Which types of licenses ?

Which types of licenses should a hedge fund manager apply and contain at SFC in Hong Kong so he could advise and deal with customers ?

Type 1 Dealing in securities
Type 2 Dealing in futures contracts
Type 3 Leveraged foreign exchange trading
Type 4 Advising on securities
Type 5 Advising on futures contracts
Type 6 Advising on corporate finance
Type 7 Providing automated trading services
Type 8 Securities margin financing
Type 9 Asset management
Type 10 Providing credit rating services

Type 1 and another depending on what you are advising on

It means a a hedge fund manager should contain at least type 1 . If a Hong Kong based hedge fund manager or a capital group holds type 9 asset management, can he advise customers in hedge fund dealings ?

For an equity linked derivative trader who needs to manage an equity derivative book comprised of index and single stock options or exotics with US$5m to US$20m in capital, with volatility risk tilting on the long side. Does he require a type 1 or type 9 ?

1, 4, 9 cover everything but as a HF manager 9 is sufficient*

*I am not in compliance. Caveat Lechtor

I got the answers :

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As discussed, any person (such as the unlicensed firm) providing financial intermediary services (such as asset management) is required to be licensed by the SFC.

In other words, if that unlicensed firm provides asset management services without a license, the firm (as well as its personnel, including the RO from another firm) commits a criminal offence.

Kind regards,

Partner

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Whether or not a firm is required to be licensed or registered with the Securities and Futures Commission ("SFC"), the local regulator, depends on whether the firm is conducting a business in a regulated activity in Hong Kong. Generally speaking, depending on the specific circumstances, an asset manager for a hedge fund may be required to obtain a Type 9 (asset management) license.

A responsible officer ("RO") can only carry on a regulated activity for a licensed corporation to which he or she is accredited. As a result, depending on the scope of the business of the unlicensed entity, such entity may need to apply for an SFC licence in order to carry on asset management activities. The RO will also need to apply for his SFC license to be transferred to that entity.

If you have any questions, please let us know.

Warm regards,
Trainee Solicitor

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The company that undertakes a regulated activity (including Type 9 regulated activities (asset management)) must be licensed by the SFC to do so otherwise it commits an offence. This is the case even if the actual person at the company undertaking the work is licensed to do so. Therefore what you propose is not permitted.

Let me know if you would like us to formally advise on this matter.

Regards

Partner

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No, it’s not legal in Hong Kong. The asset management company needs to apply for a licence with the SFC.

Regards,

Managing Director

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1. Can a person who is a responsible officer for a hedge fund manager with an SFC type 9 license deal with investors through another asset management firm which has no type 1-9 SFC licence?

It would be a criminal offence to do this in Hong Kong if the “dealings” amounted to an activity regulated under the Securities and Futures Ordinance. The other asset management firm would need to have the right licence and the person would need to be accredited to that firm.

2. Does it require to have a licence ?

Any firm which conducts regulated activities as defined in Schedule 5 of the Securities and Futures Ordinance (e.g. asset management, fund marketing and advising on securities ) is required to be licensed with the SFC.

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