Hong Kong SFC to Launch Investor Identification on 20th March 2023, Investors Must Agree to Information Disclosure to Buy Securities or OTC in Hong Kong
15th December 2022 | Hong Kong
Hong Hong Securities & Futures Commission (SFC) is launching the Hong Kong Investor Identification Regime (HKIDR) on 20th March 2023, with investors must agree to information disclosure to buy securities or OTC (Over-the-counter) securities in Hong Kong. Hong Kong SFC: “Client consent is needed in order for intermediaries to comply with the SFC’s requirements and relevant data privacy laws, including the Personal Data (Privacy) Ordinance. The SFC would like to remind investors to respond to the request from their intermediaries as soon as possible. After the implementation of the HKIDR, if investors do not provide the required consent, they will only be allowed to sell existing securities holdings but not to buy securities on the Stock Exchange of Hong Kong Limited (SEHK).” See announcements below:
” Hong Kong SFC to Launch Investor Identification on 20th March 2023, Investors Must Agree to Information Disclosure to Buy Securities or OTC in Hong Kong “
Ashley Alder, Hong Kong SFC CEO: “The launch of the investor identification regime will be a significant milestone in Hong Kong’s securities market. By enabling effective and timely surveillance, the regime will reinforce market integrity and promote investor confidence, which are vital pillars for Hong Kong as a world-class international financial centre.”
For Intermediaries: “It should be noted that upon the launch of the HKIDR, Relevant Regulated Intermediaries (RRIs) are required to tag the relevant Broker-to-Client Assigned Number (BCAN) to every on-exchange order and off-exchange trade reportable to the Stock Exchange of Hong Kong Limited (SEHK). Orders or trades without BCANs or with BCANs in an incorrect format will be rejected. RRIs are reminded that they should have obtained all written or other forms of express consent from each individual client regarding the collection, storage, processing and use of personal data in relation to such client’s BCANs and CIDs under the HKIDR in accordance with the SFC’s requirements and all applicable data privacy laws including the PDPO.”
Background – In August 2021, the SFC issued consultation conclusions on proposals to introduce an investor identification regime (HKIDR) at trading level for the securities market in Hong Kong and an over-the-counter securities transaction reporting regime (OTCR) for shares listed on the Stock Exchange of Hong Kong (SEHK). Under the HKIDR, relevant licensed corporations and registered institutions1 will have to assign a Broker-Client Assigned Number (BCAN) to each of their clients and tag the BCAN to their clients’ securities orders. They will also have to submit to SEHK’s data repository the identification data (ie, names and identity document information) of clients placing securities orders on SEHK or who conduct off-exchange trades reportable to SEHK. Separately, information about OTC securities transactions in ordinary shares and real estate investment trusts listed on SEHK as well as deposits and withdrawals of physical share certificates will be reported to the SFC under the OTCR.
Hong Kong SFC Announcements
1) SFC to launch investor identification regime in March 2023
12th Dec 2022 – The Securities and Futures Commission (SFC) today announced that the investor identification regime for the securities market in Hong Kong (HKIDR) (Note 1) will be launched on 20 March 2023.
After issuing the Consultation Conclusions Paper in August 2021 on proposals to implement the HKIDR, the SFC has been closely monitoring market readiness by conducting three rounds of survey (Note 2). The survey results indicate that significant progress has been made to prepare for the implementation, but some intermediaries may need more time to obtain from individual clients the necessary consent to the collection, storage, processing and use of personal data under the HKIDR, and update client identification information. Given the above, the SFC has decided to launch the HKIDR on 20 March 2023.
Client consent is needed in order for intermediaries to comply with the SFC’s requirements and relevant data privacy laws, including the Personal Data (Privacy) Ordinance. The SFC would like to remind investors to respond to the request from their intermediaries as soon as possible. After the implementation of the HKIDR, if investors do not provide the required consent, they will only be allowed to sell existing securities holdings but not to buy securities on the Stock Exchange of Hong Kong Limited (SEHK). For details of the HKIDR regime, investors may refer to the “Information for investors” section of the SFC’s dedicated webpage.
“The launch of the investor identification regime will be a significant milestone in Hong Kong’s securities market,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “By enabling effective and timely surveillance, the regime will reinforce market integrity and promote investor confidence, which are vital pillars for Hong Kong as a world-class international financial centre.”
