Hong Kong Securities and Futures Commission Publishes Annual Report 2019/2020
29th June 2020 | Hong Kong
Hong Kong Securities and Futures Commission (SFC), which oversees Hong Kong’s securities and futures market, has released its Annual Report 2019/2020.
” 47,167 Licensed Financial Professionals and Firms in Hong Kong “
Learn more about the financial market in Hong Kong in 2019. Find out the total number of licensed professionals and firms in Hong Kong, the number of IPOs, new investment funds launched, fines, disciplinary actions and many more.
View: Hong Kong SFC Report 2019-2020
Find out more about Hong Kong financial market:
- How many licensed professionals and firms are there?
- How many new investment funds were launched?
- How many IPO applications were made?
- How many public takeovers were attempted?
- How many IPOs may have breached regulatory process?
- How many inspections were made on Financial Institutions
- How many trading accounts were flagged ?
- How many firms and individuals were disciplined or fined for misconduct?
Tim Lui, SFC’s Chairman:
“It is more crucial than ever to deliver world-class regulation which upholds market integrity and supports Hong Kong’s vital role connecting mainland China with the world. Ensuring financial markets are healthy and sustainable is key to reinforcing Hong Kong’s status as a leading international financial centre.”
Ashley Alder, the SFC’s Chief Executive Officer:
“Our unwavering commitment to competence, independence, impartiality and public accountability is the foundation of the SFC’s work. “In the years ahead, concerted global action on the part of regulators and the industry will be essential to address the formidable challenges we face.”
1. Key Numbers (2019)
Licensed Professionals & Firms in HK
” 47,167 Financial Licensed Professionals and Firms in Hong Kong “
- Total of 47,167 licensees and registrants (31/3/20)
- 6,962 new licence applications
- 3,109 new licensed corporations
Licensed Professionals and Firms in Hong Kong
| Licensees | Corporations | Representatives | Reponsible Officers | Total |
| Stock exchange participants | 604 | 12,208 | 2,196 | 15,008 |
| Futures exchange participants | 113 | 870 | 200 | 1,183 |
| Stock exchange and futures exchange participants | 84 | 4,682 | 612 | 5,558 |
| Non-stock/non-futures exchange participants | 2,308 | 16,934 | 6,604 | 23,306 |
| Total | 3,109 | 34,874 | 9,072 | 47,055 |
Investment Products, IPOs
” 126 new funds “
- 303 listing applications
- 359 takeovers-related transactions and applications
- 2,728 collective investment schemes (31/3/20)
- 762 Hong Kong-domiciled funds
- SFC approved 126 collective investment schemes
- SFC approved 146 unlisted structured products for public offering
- Approved the world’s first iron ore futures exchange-traded fund (ETF)
- ETF structured as a public open-ended fund company (OFC) was listed and 2 private OFCs were registered
Total Collective Investment Scheme in 2019/20
| Investment Schemes | 2018 | 2019 | 2020 |
| Unit trusts and mutual funds | 2,215 | 2,216 | 2,135 |
| Investment-linked assurance schemes | 299 | 300 | 299 |
| Pooled retirement funds | 34 | 34 | 33 |
| MPF schemes | 31 | 31 | 29 |
| MPF pooled investment funds | 194 | 191 | 206 |
| Others | 26 | 25 | 26* |
| Total | 2,799 | 2,797 | 2,728 |
MPF ~ Mandatory Provident Fund is the retirement saving scheme or pension fund for residents in Hong Kong.
*14 paper gold schemes and 12 REITs
Listing Application
| Listing | 2017/2018 | 2018/2019 | 2019/2020 |
| Applications | 309 | 394 | 303 |
| New Listings^ | 203 | 193 | 182 |
| Did not proceed | 88 | 166 | 172 |
| Returned | 3 | 0 | 3 |
^ includes transfer from GEM to Mainboard. GEM (Growth Enterprise Market) is a stock market board listing in Hong Kong requiring lower listing eligibility criteria but similar continuing obligations compared to the Main Board, serving the needs of small and mid-sized issuers.
