Financial Licensing for Forex Businesses in Hong Kong

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Hong Kong is one of the most business-friendly countries in the world. Low personal income tax along with low corporate tax makes it an appealing proposition for companies looking to set up a financial service, or broker business there. English is widely spoken given its colonial past and the time zone of GMT +8 happens to fall between London and New York, the biggest financial centers in the world.

To operate a regulated, financial services business in Hong Kong, you will first need to secure a financial services license. Financial services activities in Hong Kong include the following:

  • Securities dealing
  • Futures dealing
  • Leveraged Foreign Exchange trading
  • Providing advice on corporate financing matters
  • Securities and futures
  • Providing automated trading services
  • Asset management
  • Securities margin financing

You must obtain this license under the Securities and Futures Ordinance (SFO) of Hong Kong if you intend to perform any of the activities listed above. A partnership or sole proprietorship lack the necessary qualifications for a financial services license in Hong Kong.

If you are carrying out the above-listed activities on behalf of a licensed corporation, you will require a Representative’s License. This license will accommodate t accreditations to more than one single corporation.

Other Conditions

If you are a licensed representative responsible for overseeing a licensed corporation involved in the activities above, you must first secure approval as a “responsible officer” of the licensed corporation.

If you are an individual or an overseas corporation that operates in the same nature as the ones above but doing business outside Hong Kong, you must apply for a temporary license if you want to carry out these same activities in Hong Kong. However, a temporary license is not applicable to the following activities:

  • Leverage foreign exchange trading
  • Automated trading services
  • Securities margin financing
  • Asset management services

A temporary license also does not permit you to hold your client’s assets. Meanwhile, a temporary license is only valid for 3 months at any given time, and must not exceed 6 months in total within a period of 24 months.

Exemptions for Financial Services License in Hong Kong

You will receive an exemption from the need to have a financial services license in Hong Kong if you fall under one of the following categories:

  • Securities Dealing & Margin Financing – If you have a license for dealing in securities, then you’ll need a separate license to carry out margin financing activities. Authorised financial institutions do not need to register to participate in margin financing activities.
  • Professional Investor – You are exempt from needing a license for futures and security dealing activities. This only applies if you only deal with professional investors, and you are acting as principal.
  • Incidental Regulated Activities – Exemption for certain regulated activities may be possible if your activities are incidental to other regulated activities for which you already have a license.
  • Professional Practice – Those who are active in certain professional practices will be exempt from the need for a financial services license in Hong Kong. However, the advice that they provide should be incidental and part of their job requirements. These professions include trust companies, which offer advice relating to securities, futures, asset management, corporate finance, accountants and lawyers, journalists, and broadcasters, who offer investment advice via publications.
  • Investment Advisory Services – If your business provides investment advisory services to your wholly-owned subsidiaries, or to your holding company, or even to other whole owned subsidiaries of a holding company, then you will not need a financial services license in Hong Kong.
  • AUTHORISED Financial Institutions – Institutions that provide leveraged Foreign Exchange trading need not obtain a financial services license in Hong Kong.

Prerequisites and Requirements

To obtain a financial services license in Hong Kong, you must fulfil the following prerequisites before lodging an application:

  • You must satisfy the Securities and Futures Commission (SFC) of Hong Kong’s “Fit and Proper Criteria”. You may find more information about this here. Factors include your financial status, education, qualifications, experience, ability to conduct regulated activities competently, reputation, reliability, financial integrity, and character.
  • You must demonstrate strong internal compliance systems which satisfy the SFC’s Compliance guidelines. If you are a corporation, then you must either be a company which has been incorporated in Hong Kong, or an overseas company that is registered with the Companies Registry of Hong Kong.
  • You must be able to maintain the minimum paid-up share capital and liquid capital required by the Securities and Futures (Financial Resources) Rules. Moreover, you may find out more information about those rules here.

You will then need to complete the following steps to apply for your financial services license in Hong Kong:

  • Complete the application forms and supporting documents. These can be found on the website of the securities and future commission Hong Kong website. Submit them either in-person at the SFC or via post, along with a non-refundable application fee.
  • Successful applications will normally be processed within 2-4 months.
  • If successful, you will be issued with written notification from the SFC. You will receive a license or certificate of registration.

License of Registration

Your certificate or license of registration will contain the following details:

  • Your name
  • Central Entity number
  • The effective date of license registration
  • Types of regulated activity your license permits you to conduct
  • Any conditions which are imposed on your license type
  • If you are a representative, the details of your licensed corporation where you are accredited for as principal will be noted.

You must prominently display your financial services license on your premises. To ensure no delays occur with your application, you must provide a complete set of documents which meet all of the SFC’s requirements.

As long as your documents meet all the necessary requirements, you can expect a successful application outcome. However, the SFC does reserve the right to reject your application if you fail to meet statutory requirements. In the case of rejected applications, you will have a timeframe of 21-days to submit an appeal with the Securities and Futures Appeals Tribunal. Do note that the review process can take up to several weeks to be processed.

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