Concept
A licence from Hong Kong's Securities and Futures Commission (SFC) authorises specific types of regulated activity. Schedule 5 to the Securities and Futures Ordinance (SFO, Cap. 571) lists 13 such types, of which 11 operate for licensing purposes: Types 11 and 12 are not yet in operation (SFC Licensing Handbook, para 1.1.1). A company is licensed for a set of types, and each type brings its own responsible individuals, its own capital floor and its own conditions.
Why a licence is required
Licensing gives the SFC control over those who take investors' orders, advise them and handle their money: the licence ties such activity to minimum capital, individually vetted people and ongoing supervision. Carrying on a regulated activity as a business in Hong Kong without a licence is therefore prohibited: a corporation needs a licence under s.114 SFO, and under s.115 it needs one even when it actively markets such services to the Hong Kong public from abroad. The maximum penalty for breaching s.114 is a fine of HK$5 million and seven years' imprisonment (Government reply in the Legislative Council, 21 October 2020).
Banks and other authorized financial institutions supervised by the HKMA register with the SFC as registered institutions instead of being licensed — for every type other than 3 and 8; their staff are entered in the HKMA register.
Four types matter for private capital: Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 9 (asset management). The others — margin financing, corporate finance, credit ratings, automated trading services, depositary services for funds — serve narrower business models. How the SFC licence compares with regimes in other jurisdictions is shown in the Financial Licences hub.
What sets the model apart
Three features distinguish the Hong Kong regime from European investment-firm licences.
The licence is built from types
A fund manager needs Type 9, a broker Type 1, a futures broker Type 2. Adjacent types needed only to support the core activity fall under an incidental exemption, so no extra licences are required.
People are licensed too
Everyone performing a regulated function is accredited to the licensee as a licensed representative. Each type needs at least two responsible officers, one of whom is an executive director.
Capital follows the right to hold assets
A manager or adviser licensed on condition that it does not hold client assets needs HK$100,000 of liquid capital. Without that condition the floor is HK$5 million paid-up and HK$3 million liquid capital.
The key parameters of the regime are summarised in the table. Capital is governed by the Securities and Futures (Financial Resources) Rules (FRR, Cap. 571N), procedure and requirements for people by the SFO and the SFC Licensing Handbook.
| Parameter | SFC licence |
|---|---|
| Regulator and law | SFC; SFO (Cap. 571), Schedule 5; FRR (Cap. 571N) |
| Activity | Granted type by type; discretionary management is Type 9, advice is Type 4 |
| Capital | From HK$100,000 liquid (Types 4 and 9 without client assets) to HK$5 million paid-up and HK$3 million liquid; above the floor, expenses for the first six months |
| Timing | SFC indication: about 15 weeks for a corporation, 10 for an RO, 8 for a representative |
| People | At least two ROs per type, one an executive director |
| Owners | Prior SFC approval for holdings above 10% (ss.131–132 SFO) |
| Client protection | Investor Compensation Fund — up to HK$500,000 per claimant, exchange-traded products only |
| SFC fees | HK$4,740 per type on application and annually; HK$4,740 a year per RO per type |
Which types private capital needs
Four types cover almost every private-capital model, from the family manager to the broker serving wealthy clients. The line between them runs along two questions: who takes the investment decision, and whose assets move as a result.
| Type | What it covers | Typical licensee |
|---|---|---|
| Type 1 | Dealing in securities, including fund distribution | Broker, fund distributor, investment bank |
| Type 2 | Dealing in futures contracts | Futures broker |
| Type 4 | Advising on securities and research | Independent adviser, research boutique |
| Type 9 | Managing funds and discretionary portfolios | Fund manager, discretionary manager |
Which types a firm needs is largely a question of exemptions. The Licensing Handbook lists a number of them, including for trust companies, for solicitors and accountants and for dealing as principal with professional investors; three matter most for private capital (Licensing Handbook, paras 1.3.3–1.3.15).
- Incidental to asset management. Type 9 covers Types 1, 2, 4 and 5 where they serve only the portfolios under the licensee's management; the advisory types only where it manages a fund.
- Incidental to dealing. Type 1 covers Types 4, 6 and 9 while they remain subordinate to broking; a fee based on assets under management takes the service outside the exemption.
