverse strategies or structures, will increase audit scope.
Consolidation: If your firm has subsidiaries that need to be consolidated into the financial statements, this significantly increases audit complexity and cost.
Internal Control Environment:
Strength of Controls: A firm with strong, well-documented, and effectively implemented internal controls (including IT controls) can lead to a more efficient audit, as the auditor can rely more on the system. Weak controls will require more substantive testing, increasing audit time and fees.
Quality of Record-Keeping: Well-organized, complete, and accurate accounting records will reduce the time auditors spend on data collation and reconciliation.
Client Asset Holding:
If your Type 9 firm is licensed to hold client assets, this will significantly increase the audit scope and fees. Auditors will need to perform extensive procedures to verify the existence, ownership, and safeguarding of these assets, often involving direct confirmations with custodians and detailed reconciliation. This adds a layer of complexity and risk that smaller firms not holding client assets avoid.
Industry Specialization:
An auditor with specific experience in auditing SFC-licensed entities, particularly asset management firms, will be more efficient and knowledgeable about the specific regulatory nuances. This expertise can sometimes command a higher fee but can also lead to a more streamlined audit process.
Other Services:
If the CPA firm also provides bookkeeping, tax advisory, or company secretarial services, they might offer a bundled rate, but it's important to understand the breakdown of costs.
Annual Audit Fees (HKD):
It's challenging to give precise figures without knowing the specifics of your asset management firm. However, here are some broad ranges:
Small, Non-Complex Type 9 Firm (not holding client assets, low transaction volume):
HKD 25,000 - HKD 60,000 per annum.
This would typically be for a firm with relatively few transactions, minimal assets on its balance sheet, and robust internal accounting records.
Medium-Sized Type 9 Firm (potentially holding client assets, moderate transaction volume, simple fund structures):
HKD 60,000 - HKD 150,000 per annum.
The fee increases significantly if client assets are held due to the additional audit procedures required.
Larger or More Complex Type 9 Firm (holding client assets, high transaction volume, complex fund structures, multiple entities):
HKD 150,000 - HKD 500,000+ per annum.
For very large or highly complex asset managers, especially those with international operations or multiple funds, fees can easily exceed HKD 500,000.
Recommendations:
Get Multiple Quotes: Always solicit proposals from at least 2-3 reputable CPA firms in Hong Kong to compare services and fees.
Be Transparent: Provide potential auditors with a clear understanding of your business activities, organizational structure, expected transaction volumes, whether you will hold client assets, and the complexity of your financial instruments. This helps them provide an accurate quote.
Discuss Scope: Understand exactly what the audit fee includes and excludes (e.g., tax computations, specific regulatory reporting outside of the standard financial statement audit).
Consider Expertise: While cost is a factor, choosing an auditor with experience in SFC-regulated entities is invaluable for ensuring compliance and anticipating potential issues.
The annual audit is a mandatory and critical part of operating an SFC Type 9 licensed firm in Hong Kong, and adequate budgeting for this expense is essential.
How Bestar can Help
Engaging experts is not just beneficial but often essential for successfully obtaining and maintaining an SFC Type 9 Asset Management Licence in Hong Kong. The regulatory landscape is complex, dynamic, and requires deep expertise to navigate.
Here's how Bestar can help:
I. Pre-Application Phase: Laying the Groundwork
Feasibility Assessment and Scope Definition:
Activity Analysis: Help determine if your proposed activities genuinely fall under Type 9 (or any other regulated activity) and whether any exemptions might apply. This is crucial to avoid unnecessary licensing or, conversely, operating illegally.
Business Model Review: Assess your intended business model against SFC expectations, identifying potential areas of concern or non-compliance before the application.
Structuring Advice: Advise on the optimal corporate structure for your Hong Kong entity, considering capital requirements, tax implications, and operational efficiency.
"Fit and Proper" Assessment:
Key Personnel Vetting: Conduct initial assessments of your proposed Responsible Officers (ROs), Managers-In-Charge (MICs), and substantial shareholders to ensure they meet the SFC's stringent "fit and proper" criteria (experience, qualifications, integrity, financial soundness). This is a critical hurdle, and experts can identify potential red flags early.
