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The Securities and Futures Commission (SFC) today issued a circular to clarify certain competence requirements for existing licensed persons seeking to be licensed for Type 9 regulated activity (asset management) (Note 1) and to provide further guidance on how the SFC assesses the competence of a corporation or a responsible officer (RO) to carry on asset management activities.
The circular highlights the eligibility criteria of, and restrictions on permitted activities for, licensed persons seeking conditional exemptions from passing the required examination papers (Note 2) in order to meet the SFC’s requirements.
For example, an RO licensed for Type 1 regulated activity (dealing in securities) may, subject to the SFC’s discretion, be licensed to engage in Type 9 regulated activity without sitting for the required examination papers if he or she has five or more years of related experience in managing discretionary accounts as a wholly incidental activity and completes additional continuous professional training (CPT) hours. The RO’s firm can then carry on discretionary account business which is no longer restricted to being incidental. However, the firm cannot conduct broader Type 9 activities, including fund management, unless another RO who serves as a Manager-in-Charge of the Overall Management Oversight function (Note 3) meets all the requirements for being licensed for Type 9 activity, including passing the required examination papers.
For ROs who intend to manage private investment funds, an applicant should have at least eight years of industry experience in recognised local or overseas markets (Note 4) and complete additional CPT hours. These applicants will only be allowed to be accredited to licensed corporations which provide asset management services only to professional investors.
"We welcome existing licensees to broaden their business scope in light of the growth in Hong Kong’s asset management industry," said Ms Julia Leung, the SFC’s Executive Director of the Intermediaries Division. "While our approach balances the scope of the permitted firm activity with the experience of the ROs, we also urge licensees to strengthen their compliance and internal controls in order to meet the specific requirements for asset managers."
The circular was issued in response to enquiries from existing licensed persons who intend to broaden their business scope to include asset management. Interested firms are encouraged to approach the SFC to discuss their proposed business plans or to seek further clarification of the licensing requirements (Note 5).
Notes:
- Licensed persons seeking to enter the asset management business are required to be licensed for Type 9 regulated activity (asset management) if their proposed services are not wholly incidental to the regulated activities for which they are currently licensed.
- In general, an RO for Type 9 regulated activity is required to have passed certain local regulatory framework papers, namely the Hong Kong Securities and Investment Institute’s Licensing Examination Papers 1 and 6, to ensure that he or she has an acceptable understanding of the relevant legal and regulatory requirements.
- Circular to Licensed Corporations Regarding Measures for Augmenting the Accountability of Senior Management dated 16 December 2016.
- As identified in Parts 2 and 3 of Schedule 1 to the SFO.
- The SFC has also revised Question 5 of its frequently asked questions on "Licensing examinations".