- Group. Types 4, 5, 6 and 9 are not needed for services to wholly owned group companies in respect of their own assets.
All three exemptions are narrow: they describe what a licensee does in support of its core activity, and they do not widen its client base. Distributing funds that invest in virtual assets, for example, expressly requires Type 1 (para 1.4.4).
Family offices
A family office is assessed the same way — by activity (Licensing Handbook, paras 1.4.25–1.4.26). A single family office that manages the assets of one family and provides no services to third parties does not need a licence; the SFC's example is an internal unit of a trustee managing the assets of a family trust.
A company or family office set up as a business to manage assets that include securities or futures contracts may need Type 9, and acquiring assets on the family's instructions is tested against Type 1. The tax side of a family office is covered in the article on the Hong Kong family office and the FIHV regime.
A fund manager from application to operation
The typical case is a team setting up a management company for a fund whose assets are held by an independent custodian. The company needs Type 9 with the condition that it does not hold client assets. The path runs as follows.
- The company applies through the WINGS system together with applications for approval of at least two responsible officers; RO applications are lodged together with the corporate application (para 3.2.8).
- It holds at least HK$100,000 of liquid capital. The excess over the minimum must cover projected expenses for the first six months, otherwise a funding plan is required (para 3.2.20).
- The SFC processes the corporate application in about 15 weeks; the time grows with an incomplete file, changes of shareholders or ROs during the review, waiting for work visas and capital injections (para 7.7).
- Once licensed, the company places orders with brokers for the fund's portfolio without a separate Type 1 — this is incidental to its asset management.
Offering interests in third-party funds to clients is a distinct service. If the model includes distribution, Type 1 is added to Type 9, with its own capital requirement.
Capital under the Financial Resources Rules
The FRR set two floors at once: paid-up share capital and liquid capital, which the licensee maintains at all times. Where a company is licensed for several types, the highest of the minimums applies (para 3.2.17). The table sets out the floors for the four private-capital types; the higher floor for a private OFC custodian comes from the OFC Code, the rest from the FRR.
| Type and case | Paid-up capital | Liquid capital |
|---|---|---|
| Type 1 — general case | HK$5,000,000 | HK$3,000,000 |
| Type 1 — margin financing or custodian of a private OFC (OFC Code) | HK$10,000,000 | HK$3,000,000 |
| Type 1 — approved introducing agent or trader | — | HK$500,000 |
| Type 2 — general case | HK$5,000,000 | HK$3,000,000 |
| Type 2 — introducing agent, trader or non-clearing dealer | — | HK$500,000 |
| Type 4 or Type 9 — subject to the no-client-assets condition | — | HK$100,000 |
| Type 4 or Type 9 — without that condition | HK$5,000,000 | HK$3,000,000 |
The main switch in the table is the licensing condition on client assets. A manager without it falls into the same bracket as a broker: its liquid capital floor rises thirtyfold and HK$5 million of paid-up capital is added on top.
The condition also drives reporting: companies licensed only for Types 4, 5, 6, 9 and 10 with the no-client-assets condition file financial resources returns half-yearly, all others monthly (para 9.10.1; FRR s.56). How Hong Kong's liquid capital compares with EU K-factors and US net capital is shown in the article on regulatory capital.
People: responsible officers and licensed representatives
A Hong Kong licence rests on people as much as on capital. Every individual performing a regulated function for a licensee must be a licensed representative (LR) accredited to that licensee (s.114(3)–(4) SFO). Supervision of each type sits with responsible officers (ROs), approved by the SFC individually.
RO requirements
For each type the licensee appoints at least two ROs to directly supervise the activity; at least one must be available at all times, and at least one must be an executive director (paras 3.2.3–3.2.7). The reverse rule is stricter: every director who participates in or directly supervises the regulated business must be approved as an RO (s.125 SFO).
One person may be an RO for several types if the roles do not conflict. An employment contract is not required: a consultant acting on the licensee's behalf can also be approved.
The SFO contains no residence requirement, but one follows in practice from the SFC's approach. An executive director may live outside Hong Kong if able to discharge the supervisory role. The SFC, however, licenses individuals only if they will come to Hong Kong to carry on regulated activities; an RO stationed overseas receives a non-sole condition, and the licensee must then have sufficient onshore ROs free of such conditions. Itinerant professionals, who spend only short periods in Hong Kong, should not be ROs (paras 4.4.11–4.4.13).
