Authorisation & Licensing in Hong Kong

What Changed

• - The Hong Kong Government and SFC have confirmed that dedicated regulatory regimes for VA advisory services and VA management services will be created under the Anti-Money Laundering and...
• The regulatory scope and standards of the VA advisory regime will be aligned with Type 4 “advising on securities” regulated activity under the Securities and Futures Ordinance, applying a “same...
• The regulatory scope and standards of the VA management regime will be aligned with Type 9 “asset management” regulated activity under the Securities and Futures Ordinance, implying broadly...
• The consultation received broad market support across 51 responding stakeholders, and the SFC has treated this as a mandate to proceed to finalisation of the detailed legislative proposals and...
• The new VA advisory and management regimes will sit alongside existing and proposed VA regimes for: VA trading platforms, stablecoin issuers, VA dealing and VA custody, forming an end-to-end...

Suggested Considerations

• Conduct a gap analysis comparing current or planned virtual asset advisory and management activities against Type 4 and Type 9 requirements under the Securities and Futures Ordinance to identify where equivalent capabilities, controls and governance will be required under the new VA regimes.
• Map all group entities and business lines that provide VA-related advice, research, recommendations or portfolio management to clients in or from Hong Kong, and determine which entities will need licensing or authorisation under the forthcoming AMLO-based regimes.
• Initiate early engagement with the SFC (e.g. via pre-application meetings or WINGS enquiries) to clarify how existing licences, business models and cross-border arrangements will be treated under the new VA advisory and management regimes.
• Review and, where necessary, enhance AML/CTF frameworks, including customer due diligence, transaction monitoring, sanctions screening and ongoing review procedures, to ensure they are robust enough for VA-specific risks anticipated under AMLO-based regulation.
• Update internal policies and procedures on suitability, product due diligence, risk disclosure, conflicts of interest and best execution to explicitly cover VA advisory and VA management services in line with standards applied to traditional securities and funds.

Key Dates

References

• [1] gibsondunn.com/wp-content/uploads/2022/04/hong-kong-sfc-p...
• [2] sfc.hk/en/
• [3] wings.sfc.hk
• [4] sfc.hk/TC/
• [5] ecp2.hkex.com.hk/landingsfc
• [6] apps.hkma.gov.hk/eng/index.php?c=search&m=search_by_name

What Changed

• This is not a regulatory change but rather an enforcement precedent establishing the SFC's expectations regarding:
• Conflict of Interest Disclosure: Licensed representatives must fully disclose all material conflicts of interest to investment committees and fund stakeholders, particularly when recommending...
• Fiduciary Duty Standards: Fund managers and their representatives must ensure fair treatment of fund investors and cannot exploit their position to divert fund assets or loan proceeds to themselves...
• Investment Committee Governance: Investment committees cannot rely solely on recommendations from conflicted parties without independent verification and proper conflict management protocols.
• Connected Party Transactions: Unsecured loans to connected entities require heightened scrutiny, independent approval, and ongoing monitoring to prevent asset diversion.

Suggested Considerations

• *Immediate Actions (0-30 days):
• *Conflict of Interest Audit: Conduct a comprehensive review of all current and recent transactions involving connected parties, including loans, investments, or service arrangements where licensed staff have beneficial interests.
• *Policy Review: Update or strengthen conflict of interest policies to explicitly require:
• Written disclosure of all material conflicts before investment committee meetings
• Independent review and approval of transactions involving conflicted parties

Key Dates

References

• [1] changeflow.com/govping/securities-markets/sfc-announces-n...
• [2] sfc.hk/en/
• [3] charltonslaw.com/legal/newsletters/708/sfc-enforcement-ac...
• [4] charltonslaw.com/sfc-enforcement-actions-in-january-2026-...
• [5] sfc.hk/en/Regulatory-functions/Enforcement/Enforcement-ac...
• [6] deacons.com/2026/01/28/hong-kong-sfc-licensing-and-compli...
• [7] corporatecomplianceinsights.com/state-ofac-sanctions-enfo...
• [8] aoshearman.com/en/insights/cross-border-white-collar-crim...

