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Virtual Asset Trading Platform Operators

Application


These Guidelines are applicable to all Platform Operators (whether they are licensed under the SFO and/or the AMLO) when they carry on Relevant Activities.


Parts II and III of these Guidelines are also applicable to the following persons:


(a) a corporation which applies for a licence to become a Platform Operator;

(b) an individual who applies for a licence to become an LR; and

(c) an individual who applies for approval to become an RO.


The SFC recognises that some aspects of compliance with these Guidelines may not be within the control of a licensed representative. In considering the conduct of representatives under these Guidelines, the SFC will consider their levels of responsibility within the firm, any supervisory duties they may perform, and the levels of control or knowledge they may have concerning any failure by their firms or persons under their supervision to follow these Guidelines.


1.5 A Platform Operator licensed under both the SFO and the AMLO is expected to comply with the requirements under the SFO and its subsidiary legislation, the AMLO and the codes, guidelines (including these Guidelines), circulars and frequently asked questions (FAQs) published by the SFC from time to time. Where there are any inconsistencies amongst (i) the requirements under the


Fitness and Properness Requirements


Persons applying to become a licensed person must satisfy the SFC that they are fit and proper to be licensed and, upon being licensed, they must continue to be fit and proper. When assessing a person’s fitness and properness, the SFC shall have regard to the matters below which are set out with reference to section 129(1) of the SFO and section 53ZRJ(1) of the AMLO (as further elaborated in paragraphs 2.5 to 2.8 below), whether taking place in Hong Kong or elsewhere:


(a) financial status or solvency;

(b) educational or other qualifications or experience;

(c) ability to carry on the Relevant Activities competently, honestly and fairly; and

(d) reputation, character, reliability and financial integrity.


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Financial status or solvency


2.5 The SFC is not likely to be satisfied that a person is fit and proper if that person:


(a) in the case of an individual,


(i) is an undischarged bankrupt, is currently subject to bankruptcy proceedings or is a bankrupt who has recently been discharged;


Note: In considering whether to license a bankrupt who has been discharged, the SFC would have regard to the circumstances and recency of the discharge.


(ii) is subject to receivership or other similar proceedings; or


(iii) has failed to meet any judgment debt; and


Note: The SFC would have regard to the circumstances of the failure to meet a judgment debt and the recency of the failure.


(b) in the case of a corporation,


(i) is subject to receivership, administration, liquidation or other similar proceedings;


(ii) has failed to meet any judgment debt; or


Note: These requirements aim to identify corporations of dubious financial status or solvency. As with individuals, the SFC would have regard to the circumstances of the failure to meet a judgment debt and the recency of the act.


(iii) is unable to meet any financial or capital requirements applicable to it.


Educational or other qualifications or experience


2.6 In considering a person’s educational or other qualifications or experience, the SFC will take into account the nature of the functions which the person will perform. A person is unlikely to meet the fit and proper requirement if that person, in the case of an individual,


(a) applying for a licence to become a licensed representative is under 18 years of age; or


(b) has failed to demonstrate that he or she is competent to carry out the Relevant Activities efficiently and effectively.


Note 1: The general expectations are set out in Part III (Competence requirements) below.


Note 2: Competence is assessed with reference to the person’s academic and industry qualifications together with relevant experience. Persons should be equipped with the skills, knowledge and professionalism necessary to perform their duties. The level of knowledge expected varies according to the level of responsibility and the type of function to be carried out in relation to the Relevant Activities. Persons are generally expected to be able to display an understanding of:


(a) the general structure of the regulatory framework which applies to their proposed activities;


(b) the particular legislative provisions, codes and guidelines which apply to the functions they would perform;


(c) the fiduciary obligations owed to clients and the general obligations owed to their principals or employers; and


(d) virtual assets and the virtual asset market.


