A Guide to Applying for a Type 9 SFC Licence in Hong Kong
In Hong Kong, the Securities and Futures Commission (SFC) is the regulatory body responsible for overseeing financial markets and ensuring the integrity and stability of the financial services industry.
If your entity is planning to offer asset management services in Hong Kong, applying for a Type 9 licence with the SFC is a necessary step. Below is an overview of the Type 9 licence, the application process, and the key considerations involved.
What is Type 9 regulated activity?
A Type 9 licence is granted under Part V of the Securities and Futures Ordinance (SFO) and covers both “real estate investment scheme management” as well as “securities and futures contract management”. For any corporation that wishes to be licensed for Type 9 regulated activity (asset management), the SFC generally expects such corporation to be able to exercise discretionary investment authority in order to make investment decisions for its clients. Such discretionary investment authority must be properly delegated to the corporation.
Pre-application assessment
Eligibility criteria:
To be eligible for a Type 9 licence, your entity must meet specific requirements set by the SFC. These
are some key factors to consider:
Below are the minimum capital requirements for Type 9 regulated activity as required under the SFO.
| Type 9 – Regulated Activity | Minimum Paid up Capital | Minimum Liquid Capital |
|---|---|---|
| Where the corporation is subject to the licensing condition that it shall not hold client assets | Not applicable | HK$100,000 |
| In any other cases | HK$5,000,000 | HK$3,000,000 |
Under the Securities and Futures (Financial Resources) Rules (“FRR”), licensed entities are required to maintain these capital levels at all times, and applicants must demonstrate their financial readiness to comply with these requirements while also covering operating expenses during the first six months post-licensing.
| Director | An applicant should have at least one executive director.
Executive director of the corporation who – (a) actively participates in; or (b) is responsible for directly supervising the business of a regulated activity for which the corporation is licensed. An executive director may reside outside Hong Kong so long as he/she is able to satisfactorily discharge his/her responsibility to supervise the business of regulated activity. |
| Responsible officers (“ROs”) | An applicant is required to have two ROs who will be approved by SFC in relation to each of its regulated activities (the same individual may be appointed to be a RO for more than one regulated activity of the firm).At least one of the ROs must be an executive director and should be available at all times to supervise the business of the regulated activity and must reside in Hong Kong. |
| Managers-in-charge of core functions (“MIC”) | Entity must appoint at least one individual as the MIC for core functions, namely:
An individual may serve as a MIC for more than one of the core functions. The SFC expects that MIC should seek the SFC’s approval as responsible officers in respect of the regulated activities they oversee. The board of directors should ensure that each MIC has acknowledged his/her appointment as MIC and the particular core function for which he/she is principally responsible. Any MIC of the overall management oversight function or the Key Business Line function must be approved as a responsible officer. Note: under the manager-in-charge regime, individual managers may be held accountable to the SFC for the firm’s compliance with regulatory standards even though such managers may not be licensed by the SFC. In other words, the SFC may take disciplinary action against such managers even though they are not SFC licensed. |
| Representatives | Every individual who conducts one or more regulated activities must be a representative. |
Qualification of RO
An individual applying to be a licensed representative or to be approved as a responsible officer must demonstrate that he or she is competent to perform his or her proposed regulated activities efficiently and effectively. When assessing competence, the SFC will take into account the nature of the functions which the applicant will perform with reference to his/her academic and industry qualifications and relevant experience.
SFC competency requirements:
| Option 1 | Option 2 | Option 3 | |
|---|---|---|---|
| Academic* | – Degree in the designated fields; – Other degree (with passes in at least two courses in the designated fields); – Or professional qualifications |
Other degree (without passes in two courses in the designated fields) | Attained Level 2 in either English or Chinese as well as in Mathematics in the HKDSE or equivalent |
| Industry experience | At least 3 years relevant experience over past 6 years | At least 3 years relevant experience over past 6 years | – At least 3 years relevant experience over past 6 years – At least 5 years relevant experience over past 8 years |
| Recognised Industry Qualifications (“RIQ”) or extra continuous professional training (“CPT”)* | – | Obtained relevant RIQ or completed relevant Extra CPT | – Obtained relevant RIQ – Completed relevant Extra CPT |
| Management experience | Minimum of 2 years proven management skill and experience | Minimum of 2 years proven management skill and experience | Minimum of 2 years proven management skill and experience |
| Local regulatory framework paper | Passed the relevant recognised local regulatory framework paper(s) here |
Passed the relevant recognised local regulatory framework paper(s) here |
Passed the relevant recognised local regulatory framework paper(s) here |
*Refer to the SFC Guidelines on Competence for further details
Note: ROs may be exempted from meeting the local regulatory examination requirements if certain conditions are met.shareholders and other related persons) meet the “fit and proper” criteria, considering 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 competently, honestly and fairly
- reputation, character, reliability and financial integrity.
Please refer to the fit and proper guidelines of SFC here.
Application process
The application process for a Type 9 licence begins once the application forms are submitted. The application covers various aspects of the business e.g. asset categories, investment strategies, business scale and client distribution.
III. Timeline (SFC’s performance pledge)
The SFC provides the following estimated processing times for the various stages of the application:
| Processing of a corporate licence application | 15 weeks |
|---|---|
| Processing representatives’ licence application | 8 weeks |
| Processing RO’s application | 10 weeks |
Applicants can track the progress of their application through their account on the WINGS-LIC portal.
During the review process, the SFC may request additional documentation or follow-up on clarifications. Once all requirements are met and the applicat is deemed “fit and proper,” the SFC will issue the licence electronically through WINGS mail.
How can Waystone help?
At Waystone, our team of experienced compliance professionals are equipped to guide you through the entire application process. With a thorough understanding of the rules, guidelines, and procedures for obtaining licences and registrations, we support clients from the initial business set-up phase and continue to assist with the maintenance of all ongoing regulated activities.
We can assist with:
- advising on the specific licence requirements
- advising on regulatory capital requirements
- preparation and submission of application forms
- negotiating licence conditions with authorities
- preparation of all documentation relating to operations, corporate governance and risk
- management obligations
- liaising with local regulators
If you would like to find out more about the Type 9 licence, including how Waystone can assist you, please reach out to our APAC Compliance Solutions team.