Competency Guidance: Advise on the specific academic, industry, and experience requirements for ROs and help identify any gaps that need to be addressed (e.g., through further training or recruitment).
Documentation Preparation:
Business Plan: Assist in drafting a comprehensive and robust business plan that clearly outlines your proposed activities, target clients, operational workflows, risk management strategies, and financial projections – all tailored to SFC expectations.
Compliance Manual: Develop a detailed compliance manual that covers all relevant SFC rules, codes, and guidelines. This manual is a cornerstone of your internal controls and a key document for the SFC's review.
Financial Resources Calculations: Guide you in calculating and demonstrating sufficient paid-up and liquid capital, and ensuring you can cover initial operating expenses.
Policy and Procedure Drafting: Prepare other crucial policies and procedures, such as those related to anti-money laundering (AML) and counter-terrorist financing (CTF), conflicts of interest, personal dealing, data protection, and complaints handling.
Application Forms and Supplements: Accurately complete the extensive SFC application forms and supplements, ensuring all information is consistent and meets the SFC's specific formatting and content requirements.
II. Application Submission and Liaison Phase: Navigating the Process
Application Submission:
Manage the formal submission of your application through the SFC's WINGS platform.
Ensure all supporting documents are correctly uploaded and cross-referenced.
SFC Requisition Management:
Responding to Queries: Act as a central point of contact with the SFC, interpreting their often detailed and numerous requisitions (questions for clarification or additional information).
Drafting Responses: Assist in drafting clear, concise, and strategically sound responses to SFC queries, often involving complex legal and operational considerations. Well-prepared responses can significantly expedite the approval process.
Negotiating Licence Conditions: If the SFC proposes specific licensing conditions, Bestar can negotiate these on your behalf to ensure they are pragmatic and do not unduly hinder your business operations.
Interview Preparation:
Prepare your proposed ROs and MICs for potential interviews with SFC licensing officers, familiarizing them with common questions and expected responses.
III. Post-Licensing Phase: Ensuring Ongoing Compliance
Establishing Ongoing Compliance Frameworks:
Internal Control System Implementation: Help establish and embed the internal control systems and policies outlined in your compliance manual into your daily operations.
Regulatory Reporting: Advise on and assist with preparing and submitting ongoing regulatory reports, such as monthly financial resource returns, annual audited accounts, and notifications of significant changes.
Compliance Monitoring: Set up robust compliance monitoring programs to identify and address potential breaches proactively.
Training and Awareness:
Provide training to your staff, including ROs and MICs, on their regulatory obligations, the firm's compliance policies, and the latest SFC circulars and guidelines.
Regulatory Updates and Risk Management:
Keep you informed of new SFC regulations, circulars, and industry best practices that may impact your business.
Conduct periodic compliance reviews and mock inspections to identify any gaps before a real SFC audit.
Advise on managing emerging risks, such as cybersecurity, data privacy, and virtual assets, which are increasingly on the SFC's radar.
Ad-hoc Advice and Support:
Provide ongoing advice on specific compliance queries or challenges that arise during your operations.
Assist in handling any SFC investigations or enforcement actions, if they occur.
Benefits of Engaging Bestar:
Increased Success Rate: Significantly improves the chances of a successful and timely licence approval.
Time and Cost Savings: Streamlines the application process, reducing the time and resources you would otherwise spend trying to understand and meet complex requirements. Avoids costly delays and repeated submissions.
Risk Mitigation: Identifies and mitigates potential compliance risks from the outset, protecting your firm from regulatory penalties, fines, and reputational damage.
Focus on Core Business: Allows your management team to focus on developing and executing your asset management strategy, rather than getting bogged down in regulatory complexities.
Industry Best Practices: Ensures your firm adopts industry best practices for governance, risk management, and compliance, which can also enhance investor confidence.
Navigating Nuances: The SFC often has unwritten expectations and preferred approaches. Bestar is familiar with these nuances, which are crucial for a smooth application.
In summary, Bestar serves as invaluable guides and partners throughout the entire SFC Type 9 licensing journey, from initial planning to long-term regulatory adherence. Our specialized knowledge and experience are critical for building a robust and compliant asset management business in Hong Kong.
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