SFC Type 1 Licence: Dealing in Securities
- a22162
- Aug 4
- 7 min read
Updated: Aug 6
SFC Type 1 Licence: Dealing in Securities
The Securities and Futures Commission (SFC) of Hong Kong regulates financial activities in the region, and a Type 1 licence for Dealing in Securities is one of the ten categories of regulated activities under the Securities and Futures Ordinance (SFO).
What does "Dealing in Securities" entail?
A Type 1 licence is required for businesses or individuals who:
Acquire, dispose of, subscribe for, or underwrite securities.
Seek to secure a profit from the yield or fluctuations in the value of securities.
Perform acts like placing orders, brokering, or over-the-counter (OTC) trades in securities.
Distribute unit trusts, mutual funds, and security tokens (which are considered securities under the SFO).
This generally applies to securities brokers, trading platforms, and agents. It can also extend to virtual asset trading platforms that deal with security tokens.
Key Requirements for Obtaining a Type 1 Licence:
To be granted an SFC Type 1 licence, both the corporation and the individuals involved must meet the "fit and proper" criteria, which assesses their:
Financial Status and Solvency: Ability to meet minimum paid-up share capital and liquid capital requirements.
Minimum Paid-Up Share Capital:
N/A for approved introducing agents or traders.
HK$10,000,000 if offering securities margin financing.
HK$5,000,000 in any other case.
Minimum Liquid Capital:
HK$500,000 for approved introducing agents or traders.
HK$3,000,000 if offering securities margin financing or acting as a custodian of a private Open-ended Fund Company.
HK$3,000,000 in any other case.
Competence, Honesty, and Fairness: Demonstrated ability to perform regulated activities in compliance with all relevant laws, codes, and SFC guidelines. This often involves:
Academic or industry qualifications.
Passing local regulatory framework examinations (e.g., those offered by the Hong Kong Securities and Investment Institute).
Relevant industry and management experience.
Reputation, Character, Reliability, and Financial Integrity.
For Corporations:
Must be incorporated in Hong Kong or an overseas company registered with the Hong Kong Companies Registry.
Must have a proper business structure, good internal control systems, and qualified personnel for risk management.
Responsible Officers (ROs): At least two Responsible Officers must be appointed to directly supervise each regulated activity. One must be an executive director, and at least one RO must be available at all times to supervise the business. ROs also need to meet competence requirements.
Managers-in-Charge (MICs): The licensed corporation must appoint at least one MIC for each of the eight core functions (e.g., Overall Management Oversight, Key Business Line, Compliance, Risk Management, AML/CFT, etc.).
Preparation of essential documents: Business plan, compliance manuals, and other supplements.
For Individuals:
Individuals performing a "regulated function" for a licensed corporation must be licensed as a "licensed representative" or a "Responsible Officer."
Individuals must be at least 18 years old.
Application Process:
Preparation: Determine the specific licence type needed, set up the corporation (if applicable), secure premises, identify RO candidates, and prepare all necessary application forms and supporting documents (including compliance manuals and business plans).
Submission: Submit the online application through the SFC's WINGS platform. Corporate applicants use a "sub-account of an Advisory Firm Account," while individual applicants use an "Individual Account."
Fees: Pay the prescribed application fee (e.g., HKD 4,740 per regulated activity for a Licensed Corporation).
Processing Time:
Licensed Corporation application: Approximately four to six months.
Responsible Officer application: Approximately 10 weeks.
Licensed Representative application: Approximately 8 weeks.
Ongoing Obligations:
Licensed corporations and individuals must remain "fit and proper" at all times and comply with ongoing obligations, including:
Maintaining minimum financial resources (paid-up share capital and liquid capital).
Exhibiting the licence at the principal place of business.
Ensuring at least one Responsible Officer is available for supervision at all times.
Adhering to anti-money laundering and counter-terrorist financing (AML/CFT) ordinances.
Notifying the SFC of any significant changes in business scope, address, personnel, shareholding, etc., within specified timeframes (typically 7 business days).
Maintaining well-organized records, operating manuals, and policy frameworks.
Undergoing annual audits and regulatory reporting.
It's important to note that certain activities, even if related to securities, might fall under exemptions (e.g., if wholly incidental to another licensed activity) or require other licence types (e.g., Type 8 for securities margin financing).
Fees
1. SFC Regulatory Fees (Application and Annual)
These are fixed fees set by the SFC.
Application Fees:
Licensed Corporation: HK$4,740 per regulated activity (e.g., for Type 1).
Responsible Officer (RO): HK$2,950 per regulated activity.
Licensed Representative (LR): HK$1,790 per regulated activity.
Provisional Licensed Representative: HK$800.
Annual Licensing Fees: These are recurring fees paid to the SFC annually to maintain the license.
Licensed Corporation: HK$4,740 per regulated activity.
Responsible Officer: HK$4,740 per regulated activity.
Licensed Representative: HK$1,790 per regulated activity.
The fees mentioned are for the Type 1 license specifically. If a firm applies for multiple regulated activities (e.g., Type 1 and Type 9), the per-activity fee applies for each.
2. Bestar Professional Service Fees
Our fees vary significantly based on the complexity of the application, and the scope of services required. They cover:
Licensing Consultancy:
Initial Assessment and Feasibility Study: Bestar will assess your business model, determine the appropriate license type(s), and advise on the "fit and proper" criteria.
Application Preparation: Assistance in drafting the business plan, compliance manual, internal control policies, anti-money laundering (AML) policies, and other required documentation. This is often the most labor-intensive part and thus a significant cost.
SFC Liaison: Communicating with the SFC, responding to queries, and managing the application process on your behalf.
Training: Providing training to Responsible Officers and licensed representatives on regulatory requirements and compliance.
