SFC Licensing and On-Going Compliance

Sponsors must be licensed or registered for “Type 6” regulated activity under the Hong Kong Securities and Futures Ordinance (Cap. 571) (SFO). In addition, they must meet the eligibility criteria prescribed in the Securities and Futures Commission’s (SFC’s) Additional Fit and Proper Guidelines for Corporations and Authorised Financial Institutions applying or continuing to act as Sponsors and Compliance Advisers (Sponsor Guidelines) in order to be permitted to undertake sponsor work as part of their Type 6 regulated activity.

As licensed or registered persons, sponsors are subject to:

• the SFC’s Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct), which sets out overall principles and requirements applicable to the conduct of all licensed and registered persons to which they must adhere in ensuring that they are fit and proper to remain licensed and registered;
• the SFC’s Corporate Finance Adviser Code of Conduct (CFA Code) which provides specific conduct guidance to corporate finance advisers;
• the SFC’s Fit and Proper Guidelines;
• the SFC’s Guidelines on Competence;
• the Sponsor Guidelines, which set out continuing compliance requirements, including specific competence requirements as well as the responsibilities of management and sponsor principals.

Sponsors are also required to maintain proper systems, controls and procedures in accordance with the SFC’s Management, Supervision and Internal Control Guidelines for Licensed Persons.

The capital and other financial requirements applicable to sponsors as persons licensed under the SFO are set out in the Securities and Futures (Financial Resources) Rules (FRRs). Sponsors are required to have a minimum paid up share capital of HK$10 million and liquid capital of HK$3 million, unless the corporation does not hold client assets, in which case HK$100,000 is required. A licensed entity must notify the SFC if its liquid capital falls below 120% of the required minimum. Accordingly, the licensed entity is effectively required to maintain a 20% “buffer” over and above the required minimum.

For more information on eligibility criteria for principals under the Sponsor Guidelines, please click here.