Hong Kong SFC licenses

Hong Kong SFC licenses | Bestar

Hong Kong SFC Licensing

In Hong Kong, any corporation or individual carrying out "regulated activities" in the securities and futures markets must be licensed by the Securities and Futures Commission (SFC).

The licensing regime is divided into several "Types" based on the specific financial services being provided.

Types of SFC Regulated Activities

There are currently 10 active license types (with others pending or specialized):

Type	Activity	Common Examples
Type 1	Dealing in Securities	Stockbrokers, retail brokers, and placement agents.
Type 2	Dealing in Futures	Futures brokers and traders in commodity or index futures.
Type 3	Leveraged Foreign Exchange	Forex brokers offering margin trading to retail/pro clients.
Type 4	Advising on Securities	Investment advisors and research houses issuing stock reports.
Type 5	Advising on Futures	Advisors providing specific research on futures contracts.
Type 6	Advising on Corp. Finance	IPO sponsors and advisors for mergers and acquisitions (M&A).
Type 7	Automated Trading Services	Providers of electronic trading platforms or dark pools.
Type 8	Securities Margin Financing	Providing loans to clients to buy stocks (often paired with Type 1).
Type 9	Asset Management	Fund managers (Hedge Funds, Private Equity) and discretionary accounts.
Type 10	Credit Rating Services	Agencies that provide ratings on the creditworthiness of entities.

Note: Type 13 (Depositary services for CIS) was recently introduced for custodians of SFC-authorized funds. Types 11 and 12 (OTC Derivatives) are defined but not yet fully operational for licensing.

Core Licensing Requirements

To obtain a license, a firm must meet several "Fitness and Properness" criteria:

• Incorporation: The applicant must be a company incorporated in Hong Kong or a registered foreign company.

  
  

• Responsible Officers (ROs): You must appoint at least two ROs for each regulated activity.

  
  

  • At least one RO must be an Executive Director.

  • At least one RO must reside in Hong Kong to supervise the business.

    
    

• Financial Resources (FRR): Firms must maintain minimum Paid-up Share Capital and Liquid Capital. For example:

  
  

  • Type 9 (Asset Management): Typically requires $5,000,000 HKD paid-up capital if holding client assets, or $0 if not (though liquid capital requirements still apply).

    
    

• Managers-in-Charge (MICs): Firms must identify individuals responsible for 8 core functions (e.g., Compliance, IT, Risk Management).

Application Timeline

The process is rigorous and typically involves a 4-to-6 month lead time:

1. Preparation (1–2 months): Drafting the business plan, compliance manuals, and sourcing ROs.

   
   

2. SFC Review (approx. 15 weeks): The "Performance Pledge" for a corporate application is 15 weeks, though queries can extend this.

   
   

3. Approval: Once satisfied, the SFC issues the license, and the firm's name is added to the public Register of Licensees.

Incidental Exemptions

You may not need a separate license if an activity is wholly incidental to your main one.

• Example: A Type 9 fund manager does not usually need a Type 4 (Advisory) license to give advice to the funds they manage.

Specific Capital Requirements for License Types

In Hong Kong, the financial requirements for a licensed corporation (LC) are governed by the Securities and Futures (Financial Resources) Rules (FRR).

Every firm must meet two distinct capital tests at all times:

1. Minimum Paid-up Share Capital: The total amount of shareholder equity actually "paid in" to the company.

   
   

2. Minimum Liquid Capital: The amount by which "liquid assets" exceed "ranking liabilities." This ensures the firm has enough cash or near-cash assets to cover its immediate obligations.

Capital Requirements by License Type (2026)

The table below summarizes the requirements for the most common license types. Note that if a firm holds multiple licenses, it must meet the highest of the requirements among them (they are not cumulative).

License Type	Condition	Paid-up Capital (HKD)	Liquid Capital (HKD)
Type 1 (Dealing)	Standard (No margin)	5,000,000	3,000,000
	With Margin Financing	10,000,000	3,000,000
	Introducing Agent Only	N/A	500,000
Type 2 (Futures)	Standard Dealer	5,000,000	3,000,000
	Introducing Agent Only	N/A	500,000
Type 4 / 5 / 9	Does Not Hold Client Assets	N/A	100,000
(Advisory/Asset Mgmt)	Holds Client Assets	5,000,000	3,000,000
Type 6 (Corp Fin)	Acts as IPO Sponsor	10,000,000	3,000,000 (holds assets) / 100k (no assets)
	Non-Sponsor	5,000,000 (holds assets)	3,000,000 (holds assets) / 100k (no assets)
Type 13 (Depositary)	Custodian for Retail Funds	10,000,000	3,000,000

Important Considerations for 2026

• The 20% "Comfort" Buffer: While the table shows the legal minimums, the SFC generally expects LCs to maintain a 20% buffer above the minimum liquid capital requirement. Falling below 120% of the required liquid capital triggers a notification requirement to the SFC.