Notes:
- Upon the launch of the HKIDR, relevant licensed corporations and registered institutions are required to tag Broker-to-Client Assigned Numbers (BCANs) to securities orders to be executed on SEHK (or off-exchange trades reportable to it), and submit to SEHK’s data repository the names and identity document information of their clients.
- The three rounds of HKIDR readiness survey were conducted in January, June and September 2022 respectively.
2) Circular to Intermediaries – Launch of the Hong Kong Investor Identification Regime
12th Dec 2022 – Reference is made to the Circular dated 23 September 2022 regarding the Hong Kong Investor Identification Regime (HKIDR).
Timeline of the Implementation
The SFC issued the Consultation Conclusions Paper in August 2021 on proposals to implement the HKIDR and asked market participants to start preparing for the implementation of the HKIDR. Immediately after, the SFC set up a HKIDR dedicated webpage and issued circulars to facilitate the preparation work of Relevant Regulated Intermediaries1 (RRIs). We have been closely monitoring market readiness for the implementation of the HKIDR by conducting three rounds of survey2. While significant progress has been made to prepare for the implementation, the survey results indicated that some RRIs may need more time to update client identification information and obtain express consent from individual clients for the use of their personal data under the HKIDR. Taking account of the above, the SFC has decided to provide more time for the industry’s preparation and now announces to launch the HKIDR on 20 March 2023.
It should be noted that upon the launch of the HKIDR, RRIs are required to tag the relevant Broker-to-Client Assigned Number (BCAN) to every on-exchange order and off-exchange trade reportable to the Stock Exchange of Hong Kong Limited (SEHK). Orders or trades without BCANs or with BCANs in an incorrect format will be rejected.
Submission of BCAN-CID Mapping File
Following the successful completion of market rehearsals, RRIs will be allowed to submit the real BCAN and client identification data (CID) of their clients in the BCAN-CID Mapping File to SEHK via SEHK’s Electronic Communication Platform (ECP) web interface and/or ECP (SFTP) interface commencing on 19 December 2022. RRIs should submit the latest BCAN-CID mapping data to SEHK, whenever available, from 19 December 2022 onwards prior to the launch of the HKIDR on 20 March 2023. Please refer to HKEX’s Circular dated 12 December 2022 for details of requirements.
Compliance with applicable data privacy law including Personal Data (Privacy) Ordinance (PDPO)
RRIs are reminded that they should have obtained all written or other forms of express consent from each individual client regarding the collection, storage, processing and use of personal data in relation to such client’s BCANs and CIDs under the HKIDR in accordance with the SFC’s requirements and all applicable data privacy laws including the PDPO. Please refer to the SFC’s Circular dated 13 September 2021 for details.
RRIs are also reminded that they should submit the BCAN-CID Mapping File containing BCAN and CID of their clients to SEHK’s data repository before a cut-off time on or before the previous trading day prescribed by SEHK, otherwise their clients will not be allowed to place buy orders on the trading day, except for new clients who wish to trade on the day of account opening or dormant clients3 whose accounts become re-activated on the day of entering into a trade, in which case RRIs may submit the BCAN-CID Mapping File containing such client’s BCAN and CID to SEHK’s data repository by a deadline on the trading day prescribed by SEHK.
Securities and Futures Commission
1 RRIs refer to SFC-licensed corporations and registered institutions subject to the HKIDR pursuant to paragraph 5.6 of the SFC’s Code of Conduct for Persons Licensed by or Registered with the SFC as set out in the Appendix C to the SFC’s consultation conclusions paper issued in August 2021.
2 The three rounds of HKIDR readiness survey were conducted in January, June and September 2022 respectively.
3 For the purpose of the HKIDR, dormant clients refer to clients whose trading accounts have been inactive for at least 24 months since the last trade (irrespective of account balance or fund movements).
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3) Investor Identification and OTC Securities Transactions Reporting
Updated 12th Dec 2022 – In August 2021, the SFC issued consultation conclusions on proposals to introduce an investor identification regime (HKIDR) at trading level for the securities market in Hong Kong and an over-the-counter securities transaction reporting regime (OTCR) for shares listed on the Stock Exchange of Hong Kong (SEHK).
Under the HKIDR, relevant licensed corporations and registered institutions1 will have to assign a Broker-Client Assigned Number (BCAN) to each of their clients and tag the BCAN to their clients’ securities orders. They will also have to submit to SEHK’s data repository the identification data (ie, names and identity document information) of clients placing securities orders on SEHK or who conduct off-exchange trades reportable to SEHK.