Ongoing Compliance Support: Many firms engage Bestar for ongoing advice, compliance reviews, and assistance with regulatory reporting even after the license is obtained.
Professional Fees:
Corporate Structuring: Advising on the optimal legal and corporate structure for the licensed entity in Hong Kong.
Legal Documentation Review: Reviewing and drafting legal agreements, client agreements, and other contracts to ensure compliance with SFO and other relevant laws.
Regulatory Advice: Providing specific professional opinions on complex regulatory issues, especially concerning new products (e.g., security tokens) or unique business models.
Accounting and Audit Fees:
Financial Resources Calculations: Assisting with the initial calculations and ongoing monitoring of paid-up share capital and liquid capital requirements.
Audit Services: Licensed corporations are required to undergo annual audits, which will incur ongoing accounting and audit fees.
Tax Advisory: Advice on Hong Kong tax implications for the licensed entity.
Company Secretarial Services:
Assistance with company registration in Hong Kong, maintaining statutory records, and filing annual returns.
Professional Fees:
Generally:
For a straightforward Type 1 license application for a new entity without complex business models or significant pre-existing issues:
One-off application support (consultancy/advisory): HK$100,000 to HK$500,000+ (approx. US$12,800 to US$64,000+) depending on the scope. More complex cases, especially those involving virtual assets or novel business lines, could be significantly higher.
Ongoing compliance and secretarial support: This would be charged on a retainer basis, from HK$10,000 to HK$50,000+ per month (approx. US$1,300 to US$6,400+).
Factors Influencing Our Professional Fees:
Complexity of Business Model: Highly innovative or complex business models (e.g., those involving crypto assets, exotic derivatives) require more detailed regulatory analysis and documentation.
Number of Licensed Individuals: Each RO and LR application adds to the workload.
Jurisdiction of Principals/Shareholders: If the parent company or key individuals are from jurisdictions with less stringent regulatory oversight, the SFC may require more extensive due diligence, increasing professional fees.
Readiness of Applicant: If the applicant has well-prepared documentation and a clear understanding of their business, our fees may be lower. Conversely, if much foundational work is needed, costs will rise.
Scope of Service: Whether Bestar provides end-to-end support (from company incorporation to post-licensing compliance) or just specific aspects of the application.
It is always advisable to obtain detailed quotes from Bestar before engaging.
How Bestar can Help
SFC Type 1 Licence: Dealing in Securities
Engaging professionals is highly recommended when applying for an SFC Type 1 Dealing in Securities license in Hong Kong, and for ongoing compliance. The SFC's regulatory framework is complex and stringent, and professional guidance significantly increases the chances of a successful application while minimizing risks.
Here's how Bestar can help:
Specializing in SFC licensing, Bestar offers integrated professional services, guiding clients comprehensively through the application process. This includes crucial advice on the regulatory framework, corporate structuring, and contractual matters, while also ensuring firms meet the SFC's financial resources requirements and establish sound financial controls.
How we help:
Initial Assessment: We assess your business model to determine the correct license type(s) and identify potential regulatory challenges.
Documentation Preparation: This is arguably our most critical role. We assist in drafting the extensive documentation required by the SFC, including:
Business Plan: Outlining your proposed activities, organizational structure, target clients, and financial projections.
Compliance Manuals: Detailed procedures for adhering to all SFC rules, codes of conduct, and guidelines (e.g., client onboarding, anti-money laundering (AML), risk management, record-keeping).
Internal Control Policies: Establishing robust systems for operational control, financial management, and IT security.
Fit and Proper Checks: Guiding you in demonstrating the "fit and proper" criteria for the licensed corporation, its Responsible Officers (ROs), and Licensed Representatives (LRs).
SFC Liaison: We act as a bridge between your firm and the SFC, handling communications, responding to queries, and managing follow-up requests efficiently.
Personnel Requirements: Advising on the appropriate number and qualifications of ROs and LRs, and assisting with their individual applications.
Office Setup: Providing guidance on physical office requirements and data security.
Post-Licensing Support: Bestar also offers ongoing compliance support, helping firms meet their continuous obligations and adapt to regulatory changes.
Legal Structuring: Advising on the most appropriate legal entity structure in Hong Kong for your licensed corporation, considering implications for liability, capital, and governance.
Regulatory Interpretation: Providing expert opinions on complex aspects of the Securities and Futures Ordinance (SFO) and related subsidiary legislation, codes, and guidelines. This is particularly vital for innovative business models or new product offerings (e.g., security tokens, virtual asset platforms).
Contractual Documentation: Drafting and reviewing client agreements, terms of business, prime brokerage agreements, and other legal documents to ensure they comply with SFC requirements and protect your interests.
Risk Mitigation: Identifying and advising on potential legal and regulatory risks associated with your proposed activities and operations.
Financial Resources Requirements (FRR): Assisting with the initial and ongoing calculation and monitoring of minimum paid-up share capital and liquid capital. We ensure your firm has sufficient funds to meet these statutory requirements, which are crucial for the SFC's approval.
Financial Reporting: Establishing proper accounting systems and controls for accurate and timely financial reporting to the SFC.
Audit Preparation: Preparing your firm for the annual financial audits required by the SFC, ensuring compliance with Hong Kong accounting standards.
Tax Planning: Providing advice on Hong Kong tax implications related to your licensed activities.
Internal Controls for Finance: Helping to implement robust financial controls, budgeting processes, and treasury management to mitigate financial risks.
In summary, given the stringent "fit and proper" criteria, the detailed documentation requirements, and the ongoing compliance obligations imposed by the SFC, professional assistance from Bestar is not just a convenience, but often a necessity for a successful SFC Type 1 license application and sustained operation in Hong Kong. We bring specialized knowledge, efficiency, and a reduced risk of errors or delays, allowing your business to focus on its core operations.