Competence
The Guidelines on Competence (October 2024 edition, para 4.2.1.2) give RO applicants three options; their common minimum is as follows.
| Criterion | RO requirement |
|---|---|
| Education | Degree in a designated field, another degree, or a school qualification with conditions — depending on the option |
| Industry experience | At least three years over the past six; in one option, five years over eight |
| Management experience | Two years |
| Industry qualification | A recognised qualification or a one-off five hours of extra CPT per type — depending on the option |
| Local regulatory framework paper | Required in every option |
For managers of private funds the SFC accepts a broader range of experience: proprietary trading, research, alternative strategies (Licensing Handbook, para 4.4.4). Licensing examinations are run by the Hong Kong Securities and Investment Institute (HKSI). A licensed representative faces criteria of the same kind — education, industry experience, qualification and the local regulatory paper — without the management-experience requirement; pending the decision, a representative may work under a provisional licence, which the SFC normally determines within seven business days. Once licensed, every licensed individual completes 10 CPT hours a year, and ROs two more on regulatory compliance.
Procedure, timing and fees
Applications are filed online through WINGS. The SFC publishes processing times as an indication for new market participants, and they depend above all on the quality of the file (para 7.7.1).
| Application | Usual SFC time | Application fee |
|---|---|---|
| Corporate licence | About 15 weeks | HK$4,740 per type |
| RO approval | About 10 weeks | HK$2,950 per type |
| Licensed representative | About 8 weeks | HK$1,790 per type |
| Provisional representative licence | About 7 business days | HK$800 on top of the main fee |
Annual SFC fees have been collected again since 1 April 2025, after a long waiver (SFC circular 25EC16 of 14 March 2025): HK$4,740 a year per type for the company and the same per type for each RO, HK$1,790 per type for a representative. The fee is due within one month after the licence anniversary; late payment attracts a surcharge from 10% and can lead to suspension of the licence. A bank registering as a registered institution pays HK$23,500 per type on application and HK$35,000 per type a year.
For Types 1 and 2, an exchange participant also joins the approved master insurance policy. The licensee files audited accounts within four months after its financial year end (s.156(1) SFO). If the SFC intends to refuse an application, the applicant is given an opportunity to be heard, and a refusal can be taken to the Securities and Futures Appeals Tribunal within 21 days.
Owners: fit and proper and substantial shareholders
The fit and proper requirement (s.129 SFO) extends beyond the licensee and its ROs to substantial shareholders and officers. The SFC considers financial status and solvency, qualifications and experience, the ability to carry on the activity competently, honestly and fairly, and reputation, character, reliability and financial integrity (paras 3.2.15 and 4.1.1).
The substantial shareholder threshold
The control threshold is the substantial shareholder: a person who, alone or with associates, holds more than 10% of the issued share capital or controls more than 10% of the voting power, including through an intermediate company in which it holds 35% or more of the votes. Becoming or remaining such a shareholder without the SFC's prior approval is prohibited, and a breach is a criminal offence (s.131 SFO); approval is granted under s.132. The application fee is HK$3,000, and the approval is valid for six months, within which the transaction should complete.
A person who becomes a substantial shareholder without approval must apply within three business days of becoming aware of it — a condition of the defence under s.131(3); until approval, voting rights attached to those shares are not exercisable.
For a buyer of an existing licensee this means the deal closes only after SFC approval; the general mechanics are in the article on change of control of a licensed company, and thresholds of other regulators are compared in the article on qualifying holdings and fit and proper.
Client assets and investor compensation
Hong Kong's investor protection is built around the exchange market. The Investor Compensation Fund pays up to HK$500,000 per claimant for defaults occurring on or after 1 January 2020 (previously HK$150,000), and covers only losses from an intermediary's default relating to products traded on Hong Kong exchanges and to mainland securities available through the northbound Stock Connect link (SFC FAQ). Default here means insolvency, breach of trust, defalcation, fraud or misfeasance.
The no-client-assets model therefore pays off beyond capital: client assets sit with the custodian from the outset, outside the manager's balance sheet. Protection schemes across jurisdictions are compared in the client asset protection map.