Separately, information about OTC securities transactions in ordinary shares and real estate investment trusts listed on SEHK as well as deposits and withdrawals of physical share certificates will be reported to the SFC under the OTCR.
The HKIDR is expected to be launched in the later part of Q4 2022 at the earliest and the OTCR in the later part of Q2 2023 at the earliest, subject to the market’s completion of system testing and rehearsals.
This page provides information to help the industry prepare for the implementation of the two regimes.
Information for market participants
- Consultation paper
- Consultation conclusions paper, including revisions to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission
- Information paper, technical guidance and related materials for submitting information to SEHK under the HKIDR (issued by Hong Kong Exchanges and Clearing Limited)
- The industry webinar – Video (full version) / HKIDR – Regulatory Overview/ HKIDR – Files Submission & Order Tagging/ OTCR – Regulatory Overview/ HKIDR and OTCR – Client Consent and Overview of Project Timeline
- The industry webinar – Presentation Materials
- OTCR Technical Information Paper (version 1.3) (Marked-up version) [updated on 28 November 2022]
- OTCR Reporting File Template and Submission Process Flow (version 1.1) (Marked-up version) [updated on 28 November 2022]
Information for investors
- Press Release – SFC to launch investor identification regime in March 2023 [NEW]
- Unlocking Investor ID – Full Video / Highlights 2
- Tips on the Investor Identification Regime (Pamphlet)
- Brief introduction to the HKIDR for investors (leaflet)
- Investor Identification Regime for Securities Market in Hong Kong (IFEC blog article)
- Consultation paper (for further understanding of the regimes)
- Consultation conclusions paper, including revisions to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (for further understanding of the regimes)
Circulars
- Circular to intermediaries – roadmap for implementing the HKIDR and the OTCR
- Circular to intermediaries on obtaining client consent under the HKIDR and the OTCR
- Circular to Intermediaries – End-To-End (E2E) Test for systems relating to HKIDR
- Circular to Intermediaries – Publication of End-To-End (E2E) Test packages and File Transfer Connectivity Guide for the HKIDR
- Circular to Intermediaries – Commencement of End-To-End (E2E) Test for the HKIDR
- Circular to Intermediaries – Reminder on End-To-End (E2E) Test for the Hong Kong Investor Identification Regime (HKIDR)
- Circular to Intermediaries – Extension of End-To-End (E2E) Test for the Hong Kong Investor Identification Regime (HKIDR)
- Circular to Intermediaries – Reminder on End-To-End (E2E) Test for the Hong Kong Investor Identification Regime (HKIDR)
- Circular to Intermediaries – Investor Education on the Hong Kong Investor Identification Regime (HKIDR) and Over-the-counter Securities Transactions Reporting Regime (OTCR)
- Circular to Intermediaries – Market Rehearsals (MRs) for the Hong Kong Investor Identification Regime (HKIDR)
- Circular to Intermediaries – Launch of the Hong Kong Investor Identification Regime [NEW]
Questions
- Frequently Asked Questions on the HKIDR/OTCR requirements. The SFC will revise or publish further Frequently Asked Questions on the HKIDR and OTCR from time to time.
- Frequently Asked Questions on the HKIDR file submission and order tagging (issued by Hong Kong Exchanges and Clearing Limited)
- For questions on the HKIDR/OTCR, please address questions about the HKIDR to [email protected] and questions about the OTCR to [email protected].
- For questions about the technical guidance for systems and related materials for submitting information to SEHK under the HKIDR, please write to [email protected].
Survey
- Relevant licensed corporations and registered institutions1, please click here (https://www.sfc.hk/-/media/EN/files/SOM/HKIDROTCR/survey/Survey_3) to download the fillable survey form. Please complete the fillable survey form and return it to the SFC by email to [email protected] on or before 14 October 2022.
Note 1 – Please refer to the consultation conclusions paper for an explanation of what constitutes “relevant licensed corporations and registered institutions” (i.e. Relevant Regulated Intermediaries) under the HKIDR and OTCR.
Note 2 – Disclaimer and Reminder
This video provides information of a general nature which is not based on a consideration of specific circumstances. Furthermore, it is not intended to cover all requirements which are applicable to you and your firm. Accordingly, it should not be regarded as a substitute for seeking detailed advice from your own professional adviser in any specific case.
The SFC is the owner of the copyright and any other rights of this video. It may not be reproduced for or distributed to third parties, or used for commercial purposes, without the SFC’s prior written consent.
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