How to expand to Hong Kong? Key insights on licensing and exemptions

Rick Steves

The paper from Advanced Markets enumerates the 12 types of activities that require a license to establish a financial services business in Hong Kong as well as the exemptions, prerequisites, and requirements.

Most companies within the trading industry yearn for business expansion, which includes setting up shop in new countries. Which one to choose depends on several factors, but a dynamic, business-friendly, low tax jurisdiction is always an appealing proposition.

That is why Hong Kong comes at the top of the list. The former British Empire territory is now a China Special Administrative Region, which grants Hong Kong a degree of autonomy that allowed to become one of the world’s financial centers.

English is widely spoken there and the time zone of GMT +8 happens to fall between London and New York, two other leading financial centers in the world.

Advanced Markets, a provider of trade execution and multi-asset liquidity and credit solutions for banks, hedge funds, and other institutional market participants, is well-positioned to help new entrants figuring out what licenses are required for any given activity and what exemptions are there.

The Securities and Futures Ordinance (SFO) of Hong Kong is the regulatory authority that issues licenses for financial services firms that intend to perform any of the following activities:

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

Advanced Markets’ Jeremy Kang has provided key insights on the do’s and don’ts in HK licensing, starting with reminding that 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 accreditations to more than one single corporation”, he explained.

“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”, Mr. Kang added.

A temporary license is not applicable to the following activities:

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

Additionally, a temporary license does not permit firms to hold clients’ assets and is only valid for 3 months at any given time, and must not exceed 6 months in total within a period of 24 months.



When it comes to exemptions from the need to have a financial services license in Hong Kong, these exist only 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.

“Any corporation hoping to operate a banking business or a business of taking deposits must obtain a licence issued by the HKMA. Hong Kong maintains a three-tier system of deposit-taking institutions, comprising licensed banks, restricted licence banks, and deposit-taking companies. They are classified according to the amount and term of deposits accepted and the nature of the business, and are collectively known as authorized institutions”, Jeremy Kang further explained.


Prerequisites and Requirements

The Securities and Futures Commission (SFC) of Hong Kong’s “Fit and Proper Criteria” contains a list of prerequisites, from financial status, education, qualifications, and experience, to ability to conduct regulated activities competently, reputation, reliability, financial integrity, and character.

The SFC’s Compliance guidelines require demonstrable strong internal compliance systems. Corporations must be either incorporated in Hong Kong or an overseas company that is registered with the Companies Registry of Hong Kong.

The Securities and Futures (Financial Resources) Rules include a minimum paid-up share capital and liquid capital which have to be maintained.

Beyond these prerequisites, Advanced Markets has enumerated the several steps required to complete the application for a financial services license in Hong Kong:

Complete the application forms and supporting documents. These can be found on the website of the securities and futures 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 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: 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”, Mr. Kang stated.

“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.”

You can download a copy of “SFC license types for regulated activities & exemptions” from Advanced Markets here.

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