Hong Kong Securities and Futures Commission
|Securities and Futures Commission|
|Key People||Tim Leung, Chairman; Ashley Alder, CEO|
The Securities and Futures Commission (SFC) is an independent non-governmental statutory body responsible for regulating the securities and futures markets in Hong Kong.
Until the mid-1970s, stock and commodities markets in Hong Kong were largely unregulated. After the stock market crash of 1973-1974, the Government intervened and enacted legislation that established a regulatory structure that was administered by two part-time Commissions.
This structure remained largely unchanged for over a decade, during which time there was rapid change in the securities and futures markets, both internationally and in Hong Kong.
In 1987, deficiencies in the structure were made apparent by the October crash, which resulted in the closure of both the Hong Kong stock and stock index futures markets for four days. In the aftermath of the crash, a six-member Securities Review Committee, chaired by Ian Hay Davison, was created to examine Hong Kong's regulatory structure and recommend improvements that would minimize the chances of a repeat of the disruption and chaos of October 1987.
In May 1988, the Committee released its recommendation, which was that the existing structure be replaced with a single statutory body outside the civil service, headed and staffed by full-time professional regulators and funded primarily by the market. Such a body would have broad investigative and disciplinary powers to enable it to perform its regulatory functions effectively.
In May 1989, following the enactment of the Securities and Futures Commission Ordinance (SFCO), the SFC was born.
In April 2003, the SFCO and nine other securities and futures-related ordinances were consolidated into the Securities and Futures Ordinance (SFO).
Products and Services
The Securities and Futures Commission's statutory regulatory objectives as set out in the Securities and Futures Ordinance are:
- To maintain and promote the fairness, efficiency, competitiveness, transparency and orderliness of the securities and futures industry
- To promote understanding by the public of the operation and functioning of the securities and futures industry
- To provide protection for members of the public investing in or holding financial products
- To minimize crime and misconduct in the securities and futures industry
- To reduce systemic risks in the securities and futures industry
- To assist the Financial Secretary in maintaining the financial stability of Hong Kong by taking appropriate steps in relation to the securities and futures industry.
At first, the SFC did not make a strong push to pursue regulation enforcement against digital asset trading platforms because it did not consider virtual currencies to be securities. It did, however, issue multiple statements about the legal and regulatory requirements - as well as risks - of engaging with the cryptocurrency markets in one way or another.
In 2017, the SFC released a statement about initial coin offerings (ICOs). The statement said that while "a virtual commodity itself is not a security," some ICOs may technically qualify as securities under the SFC's guidelines, and would be regulated as securities offerings. In December of that year, the SFC put out another statement about the legal and regulatory requirements of investing in bitcoin futures.
In February 2018, the SFC published another notice on its site that warned of trading cryptocurrency on centralized exchanges and investing in ICOs, saying that it had taken regulatory action against a number of cryptocurrency exchanges and issuers of ICOs.
2019: Opt-in regulation
In November 2019, in conjunction with Hong Kong FinTech Week, the SFC published a position paper explaining new operational requirements for cryptocurrency and digital asset exchanges that would allow them voluntarily to apply for and receive operating licenses. Among the many rules laid out in the paper, the paper said that the SFC would not give licenses to decentralized peer-to-peer platforms and that only professional investors would be allowed to trade on licensed platforms.
2020: Licensing requirement
In a speech to the Hong Kong FinTech Week on November 3, 2020, Commission CEO Ashley Alder said that the Hong Kong government would begin requiring all cryptocurrency trading platforms to be registered with the SFC regardless of whether they list security tokens or derivatives. Leveraging its anti-money laundering authority, the government's action focused on all businesses that operate in Hong Kong or target Hong Kong residents. Adler said that the regulation would address risk management and financial capacity of trading platforms as well as allow the SFC to fulfill its international responsibilities with regard to preventing money laundering and terrorism financing.
- Introducing the SFC. Securities and Futures Commission.
- Historical Background. Securities and Futures Commission.
- SFC welcomes new Chief Executive Officer. SFC.
- HK Government Names Ashley Alder As CEO Of Securities Regulator. WSJ.
- Statement on initial coin offerings. Hong Kong SFC.
- Circular to Licensed Corporations and Registered Institutions on Bitcoin futures contracts and cryptocurrency-related investment products. Hong Kong SFC.
- SFC warns of cryptocurrency risks. Hong Kong SFC.
- Hong Kong Regulator Sets Out Rules for Crypto Exchanges to Get Licenses. Bloomberg.
- Position paper Regulation of virtual asset trading platforms. Hong Kong SFC.
- Fintech: the regulatory response to evolving challenges, Keynote address at Hong Kong FinTech Week. Hong Kong Securities and Futures Commission.