Operating under someone else's licence
In Hong Kong the licence attaches to the person carrying on the activity as a business: a team's own company without a licence may not manage client assets, even if every decision is cleared with a licensee. The "platform" model is therefore built through people: team members are accredited to an existing licensee as licensed representatives, senior members are approved as its ROs, and the regulated business is legally carried on by the licensee, which is responsible for supervision.
A representative moving to another licensee applies for a transfer of accreditation within 180 days of leaving; for the same types the SFC processes it in about seven business days (para 7.11.6).
Under the UK appointed representative or host AIFM model the team keeps its own company; the general principle and its limits are described in the article License for Rent. Hong Kong accreditation is closer to employment: the brand, the client contracts and the liability belong to the licensee.
Other lawful routes
Three further routes are lawful.
- Buying a licensee. An existing company keeps its licence, but a new substantial shareholder obtains the SFC's prior approval.
- Temporary licence. For a firm licensed abroad — up to three months at a time and six months in any 24, only Types 1, 2, 4, 5, 6 and 10 and without client assets; not available for asset management.
- Exemptions. The incidental and intra-group exemptions described above.
Virtual assets: an add-on to Types 1, 4 and 9
Until the new regimes take effect, the SFC regulates existing licensees' virtual asset business through licensing conditions added to the existing types (SFC and HKMA joint circular of 22 December 2023).
| Type | Add-on |
|---|---|
| Type 9 | A portfolio with a stated objective to invest in virtual assets, or an intention to invest 10% or more of gross asset value in them, attracts additional licensing conditions (RA9 terms and conditions) |
| Type 1 | Virtual asset dealing only through SFC-licensed trading platforms, by introducing clients or via an omnibus account, and only for the firm's own Type 1 clients |
| Types 1 and 4 | Virtual asset advice under prescribed terms and conditions, including suitability |
Before starting such activity the licensee notifies the SFC. A supplemental circular of 30 September 2025 allowed intermediaries to provide staking services to clients. A circular of 11 February 2026 allowed brokers dealing in virtual assets through an omnibus account and providing securities margin financing to finance their margin clients' virtual asset dealing, and set standards for shared order books and for safeguarding client virtual assets on withdrawal.
Moving to separate licences
This arrangement is temporary. Following the consultation conclusions of 24 December 2025 and 26 May 2026, the Government and the SFC are preparing separate licences for virtual asset dealers, custodians, advisers and managers under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO, Cap. 615); the advisory and management regimes are aligned in scope with Types 4 and 9.
The new regimes will replace the licensing conditions, and intermediaries doing virtual asset business under those conditions will need a licence or registration under the AMLO (consultation conclusions, paras 62–67). There will be no deeming for existing advisers and managers: the regimes take full effect on commencement, and SFC licensees are promised an expedited approval process. The bill is targeted for introduction into the Legislative Council in 2026.
Trading-platform, MSO and SVF licences are covered in the financial licences map, and an example of licensed crypto infrastructure in the profile of HashKey Group.
Popular structures that end badly
A typical problem with the SFC is a business model that has drifted away from what the licence says. Six such structures follow.
| Structure | How it ends |
|---|---|
| Managing client money under a "consultancy" agreement without Type 9 | Substance prevails over labels: this is unlicensed asset management under s.114, with up to HK$5 million in fines and seven years' imprisonment |
| Discretionary accounts under a Type 4 licence | Type 4 covers advice only; management requires Type 9 |
| Selling services to Hong Kong investors from abroad | Actively marketing to the Hong Kong public requires a licence under s.115, wherever the seller sits |
| A "paper" RO living abroad | A non-sole condition and the need for onshore ROs free of conditions; an itinerant professional cannot be an RO |
| Taking client money under the no-client-assets condition | A breach of a licensing condition; the lawful alternative is to lift the condition and move to HK$5 million paid-up and HK$3 million liquid capital |
| Stretching the group exemption to the group's clients | The exemption covers only the group's own assets; managing its clients' assets requires a licence |
The common thread is growth without revisiting the licence. Adding a type, lifting a condition or changing a shareholder before SFC approval turns a lawful firm into an offender.
