Hong Kong SFC Licence Types 1–12: Business Scope, Application Thresholds, Staffing and Compliance
Overview of SFC Licence Types 1–12
Hong Kong's Securities and Futures Commission (SFC) licenses 12 types of regulated activities. Each licence type covers a defined business scope, and firms typically need one or more licences depending on the services they offer.
Business Scope and Application Thresholds
The following table summarises the regulated activity, its scope, and the key application thresholds for each licence type.
| Licence Type | Regulated Activity | Business Scope | Application Thresholds |
|---|---|---|---|
| Type 1 | Dealing in securities | Buying, selling or dealing in securities for clients or own account | Must be a fit and proper person; minimum capital and competence requirements apply |
| Type 2 | Dealing in futures contracts | Dealing in futures contracts, including options and other derivatives | Same fit-and-proper and capital requirements |
| Type 3 | Leveraged foreign exchange trading | Providing leveraged foreign exchange trading services | Full SFC authorisation required; must meet financial resources rules |
| Type 4 | Advising on securities | Providing advice on securities | Must have at least one responsible officer (RO) competent in Type 4 |
| Type 5 | Advising on futures contracts | Providing advice on futures contracts | Must have an RO competent in Type 5 |
| Type 6 | Advising on corporate finance | Advising on corporate finance, including takeovers and listings | Must meet competence and capital requirements |
| Type 7 | Providing automated trading services | Operating an automated trading platform | Requires SFC approval and robust systems controls |
| Type 8 | Securities margin financing | Providing margin financing for securities transactions | Must comply with specific margin rules and capital adequacy |
| Type 9 | Asset management | Managing a portfolio of securities or futures for clients | Must have at least one RO competent in Type 9; capital requirements apply |
| Type 10 | Providing credit rating services | Issuing credit ratings for public dissemination | Must be a fit-and-proper rating agency; subject to SFC oversight |
| Type 11 | Dealing in wholesale debt securities | Dealing in wholesale debt securities (only for licensed corporations) | Restricted to professional investors and large transactions |
| Type 12 | Providing client clearing services | Providing clearing services for clients in exchange-traded derivatives | Must be an approved clearing member of a recognised exchange |
Personnel and Responsible Officer Requirements
For each licence type, at least one Responsible Officer (RO) must be appointed to oversee the regulated activity. The RO must be competent in that specific activity and must be a director or employee who can exercise significant influence. For Type 9, the RO must also meet professional qualifications and experience standards. Firms must ensure that all staff engaged in regulated activities are licensed as representatives or ROs.
Compliance Essentials
- Maintain adequate financial resources (liquid capital) per SFC guidelines.
- Implement effective internal controls and risk management systems.
- Meet ongoing fit-and-proper criteria for the firm and its individuals.
- File periodic returns and notify the SFC of changes in controllers or ROs.
- Adhere to client asset segregation and disclosure requirements.
Decision Tree: Which Licence Do You Need?
Use the following questions to identify your required licence type:
- Do you plan to buy or sell securities for clients? → Type 1 (and possibly Type 8 if you provide margin financing).
- Do you plan to deal in futures contracts? → Type 2 (or Type 5 if you only give advice).
- Do you plan to provide leveraged FX trading? → Type 3.
- Do you plan to give investment advice on securities or futures? → Type 4 (securities) or Type 5 (futures).
- Do you plan to advise on corporate finance (e.g., IPOs, takeovers)? → Type 6.
- Do you plan to operate a trading platform? → Type 7.
- Do you plan to manage client assets on a discretionary basis? → Type 9.
- Do you plan to issue public credit ratings? → Type 10.
- Do you plan to deal in wholesale debt securities? → Type 11 (with special restrictions).
- Do you plan to provide client clearing services for exchange-traded derivatives? → Type 12.
Common Licence Combinations
Firms often apply for multiple licences to cover a range of services. Typical combinations include:
- Type 1 + Type 4: For a securities broker that also provides investment advice.
- Type 1 + Type 9: For a firm that deals in securities and also manages assets.
- Type 2 + Type 5: For a futures broker that offers advice.
- Type 1 + Type 8: For a securities dealer that offers margin financing.
- Type 6 + Type 9: For a firm that advises on corporate finance and manages assets.
Each combination requires meeting the individual RO and capital requirements for every licence type.
Further Guidance
For detailed step-by-step guidance on applying for specific licences, refer to: