SFC's Q4 2022 Report
In March of 2023, the Securities and Futures Commission (SFC) published its quarterly report for the period of October – December 2022.
The report highlights the most significant changes in the regulatory landscape over the final quarter of 2022 in Hong Kong.
While the general consensus on Hong Kong has been relatively dispirited over the past couple of years, the data within the report shows signs of life. In comparison to December 2021:
- Total number of SFC licensed companies increased by 1.3%
- Total number of registered institutions remained the same
- Total number of SFC licensed individuals decreased by just 22 (out of over 45,300)
Listing Applications
36 applications were submitted for vetting, including 1 from a company with a weighted voting rights structure, 4 from pre-profit biotech companies and 2 special purpose acquisition companies.
SFC Licensing
The SFC:
- Received 1,470 new license applications, comprising of 1,427 individuals and 43 corporations
- Approved 59 corporate licenses
The SFC approved 59 corporate licensing applications, of which 46% were Type 9 (asset management) and 39% were Type 4 (advising on securities). The number of firms licensed for Type 9 regulated activity (asset management) increased by six to 2,069.
Licensees and Registrants
The total number of SFC licensed corporations increased to 3,253 this quarter, up 1.3% from the same period last year, with the number of registered institutions and licensed individuals remaining relatively stable (~0% YoY change). Specifically, there were 22 fewer licensed individuals in December 2022 compared to December 2021.
SFC Licensing Applications
It is reported that there were 5,059 applications to conduct new regulated activity and 1,470 applications for SFC licenses, with a YoY change of -35% and -38.8% respectively. Licensed applications were down this quarter compared to last year’s period, but we suspect this is mainly due to the Covid-19 epidemic’s unique impact.
Supervision
The SFC conducted 54 on-site inspections of licensed corporations to review their compliance with regulatory requirements.
Products
Fund Flows: As at 31st December 2022, the assets under management of Hong Kong-domiciled funds increased 11% from the previous quarter to US$165.2 billion.
Net fund inflows of about US$3.6 billion were recorded during the quarter.
Markets
Investor Identification: The SFC issued a press release and a circular to announce that the investor identification regime for the securities market in Hong Kong will be launched on 20 March 2023.
Enforcement
Disciplinary Actions
The SFC disciplined three licensed corporations and five individuals during the quarter, resulting in total fines of HK$7.61 million.
Market Surveillance
The SFC’s surveillance of untoward price and turnover movements resulted in 1,366 requests for trading and account records from intermediaries in the quarter.
Virtual Assets
Virtual Asset Futures ETFs: The SFC issued a circular setting out its requirements for authorising ETFs which obtain exposure to virtual assets through futures.
Sustainable Finance
Climate-related Risks: In November 2022, new requirements for all fund managers to consider climate-related risks in their governance, investment and risk management processes and make related disclosures took full effect.
Communications
The SFC issued 36 press releases, statements, and announcements, 15 circulars and 53 social media posts during the quarter. The SFC also launched a dedicated webpage featuring its latest sustainable finance initiatives.