Ability to carry on the Relevant Activities competently, honestly and fairly


2.7 A person has to demonstrate the ability to carry on the Relevant Activities competently, honestly and fairly; and in compliance with all relevant laws, codes and guidelines promulgated by the SFC. The SFC is not likely to be satisfied that a person is fit and proper if that person:


(a) in the case of an individual,


(i) has been a patient as defined in section 2 of the Mental Health Ordinance (Cap. 136) to the extent that, in the opinion of the SFC after taking into account relevant factors including the person’s past training, experience and qualifications, the person would be unable to carry out the inherent requirements of the Relevant Activities; or


(ii) has evidenced incompetence, negligence or mismanagement, which may be indicated by the person having been disciplined by a professional, trade or regulatory body; or dismissed or requested to resign from any position or office for negligence, incompetence or mismanagement; and


Note: Competence and efficiency are key elements to being fit and proper. However, the weight given to events of the types listed above in considering whether a person is fit and proper will depend on a number of factors, such as the time since the event, the seriousness of the event and the responsibility to be undertaken. The source and quality of evidence will also be taken into account.


(b) in the case of a corporation,


(i) has non-executive directors, key personnel (such as managers, officers, directors and chief executives), substantial shareholders, ultimate owners or other controllers who fail to meet the requirements in Part II of these Guidelines other than the requirement regarding competence to carry on the Relevant Activities (unless such requirements are otherwise applicable); or


Note: In the SFC’s view, all persons involved in the management or control of the Platform Operator must be honest and fair.


(ii) has failed to demonstrate that it is competent to carry on the Relevant Activities efficiently and effectively.


Note: The general expectations for competence are set out in Part III (Competence Requirements) below. The competence of a person is generally assessed with reference to its organisational structure and personnel. Reference should be made to paragraphs 3.4 to 3.7 below. The SFC is unlikely to be satisfied that a person is competent if:


 its organisational structure and personnel are unable to comply with the relevant legislative or regulatory requirements; or


 it lacks the infrastructure and internal control systems to manage risks effectively, avoid conflicts of interest and maintain a proper audit trail.


Reputation, character, reliability and financial integrity


2.8 The SFC is not likely to be satisfied that a person is fit and proper if that person:


(a) in the case of an individual,


(i) was found to be of poor reputation, character or reliability, lacking in financial integrity, or dishonest. The weight given to events of the types listed below will depend on a number of factors, such as the time since the event, the seriousness of the event, and the level of responsibilities to be undertaken. Instances which, if remain unexplained, might result in the person being regarded as having failed to meet this test are where the person has been:


(I) found by a court or other competent authority to be involved in or liable for fraud, dishonesty or misfeasance;


(II) convicted of a criminal offence or is the subject of unresolved criminal charges which are of direct relevance to fitness and properness;


(III) censured, disciplined or disqualified by any professional or regulatory body in relation to any trade, business or profession;


(IV) refused or restricted from the right to carry on any trade, business or profession for which a specific licence, registration or other authorisation is required by law;


(V) disqualified by a court of competent jurisdiction from being a director;


(VI) found culpable of market misconduct by the Market Misconduct Tribunal, or unable to abide by any codes and guidelines promulgated by the SFC, other regulators or any relevant exchanges in Hong Kong or overseas (if applicable); or


(VII) a director, substantial shareholder, ultimate owner, or involved in the management, of a corporation or business which:


 was wound up (otherwise than by a solvent members’ voluntary dissolution) or was otherwise insolvent or had a receiver or administrator appointed, however described;


 was found guilty of fraud;


 has not met all its obligations to clients, compensation funds established for the protection of investors or inter-member guarantee funds; or


 has been found to have committed the acts described in subparagraphs (I), (II), (III), (IV) or (VI) above; or


Note 1: The extent of the person’s involvement in the relevant events, and the person’s behaviour at that time, will have a substantial impact on the weight the SFC attaches to the events in considering the person’s fitness and properness.


Note 2: The SFC is also unlikely to be satisfied that a person is fit and proper if a person has failed to comply with a requirement imposed under the AMLO1.


(ii) has been a party to a scheme of arrangement or entered into any form of compromise with a creditor involving a considerable amount; and


Note: Where the amount involved is in excess of HK$ 100,000 or equivalent, the SFC would have regard to the recency of, and the circumstances leading to, the event.