Owners and clients from Russia
Hong Kong implements United Nations Security Council sanctions and, according to the Government, does not implement, nor have the legal authority to act on, unilateral sanctions imposed by other jurisdictions (Government statement of 9 October 2022). For clients this means Hong Kong law imposes no separate restrictions on serving Russian nationals or residents; licensees must still screen clients and payments against UN sanctions lists, updates to which the SFC circulates (for example, circular 25EC54).
For owners, the fit and proper criteria of s.129 SFO concern financial status, qualifications, integrity and reputation; nationality is not among them. The SFC may, however, take into account decisions of other regulators concerning the person (s.129(2) SFO), so a shareholder's record with foreign supervisors forms part of the assessment.
EU sanctions within the structure
Foreign regimes continue to bind their own addressees. EU Regulation 833/2014 applies, among others, to nationals of Member States and to legal persons incorporated under the law of a Member State, wherever they are (Art. 13). A director who is an EU national is personally bound by its prohibitions, and a European parent must use its best efforts to ensure that a controlled company outside the EU does not take part in activities undermining them (Art. 8a). The content of the EU prohibitions is covered in the article on qualifying holdings and fit and proper.
Risks and limitations
An SFC licence covers activity in Hong Kong and active marketing to the Hong Kong public; dealings with investors in the EU or the UK follow those jurisdictions' rules, covered in the articles on the MiFID II investment firm and on the FCA investment firm. The tax side of a Hong Kong company is covered separately, in the article on the Hong Kong company; the manager's place among other centres is in the article on fund manager jurisdictions.
The main operational risk is people. The departure of one of the two ROs for a type breaks the minimum, and a new RO needs about ten weeks for approval. The second risk is growth: moving from the no-client-assets model to holding assets, or adding distribution, requires new capital and a new application.
Q/A
Licence and capital
Which licence does a fund manager need in Hong Kong?
Type 9 (asset management). If the manager does not hold client assets and accepts the corresponding licensing condition, it needs HK$100,000 of liquid capital and no minimum paid-up capital; otherwise HK$5 million paid-up and HK$3 million liquid. Placing orders for portfolios under its management is covered by the incidental exemption and needs no separate Type 1.
Is Type 1 needed to sell funds?
For distributing third-party funds, yes: it is a distinct service outside the manager's exemption. For funds investing in virtual assets the SFC requires Type 1 expressly. Where a firm is licensed for several types, the highest capital floor applies.
How does Type 4 differ from Type 9?
Type 4 is advising on securities: the decision stays with the client. As soon as the licensee itself takes decisions over a client's portfolio, that is asset management, which requires Type 9.
People and procedure
How many responsible officers are needed, and must they live in Hong Kong?
At least two per type, one of them an executive director, and at least one available at all times. There is no express residence rule, but the SFC licenses only individuals who come to Hong Kong to carry on the activity, and an RO based abroad receives a non-sole condition; in practice at least one onshore RO free of conditions is needed.
How long does licensing take?
By the SFC's indication, about 15 weeks for a corporation, 10 weeks for an RO and 8 weeks for a licensed representative with a complete file. A provisional licence for a representative is normally determined within seven business days.
What are the SFC fees?
HK$4,740 per type on a corporate application and the same annually; HK$2,950 per type for RO approval and HK$4,740 a year; HK$1,790 per type for a representative on application and annually. Annual fees have been collected again since 1 April 2025.
Owners and client protection
Can one buy an existing SFC-licensed company?
Yes, but a buyer of more than 10% of the capital or votes — a substantial shareholder — needs the SFC's prior approval under ss.131–132 SFO. The fee is HK$3,000 and the approval is valid for six months; the SFC refuses it unless the company will remain fit and proper after the deal.
Can a Russian national own a Hong Kong licensee?
The SFO does not list nationality among the fit and proper criteria. Hong Kong implements only UN Security Council sanctions. The SFC assesses a substantial shareholder's financial status, reputation and integrity and may take account of foreign regulators' decisions. EU nationals and EU companies within the structure remain bound by EU sanctions, and a European parent carries a best-efforts duty for its Hong Kong subsidiary.
What does a client get if the licensee fails?
The Investor Compensation Fund pays up to HK$500,000 per claimant, but only for products traded on Hong Kong exchanges and northbound Stock Connect securities. For unlisted funds and foreign securities, protection rests on segregation of assets with the custodian.