On October 31, the Financial Affairs and Treasury Bureau under the Hong Kong Financial Secretary officially released the Policy Declaration on the Development of Hong Kong's Virtual Assets, which attracted everyone's attention. Many insiders said frankly: "This Declaration may be going up in Hong Kong."
The Declaration more means that a more open and comprehensive virtual asset protection and supervision system will be established in Hong Kong.
Have you understood the license of Hong Kong Virtual Assets Exchange? Unless there is a specific exemption, any person who conducts regulated activities in the Hong Kong securities and futures market and the non bank retail leveraged foreign exchange market must obtain a license from or register with the SFC.
1、 Do you need a license or registration?
1. Categories of regulated activities
Ten categories of regulated activities are defined in Schedule 5 of the Securities and Futures Ordinance, and various regulated activities are defined:
2. General provisions
(1) Generally speaking, a licence is required if the following activities are carried out by a financial institution other than an authorized financial institution:
You are a corporation carrying on a business in Hong Kong of a type of regulated activity (section 114 (1) and (2) of the Securities and Futures Ordinance);
You are a corporation (whether by yourself or by another person on your behalf) that actively promotes any of the services you provide to the public in Hong Kong or from outside Hong Kong, and the provision of such services in Hong Kong would constitute a type of regulated activity (section 115 of the Securities and Futures Ordinance);
If you perform a regulated function in your personal capacity as your principal (licensed corporation) in relation to any regulated activity conducted in the form of business, you must be the licensed representative of the principal to which you belong (section 114 (3) and (4) of the SFO).
In addition, if you are the executive director of the corporation, you also need to be approved as a responsible person (section 125 (1) (a) of the SFO).
(2) You need to register if you are an authorized financial institution for the following activities:
The business of conducting a certain type of regulated activities, except for Category 3 (leveraged foreign exchange trading) and Category 8 (provision of securities margin financing) regulated activities. In this case, you must be a registered institution (Section 114 (1) and (2) of the SFO);
Or (whether by yourself or another person on your behalf) actively promote any services you provide to the public in Hong Kong or from outside Hong Kong, which, if provided in Hong Kong, would constitute a type of regulated activity. In this case, you must be a registered institution (Section 115 of the SFO).
(3) Relevant persons who perform any regulated function in relation to any regulated activity carried out by a registered institution (such as bank staff working in the securities trading department) are not required to obtain a licence from or register with the SFC. However, if such person intends to engage in a regulated activity, he must be a person whose name appears on the register kept by the HKMA.
(4) Both licensed corporations and registered institutions are referred to as "intermediaries". In terms of licensing, sole proprietorship or partnership is a business structure that will not be accepted.
2、 What are the requirements for obtaining a license or registration?
1. General Suitability Rules
If the applicant cannot satisfy the SFC that he or she has the qualifications of a suitable person, the SFC must refuse to grant him or her a licence or registration. In accordance with Article 129 of the Securities and Futures Ordinance, when considering whether an applicant has the qualifications of a suitable person to be licensed or registered, the SFC shall consider the following matters concerning the applicant and, where appropriate, other relevant persons of the applicant, in addition to other matters that the SFC considers relevant:
✔ Financial condition or solvency;
✔ Education or other qualifications or experience, and consideration in this regard must take into account the nature of the functions to be performed by the applicant;
✔ Whether it is capable of conducting relevant regulated activities in a competent, honest and fair manner;
✔ And reputation, character, reliability and financial soundness. The above are the main considerations of the SFC when dealing with each application for licence or registration.
2. Specific Approval Criteria - Licensed Corporations
✔ (1) Incorporation
You must be a company incorporated in Hong Kong or an overseas company registered in the Hong Kong Companies Registry.
✔ (2) Competency
You must satisfy the SFC that you have an appropriate business structure, a good internal control system and qualified personnel, which are sufficient to ensure that you can properly manage the risks you may face when conducting the proposed business as detailed in the business plan.
✔ (3) Person in charge
For each type of regulated activity you apply for, you must appoint at least two responsible persons to directly supervise the relevant activities you plan to carry out. For each type of regulated activity you apply for, you must have at least one responsible person who can supervise the relevant business at all times. As long as the appointee is an appropriate person and the relevant arrangements will not cause conflict of roles, the same person can be appointed to be responsible for more than one type of regulated activities. At least one of the responsible persons you intend to appoint must be defined in the SFO.
✔ (4) Executive Director
Generally speaking, the CSRC expects that the core functional directors responsible for the overall management and supervision functions and main business functions described in the section of "senior management" of this chapter should seek the approval of the CSRC to become the responsible persons for the regulated activities under their supervision. All your executive directors must seek the approval of the SFC to become responsible persons under your jurisdiction (as a corporation). When you submit your application for a licence, you must submit to the SFC all applications for approval of the proposed responsible officer for consideration by the SFC.
✔ (5) Senior management
The primary responsibility of the senior management of your corporation is to ensure that you maintain appropriate standards of conduct and follow appropriate procedures. In the opinion of the SFC, the senior management of a licensed corporation includes (among other members):
✔ Directors of the corporation
✔ Responsible person of the corporation
✔ And what we call core functional executives.
The above three categories of posts need not be held by different persons. For example, a person may serve as a director, responsible person and core functional officer of a licensed corporation at the same time. When applying for a licence under section 116 (1) of the Securities and Futures Ordinance, you must provide information about your core functional officers and an organizational chart. The management structure of a licensed corporation (including the appointment of core functional directors) shall be approved by the board of directors of the corporation. In addition, the Board of Directors shall ensure that each core functional officer of the licensed corporation has agreed to accept his appointment as a core functional officer and the specific core functions for which he is primarily responsible. After you are licensed, if you make any changes to the appointment of your core functional supervisor or some details of your core functional supervisor, you should notify the SFC of the changed details within seven business days after the change occurs. In some cases, you must also submit an updated organization chart in the notice of change.
✔ (6) Major shareholders, senior officers and other relevant persons must have the qualifications of appropriate candidates
Any other person employed or to be employed by your substantial shareholder or senior officer in connection with the regulated activities to which your application relates, or any other person associated with you in connection with such activities, must be qualified as an appropriate person. If there is no "close connection" between the major shareholders and the applicant for the corporate license, they may choose to provide less information in the application form. However, if the SFC deems it necessary, it may request additional information later.
✔ (7) Financial resources
At any time, you must maintain your paid up share capital and liquid capital at not less than the relevant amount specified in other regulatory requirements such as the Securities and Futures (Financial Resources) Rules, the Guidelines for Sponsors and the Code for Open ended Fund Companies (if applicable) in respect of the type of regulated activities for which you apply to be licensed. If you apply for more than one category of regulated activities, the minimum paid up share capital and liquid capital you should maintain will be the highest of the required amounts for regulated activities you apply for.
The following table is a summary of the minimum amount of paid up capital and liquid capital required to be maintained by a licensed corporation for each type of regulated activity.
Minimum requirements for fully paid share capital and quick capital
We firmly believe that the supervision will become more mature and the development of virtual assets will become more perfect. It is only a matter of time before we enter the board. Hong Kong has much to offer on the road to building a virtual economic center in China in the future. We'll see!
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