(b) in the case of a corporation,


(i) was found to be of poor reputation or reliability, or lacking in financial integrity. Similar considerations will be given to the events described in paragraphs 2.8(a)(i) (except for subparagraph (V)) and 2.8(a)(ii) above; or (ii) has been served with a winding up petition.


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(VI) found culpable of market misconduct by the Market Misconduct Tribunal, or unable to abide by any codes and guidelines promulgated by the SFC, other regulators or any relevant exchanges in Hong Kong or overseas (if applicable); or


(VII) a director, substantial shareholder, ultimate owner, or involved in the management, of a corporation or business which:


 was wound up (otherwise than by a solvent members’ voluntary dissolution) or was otherwise insolvent or had a receiver or administrator appointed, however described;


 was found guilty of fraud;


 has not met all its obligations to clients, compensation funds established for the protection of investors or inter-member guarantee funds; or

 has been found to have committed the acts described in subparagraphs (I), (II), (III), (IV) or (VI) above; or


Note 1: The extent of the person’s involvement in the relevant events, and the person’s behaviour at that time, will have a substantial impact on the weight the SFC attaches to the events in considering the person’s fitness and properness.


Note 2: The SFC is also unlikely to be satisfied that a person is fit and proper if a person has failed to comply with a requirement imposed under the AMLO1.


(ii) has been a party to a scheme of arrangement or entered into any form of compromise with a creditor involving a considerable amount; and


Note: Where the amount involved is in excess of HK$ 100,000 or equivalent, the SFC would have regard to the recency of, and the circumstances leading to, the event.


(b) in the case of a corporation,


(i) was found to be of poor reputation or reliability, or lacking in financial integrity. Similar considerations will be given to the events described in paragraphs 2.8(a)(i) (except for subparagraph (V)) and 2.8(a)(ii) above; or


(ii) has been served with a winding up petition.


III. Competence Requirements


3.1 The competence requirements stem from the fitness and properness requirements. Individuals and corporations will generally not be considered fit and proper unless they can demonstrate that they have the ability to carry on the Relevant Activities competently. The objective is to ensure a person, in carrying on any Relevant Activities, is equipped with the necessary technical skills and professional expertise to be “fit” and is aware of the relevant ethical standards and regulatory knowledge to be “proper”.


3.2 Part III of these Guidelines sets out the non-exhaustive matters the SFC will normally consider in assessing whether a person is competent to carry on any Relevant Activities. Failure to follow these Guidelines may reflect adversely on the fitness and properness of a person to carry on any Relevant Activities.


3.3 The key elements for the competence requirements for corporations and individuals set out in Part III of these Guidelines are high-level. The SFC is aware that the application of these elements may be different, depending on a corporation’s business model, the complexity of its business lines and an individual’s particular circumstances, amongst other factors. The SFC will administer the competence requirements in a pragmatic manner.


Requirements for corporations


3.4 In determining whether a corporation is competent to carry on any Relevant Activities, the SFC will consider various key elements including its business, corporate governance, internal controls, operational review, risk management and compliance as well as the combined competence of its senior management and other staff members. 3.5 A corporation applying to carry on Relevant Activities should have a clear business model, detailing its modus operandi and target clientele. It should also have written policies and procedures to ensure continuous compliance with the relevant legal and regulatory requirements. 3.6 The SFC emphasises that corporations must remain competent and ensure that the individuals they engage remain competent, including compliance with the continuous professional training (CPT) requirements. They must also keep the SFC informed of any material changes in their business plans, organisational structures and personnel. 3.7 The following non-exhaustive examples illustrate key elements the SFC will consider for assessing the competence of a corporation: (a) Business (i) Information about the proposed business lines (ii) Information about its target clientele, products and services (iii) Information about its remuneration model and basis of calculation



https://www.sfc.hk/-/media/EN/assets/components/codes/files-current/web/guidelines/Guidelines-for-Virtual-Asset-Trading-Platform-Operators/Appendix-B--Guidelines-for-Virtual-Asset-Trading-Platform-Operators-Eng.pdf?rev=8bf2663c890648318cff2a1409ebf88e

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