* Lapsed / Withdrawn / Rejected
Interventions, Enforcements, Disciplinary Actions
” $61.8 million in fines “
- $61.8 million / HKD 479 million in fines on licensees for intermediary misconduct
- 44 disciplinary actions (20 firms and 24 individuals)
- 158 individuals and corporates subject to civil proceedings
- 1,489 breaches of the SFC rules
- 4,491 complaints against intermediaries and market activities
- 317 risk-based on-site inspections of intermediaries
- 8,767 requests for trading and account records
- 197 cases initiated for investigation
- 182 investigations completed
- Directly intervened in 35 IPO applications
- Directly intervened in 12 post-listing cases
USDHKD = 7.75 to 7.85 range (HKD is pegged to USD)
IPO & Post-IPO Intervention
| Intervention | 2014/15 | 2015/26 | 2016/17 | 2017/18 | 2018/19 | 2019/20 |
| IPO | 1 | 0 | 2 | 15 | 19 | 35 |
| Post-IPO | 0 | 0 | 1 | 17 | 27 | 12 |
| Total | 1 | 0 | 3 | 32 | 46 | 47 |
Breaches during On-site Inspection
| Breaches | 2017/2018 | 2018/2019 | 2019/2020 |
| Internal Control | 535 | 443 | 451 |
| Code of Conduct | 320 | 275 | 273 |
| AML guidelines | 175 | 201 | 331 |
| Safekeep client money | 59 | 28 | 42 |
| Safekeep client securities | 38 | 32 | 31 |
| Others | 349 | 257 | 361 |
| Total | 1,476 | 1,236 | 1,489 |
2. Selected SFC Actions (2019)
Selected Fines – Financial Firms:
- China Merchants Securities fined $3.4 million / HKD 27 million (inadequate due diligence conducted)
- UBS & UBS Securities fined record $48.3 million / HKD 375 million and suspended (failure to verify major assets and others)
- UBS fined $51.6 million / HKD 400 million for overcharging clients over 10 years period
- Credit Suisse fined $360k / HKD 2.8 million (Breach research reports disclosure requirements)
- HSBC fined $270k / HKD 2.1 million (Ineffective telephone recording procedures)
- China Rise Securities Asset fined $810k / HKD 6.3 million (Breaches in short selling orders, cross trades and record keeping)
Selected Fines – Individuals:
- Former Chairman and Executive Director of Listco paid $2.87 million / RMB 20.3 million to group subsidiary (misconduct)
- Freeze $16.1 million / HKD 124.9 million of assets of Listco (suspected manipulation of shares)
- Individual banned from re-entering industry (stealing clients shares worth over $14.1 million / HKD 110 million)
- Individual banned from re-entering industry (Accepted bride of around $830k / HKD 6.4 million)
- Individual banned from re-entering industry (Solicited and accepted $180k / HKD 1.4 million of illegal commission payments)
Notes
- USDHKD = 7.75 to 7.85 range (HKD is pegged to USD)
- USDCNY = 7.06 (RMB / CNY – Reminbi / Chinese Yuan)
The USDHKD and USDCNY exchange rates are used on the 29th of June 2020. The annual report publishes the data in HKD / RMB, and its value throughout 2019 and Q1 2020 when converted to USD will be different, depending on the exchange rate on the selected day. The USD in this article value serves as a guide, though the differences is minimal as HKD is pegged to USD while the USDCNY rate has not fluctuate by more than 15% over the last 5 years and 3.5% over the last 12 months.
3. Mainland-Hong Kong Stock Connect (launched 2014)
Mainland-Hong Kong Stock Connect (launched 2014)
- Covered 1,288 Mainland stocks and 477 Hong Kong stocks
- $159.4 billion / RMB 1,125.7 billion net inflow to Hong Kong since 2014 (launch)
USDCNY = 7.06 (RMB / CNY – Reminbi / Chinese Yuan)
4. New Derivative Products
New Derivative Products:
- USD London Metal Mini Futures (Aluminum, Zinc, Copper, Nickel, Tin, Lead)
- Weekly Index Options (Hang Seng Index, Hang Seng China Enterprises Index)
- Silver Futures (USD, CNH)
5. Increased Investor Protection to HKD 500,000
In 2019, SFC increased per investor protection from $19,353 / HKD 150,000 to $64,510 / HKD 500,000 (intermediary default for Hong Kong-listed securities or futures contracts and Mainland-listed securities traded under Stock Connect)
Investor Compensation Claims (2019/20)
- Received: 7
- Processed: 4
USDHKD = 7.75 to 7.85 range (HKD is pegged to USD)
Hong Kong Securities and Futures Commission Annual Report 2019/2020
Strategic Priorities
The 2019/2020 reports sets out SFC priorities to ensure the integrity and overall soundness of Hong Kong’s securities and futures markets, safeguarding interests of investors, minimize fraud and market key conduct to instil investors’ confidence.
SFC is also mandated to maintain Hong Kong’s financial stability and its status as an international financial centre.
SFC Statutory Objectives:
- Maintain and promote a fair, efficient, competitive, transparent and orderly securities and futures industry
- Help the public understand the workings of the industry
- Provide protection for the investing public
- Minimise crime and misconduct in the industry
- Reduce systemic risks in the industry Assist the Government in maintaining Hong Kong’s financial stability
The report recaps the SFC’s efforts to promote regulatory compliance, ensure markets operate efficiently and fairly amidst increased volatility and a challenging business environment.
- Increases its supervisory work
- Conducts regular stress tests to monitor firms’ financial resilience
- Conducts special inspections to ensure compliance with the SFC’s requirements.
The report also reviews the progress of the SFC’s front-loaded approach which over the past few years has helped it address misconduct and market irregularities through pre-emptive, timely regulatory intervention.
What’s New
- Introduction of a regulatory framework for licensing virtual asset trading platforms
- Proposed new type of regulated activity for trustees and custodians of SFC-authorised collective investment schemes
- With Hong Kong Exchanges and Clearing Limited and the Federation of Share Registrars, the SFC concluded a joint consultation on a proposed operational model for an uncertificated, or paperless, securities market.
- Features the SFC’s initiatives to develop Hong Kong as a hub for green and sustainable finance, including a survey report on integrating environmental, social and governance factors and climate risks in asset management
View: SFC Annual Report 2019/2020
What SFC regulates
- Corporates
- Intermediaries
- Products
- Markets
- Enforcement
Who SFC regulates
- Brokers, investment advisers, fund managers and intermediaries
- Investment products
- Listed companies
- Hong Kong Exchanges and Clearing Limited (HKEX)
- Automated trading service (ATS) providers
- Approved share registrars
- Investor Compensation Company Limited (ICC)
- Market participants (including investors)
About SFC
The Securities and Futures Commission (SFC) is an independent statutory body set up in 1989 to regulate Hong Kong’s securities and futures markets.
We derive our investigative, remedial and disciplinary powers from the Securities and Futures Ordinance (SFO) and subsidiary legislation. Operationally independent of the Government of the Hong Kong Special Administrative Region, we are funded mainly by transaction levies and licensing fees.
Visit: Hong Kong Securities and Futures Commission
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