Better Access to Hong Kong Licensing Information to Make Life Easier for Compliance

Better access to licensing information held by Hong Kong's Securities and Futures Commission ("SFC") will make life easier for compliance and legal staff at the territory's banking and financial institutions, industry officials said. 

The SFC announced late last month that it would publish a comprehensive Licensing Handbook to make licensing information easier to access. The regulator has also revamped the licensing section of its website to make it more user friendly. 

The SFC's new handbook consolidates information previously issued in its Licensing Information Booklet and frequently asked questions ("FAQs") and circulars. The consolidation of this information into a single document has enabled the securities regulator to withdraw its previously issued booklet and about 80, approximately one-third, of its licensing-related FAQs.

"The SFC is trying to improve the user experience for both the public and compliance professionals when they are seeking licensing-related information. Circulars and guidelines which are related to licensing are now mentioned in the Licensing Handbook and hyperlinks are included in the Licensing Handbook so people no longer need to go to many different parts of the SFC website to obtain licensing information," said Keith Chan, associate with regulatory consultancy Bovill Asia in Hong Kong. 

"The SFC receives many questions regarding licensing applications and requirements, and so they have decided to address this by providing clearer and more centralised licensing information on their website," he said.

Although they are still published as separate documents, the various licensing guidelines have been attached to the Licensing Handbook as appendices for ease of reference. Some of the FAQs which came up in the more than 30,000 annual licensing-related enquiries received by the regulator were taken into account during the drafting of the handbook. Among the most popular topics were establishing newly licensed corporations, which types of licences were required for various regulated activities and competence requirements for licensed individuals.

A boon to compliance?

While on one level the SFC's new handbook has merely made editorial changes to its earlier booklet, the consolidation will make life much easier for compliance and legal staff at locally based financial institutions, as was seen in 2012 when Hong Kong consolidated its anti-money laundering rules into one source, the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance ("AMLO").

The regulator had taken the opportunity to align the licensing regime with other regulatory changes, such as the forthcoming manager-in-charge ("MIC") regime and practices for temporary and itinerate licences, said Judy Vas, EY's Asia-Pacific regulatory leader for financial services in Hong Kong. 

"Particularly the reference to the more open acceptance of MIC candidates without meaning the traditional requisite criteria added to the handbook will be welcome," she said.

"The SFC's recent improvements to its website and the publication of a new Licensing Handbook will clarify licensing requirements and make licensing information easier to access for persons who are, or who are seeking to become, licensed, as well as their advisers. These improvements are part of a continuing drive toward increasing efficiency at the SFC. With ever more licensed intermediaries and applicants for licensing in Hong Kong, these measures are to be welcomed," said James Parker, partner at Norton Rose Fulbright in Hong Kong.

Could the review have gone further?

Some practitioners felt the regulator's review of the licensing system had gone insufficiently far, however. One local compliance officer in the asset management sector shared his misgivings about the existing state of affairs. 

"Were you aware that legal and compliance professionals are generally not entitled to submit licensing documents via the SFC portal? This, I think, is part of the SFC's overall tone-deafness toward compliance professionals. Instead, a legal and compliance professional will typically prepare the documents then a responsible officer [RO] has to submit it. I feel that this promotes the impression that legal and compliance are subordinate to ROs, when the two oversight mechanisms should be equal and segregated. It is also absurdly inefficient and slightly embarrassing," he said, speaking condition of anonymity.

"We are now in many cases going to be part of the MIC regime and [will be] held accountable all the time, but are deemed not even worthy of licensure ... and having licensed status, by the way, is a good thing for one's resume, so we are needlessly foreclosed from job opportunities. There is or was some discussion on the SFC site along the lines that in many cases such professionals 'may lack the experience' to serve as ROs. In most cases, I believe, this is wrong."

In response, an SFC spokesman told Thomson Reuters Regulatory Intelligence that "under the current system, legal and compliance professionals can self-register a portal account and submit licensing applications via the SFC Online Portal for licence applicants".

Policy Rationale

The regulator's consolidation of the licensing regime has been motivated largely by a desire to offer a convenient, usable source for licensing information to market participants.

"They [the SFC] want to offer a more friendly version to the industry. However, my view is that SFC should streamline and simplify the SFC licensing process, instead of just editing the licensing booklet, though the effort is appreciated," said Josephine Chung, director of CompliancePlus Consulting in Hong Kong.

The new handbook includes MIC-related information in the licensing documentation as corporate licence applicants are required to provide MIC information during the application process.

Chan also praised the new handbook for making it clearer how to submit licence applications. "It includes more guidance on various scenarios whether an SFC licence is required," he said.

Previously, licence applications could be submitted in paper format or via the SFC online portal. Since 1 February 2017, all individual applicants and licensees have been required to submit their licensing applications, notifications and annual returns via the SFC online portal only, and paper applications can no longer be accepted.

For convenient cross-referencing of statutory provisions and SFC publications, hyperlinks have been included in the Licensing Handbook and also added to the licensing section of the SFC's website. Members of the public are encouraged to consult the website for answers to their questions about licensing and other SFC-related matters.

"With the Licensing Handbook and more user-friendly web pages, the industry and the general public will be able to find information more quickly without the need to refer to multiple publications," said Julia Leung, executive director of the SFCs intermediaries division.

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Ajay Shamdasani is a senior staff writer with Thomson Reuters Regulatory Intelligence in Hong Kong. He covers regulatory developments in Hong Kong, India and South Korea. He also writes about money laundering, fraud, corruption, data privacy and cybercrime.