The Securities and Futures Commission (SFC) has published a set of frequently asked questions (FAQs) on licensing related matters to facilitate intermediaries and licensing applicants in navigating their compliance challenges during the COVID-19 pandemic. The SFC aims to provide regulatory flexibility whilst ensuring that market integrity and investor protection principles are maintained.

The FAQs cover the SFC’s regulatory expectations on a range of matters including: regulatory examinations and continuous professional training; contingency measures and temporary arrangements; use of electronic signatures by overseas licence applicants; and extensions for filing audited accounts.  Some of the more pertinent issues covered by the FAQs are set out below.

Requirement to notify the SFC of significant changes in an LC’s business (Q4 of the FAQ)

An LC is generally required to notify the SFC of significant changes in its business plan covering internal controls, organisational structure, contingency plans and related matters[1].  In the context of the current COVID-19 pandemic, an LC would be expected to notify the SFC immediately of the following situations (among others):

  • Confirmation of staff infection which may have an impact on the LC’s operations;
  • Closing of office premises as a result of staff infection or government lockdown, including overseas office premises, if the closure has implications for the LC’s operations or the carrying on of its regulated activities (e.g. temporary closing of overseas office premises which handles back and middle office functions);
  • Changes to its organisational resources (e.g. split team arrangements, staff relocation to overseas offices); and
  • The triggering of the LC’s business continuity plan.

Home and overseas working arrangements (Q8 of the FAQ)

Where an LC has arranged for its staff to work from home or in overseas offices which have not been approved as premises from which the LC’s business or regulated activities can be conducted[2], the LC should ensure that staff are able to access trading or other systems remotely. The activities conducted should be captured in the records and documents generated by these systems[3].

The SFC also notes that if certain records and documents need to be kept in unapproved premises on a temporary basis, the LC should return them to the approved premises of the LC as soon as practicable.

Delayed submission of audited accounts (Q10 of the FAQ)

The SFC acknowledges that certain LCs or associated entities (AEs) may, due to the COVID-19 outbreak, encounter operational difficulties in preparing and filing their audited accounts by the submission deadline. The SFC has indicated that it will consider granting extensions on a case by case basis. If delays are anticipated by the LC or AE, an application should be made as soon as practicable using Form B (in the case of LCs) or Form E (in the case of AEs) which are available on the SFC’s website, or via the SFC Online Portal.

A copy of the FAQs can be found here.

[1] The notification requirement is set out under section 4 and paragraph 9 of section 1 of Schedule 3 to the Securities and Futures (Licensing and Registration) (Information) Rules.

[2] An LC is required to seek the SFC’s prior written approval under section 130 of the Securities and Futures Ordinance (Cap 571) (SFO) for using any premises for the keeping of records or documents relating to the carrying on of the regulated activities for which it is licensed.

[3] An LC is required to keep records and documents under the SFO and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap 615).