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Securities And Futures Commission Of Hong Kong (SFC) Brokers 2024

Written By

Tobias Robinson

Written By

Tobias Robinson

Tobias is a partner at DayTrading.com, director of a UK limited company and active trader. He has over 25 years of experience in the financial industry and contributed via CySec to the regulatory response to digital options and CFD trading in Europe. Toby’s expertise and dedication to financial education make him a trusted voice in the industry, including a BBC investigation into digital options.

» Tobias Robinson Profile Page

Fact Checked By

William Berg

Fact Checked By

William Berg

William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.

» William Berg Profile Page

Updated

Jun 24, 2024

The Securities and Futures Commission of Hong Kong (SFC) is an independent body in charge of regulating brokers and protecting retail investors. This guide will list the top brokers authorized by the SFC. We also explore the SFC’s history, structure and public register, as well as the responsibilities and powers it levies on financial entities.

Background & History Of The SFC

The Securities and Futures Commission (SFC) is fundamentally responsible for administering, overseeing and regulating the securities and futures markets of Hong Kong. While it is considered a branch of the government, it operates independently and works to boost Hong Kong’s status as an international financial centre.

The entity’s head office address is 54/F One Island East, Quarry Bay in Hong Kong.

Before 1971, all markets in Hong Kong were unregulated. In 1973, after a stock market crash, legislation was passed to introduce a system to supervise the stock and commodity trading industry.

A further stock market crash in 1987 saw the formation of an advisory committee with six members. The committee recommended that a single, independent statutory body should regulate the markets and, in May 1989, the Securities and Futures Commission Ordinance was enacted. This created a new regulatory framework for Hong Kong, ultimately leading to the opening of the SFC.

Activities & Purpose

According to the Securities and Futures Commission’s website, its primary activities include:

1. The setting and enforcement of market regulations, plus the investigation of breaches or misconduct.
2. Licensing and supervising market participants that fall under the SFC’s market responsibility.
3. Managing market operators, such as exchanges, clearinghouses, share registrars and alternative trading platforms.
4. Authorising investment products and providing associated documents to investors.
5. The takeovers and mergers panel of the securities and futures commission oversees any takeovers of public companies and the Stock Exchange of Hong Kong.
6. Assisting local and overseas regulatory authorities, such as those in Korea and Taiwan.
7. Educating investors on markets and risks, plus their rights and responsibilities.

Similar to regulatory bodies in the USA, UK and Singapore, the purpose of the Securities and Futures Commission of Hong Kong (HK) is to ensure safe and successful practices among customers and financial service providers. To achieve this, policy statements are released by the Securities and Futures Commission, setting out guidelines on topics such as new fees and rules.

Additionally, the SFC provides a public register of any company or broker licensed by the organisation. With this feature, any member of the public can easily find any entity regulated by the Securities and Futures Commission, allowing them to search for relevant information before they trade with a broker. The SFC advisory committee also creates an alert list that warns customers of any brokers or entities that do not hold a license.

Market participants can gain access to occasional circulars from the Securities and Futures Commission, which contain reminders of any regulatory requirements and red flags. Occasionally, releases may relate to enforcement news or updates from Chinese markets.

Structure

The Securities and Futures Commission is led by the board of directors and the chairman of the SFC. Working alongside the Securities and Futures Commission board is a series of committees overseeing various responsibilities, whilst the CEO and non-executive director manage the commission in a more hands-on sense.

Beneath them is a management team covering all aspects of the Securities and Futures Commission. This includes a corporate finance division, which manages annual reports and revenue. There is also a process review panel for the Securities and Futures Commission, which evaluates the fairness of its internal operations.

Powers

For entities to become successfully licensed, they must satisfy the criteria outlined in the ‘Fit and Proper Guidelines’ that are issued by the Securities and Futures Commission. Any financial service provider that breaks these rules can be subject to a penalty. As such, the SFC has the power to:

• Revoke or suspend SFC licenses
• Issue private or public reprimands
• Ban and prevent people from participating in activities
• Issue fines and penalties, payable by cheque or transfer

Notably, there have been some high-profile cases involving the SFC, including AA & EA vs the Securities and Futures Commission and the SFC vs Tiger Asia Management LLC. In 2020, the SFC fined Goldman Sachs $350 million for its role in the 1Malaysia Development Berhad scandal (1MDB scandal).

Broker Requirements

Any broker wishing to receive a license from the Securities and Futures Commission must use the SFC online portal on the Hong Kong website to register. They must also follow the licensing handbook and provide information relating to:

• Shareholders and shareholding structure
• Proposed business and internal controls
• Management and governance structure
• Financial strength

Criticisms

The Securities and Futures Commission has faced some criticism over the years, particularly concerning licensing examination. Critics stated that the test was not checked or validated independently before being implemented in the examinations. Moreover, no formal appeal practices are in place to check the legitimacy of such examinations.

Final Thoughts On The SFC

The Securities and Futures Commission is responsible for ensuring that Hong Kong’s financial markets are safe and regulated for both customers and financial service providers. To achieve this, the SFC implements a strong regulatory framework and robust enforcement procedures.

Before trading with a broker, investors should always conduct an entity search using the Securities and Futures Commission public register to check whether the company is fully licensed by the SFC.

FAQs

Who Owns The Securities And Futures Commission?

The SFC is a branch of the Hong Kong government. However, it is an independent statutory body led by agency executives and advisory committees.

When Did The Securities And Futures Commission Become Operational?

Following the stock market crash of 1987, a committee of six members was formed, which later created the SFC in May 1989.

Does The Securities And Futures Commission Regulate Banks?

The SFC does not regulate banks. It regulates any financial services provider operating within the securities and futures markets.

How Do I Check If A Broker Is Licensed By The Securities And Futures Commission?

The SFC provides a public register of all licensed companies and brokers. The public can conduct their own company search to check whether a broker is licensed.

Does The Securities And Futures Commission Regulate Forex Brokers?

Yes, the SFC regulates forex brokers. Any company within the securities and futures markets, and operating in Hong Kong, is regulated by the SFC.