  
  

• OTC Derivatives (Type 11 & 12): New reforms implemented in 2025 have introduced significantly higher capital tiers for OTC derivative dealers. Non-centrally cleared dealers may face a baseline capital requirement as high as $1 billion HKD depending on their risk model.

  
  

• Variable Liquid Capital: For many licenses (especially Type 1), the "Required Liquid Capital" is actually the higher of the floor amount in the table OR a variable calculation (usually 5% of adjusted liabilities).

  
  

• Asset Management (Type 9) Nuance: Most hedge fund managers or private equity firms in Hong Kong operate under the "Does Not Hold Client Assets" condition. This allows them to start with no specific paid-up capital requirement and a very low 100,000 HKD liquid capital requirement, provided a third-party custodian holds the fund's assets.

How Bestar Hong Kong can Help

Hong Kong SFC licenses

When applying for an SFC (Securities and Futures Commission) license in Hong Kong, the complexity of the "Fit and Proper" guidelines and Financial Resources Rules (FRR) often necessitates professional guidance. Bestar Hong Kong acts as an all-in-one partner to streamline this rigorous process.

Here is how Bestar helps firms navigate SFC licensing, optimized for clarity and professional insight:

1. Pre-Licensing Feasibility & Gap Analysis

Before submitting an application, Bestar conducts a readiness review to ensure you don't waste time or resources on a failing application.

• Licence Type Identification: Helping you determine if your business model requires a single license (e.g., Type 9 for Asset Management) or a combination (e.g., Type 1 and Type 4 for stock brokerage and advisory).

  
  

• "Fit and Proper" Vetting: Pre-screening your proposed Responsible Officers (ROs) and Managers-in-Charge (MICs) to ensure they meet the SFC's strict academic, experience, and integrity requirements.

  
  

• Corporate Structuring: Advising on the optimal Hong Kong legal entity to satisfy both SFC requirements and tax efficiency.

2. Documentation & Application Management

The SFC application is document-intensive. Bestar manages the heavy lifting for the WINGS (SFC’s online portal) submission:

• Tailored Business Plans: Drafting comprehensive plans that outline operational workflows, target client segments, and revenue models in the specific language the SFC expects.

  
  

• Compliance Manuals: Developing bespoke internal control manuals covering AML/KYC, personal account dealing policies, and risk management frameworks.

  
  

• Financial Resources Calculations: Ensuring your firm meets the minimum paid-up and liquid capital requirements (e.g., proving the $5M HKD requirement for Type 9 firms holding client assets).

3. SFC Liaison & Interview Preparation

Bestar acts as your official point of contact, handling the "back-and-forth" that often occurs during the 15-week performance pledge period.

• Requisition Handling: Responding to SFC "requisitions" (follow-up questions) promptly to prevent the review clock from restarting.

  
  

• RO Coaching: Preparing your Responsible Officers for potential interviews with SFC case officers regarding their technical knowledge and supervisory experience.

4. Post-Licensing & Ongoing Compliance

Securing the license is only the beginning. Bestar provides retainer-based compliance support to maintain your standing:

• FRR Returns: Preparing and filing monthly or semi-annual Financial Resources Rules returns.

  
  

• CPT Tracking: Monitoring Continuous Professional Training (CPT) hours for all licensed individuals.

  
  

• Annual Audits: Coordinating with auditors to ensure the annual compliance review and financial audits meet SFC standards.

Why Choose Bestar for SFC Licensing?

Benefit	Description
One-Stop Shop	Integrated services covering company incorporation, bank account opening, and SFC licensing.
Local Expertise	Deep knowledge of the Hong Kong SFO (Securities and Futures Ordinance) and the latest 2025 regulatory updates.
Risk Mitigation	Identification of "red flags" in personnel or capital structures before the SFC sees them.

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