What Changed

• This is an enforcement decision, not a new rule or circular introducing regulatory changes. It reinforces existing requirements under the Securities and Futures Ordinance (SFO), particularly:
• Prohibitions on matched trades (defined as coordinated buy-sell transactions at non-market prices creating false trading appearances, per Note 2 in the publication), which can distort price formation...
• Staff dealing policies mandating full disclosure of personal accounts, beneficial ownership, and trading activities; concealment via false declarations breaches fitness and properness standards for...
• Accountability for responsible officers (ROs) in Type 1 (dealing in securities) and Type 2 (dealing in futures contracts) activities, where proprietary trading must not favor personal interests over...

Suggested Considerations

• Conduct immediate staff dealing audits: Review disclosures for accuracy, verify beneficial ownership in spouse/associate accounts, and cross-check against trading records (https://apps.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=26PR44).
• Enhance trading surveillance: Implement real-time monitoring for matched trades (e.g., coordinated patterns outside bid-ask spreads in derivatives like Hang Seng Index options); flag proprietary vs. personal account interactions.
• Update internal policies: Strengthen RO oversight, mandatory training on SFO market misconduct rules, and escalation protocols for false declarations.
• Firm-wide attestation: Require annual (or more frequent) certifications of no undisclosed accounts; integrate with pre-trade controls.
• Risk assess proprietary trading: Segregate duties to prevent self-dealing; report suspicious patterns to SFC promptly.

Key Dates

References

• [1] changeflow.com/govping/securities-markets/sfc-announces-n...
• [2] sfc.hk/en/
• [3] charltonslaw.com/hong-kong-law/market-misconduct-under-th...
• [4] sfc.hk/en/News-and-announcements/News/Enforcement-news
• [5] sfc.hk/edistributionWeb/gateway/EN/news-and-announcements...
• [6] sfipc.org.tw/en/News.aspx?n=7621&sms=12374
• [7] thinkadvisor.com/2026/03/17/inside-the-2026-enforcement-m...
• [8] www1.hkexnews.hk/listedco/listconews/sehk/2025/0618/20250...

What Changed

This is an enforcement action, not a new rule change, but it reinforces existing SFC circulars requiring VA products (including unauthorised funds and exchange-traded VA derivatives) to be offered exclusively to professional investors (PIs). Key requirements reiterated include: conducting VA-specific product due diligence; assessing client knowledge of VA investments; providing sufficient VA-specific information and warnings; and implementing platform controls to restrict retail access to complex products.

Suggested Considerations

• Conduct immediate VA product due diligence using SFC-specific procedures, not just group-wide protocols, to identify unauthorised VA funds and derivatives.
• Implement client knowledge assessments for VA investments before transactions, especially for retail clients.
• Provide VA-specific warnings and information on platforms and ensure retail access is blocked for PI-only products.
• Review and enhance online platform controls for suitability checks on complex products; audit historical VA trades for compliance gaps.
• Update internal policies to align with SFC circulars on VA distribution, including staff training on breaches like those at SCMHK.

Key Dates

References

• [1] apps.sfc.hk/edistributionWeb/gateway/EN/news-and-announce...
• [2] structuredretailproducts.com/insights/82184/scmhk-hit-wit...
• [3] rootdata.com/news/493972
• [4] binance.com/en/square/post/01-07-2026-hong-kong-regulator...
• [5] financemagnates.com/forex/saxo-hong-kong-offered-wrong-cr...
• [6] hoganlovells.com/en/publications/no-shortcuts-online-sfc-...
• [7] jdsupra.com/topics/regulatory-oversight/online-platforms/...

What Changed

• - VA Dealer Regime: Introduces licensing for VA dealing activities (e.g., VA conversions, broker-dealer services at physical outlets or otherwise), excluding tokenized securities/derivatives...
• VA Custodian Regime: Targets entities safeguarding private keys or enabling unilateral VA transfers (e.g., capturing staking providers but exempting non-custodial wallets or delegating top-layer...
• Exemptions Under Consideration: Aligns partially with Type 1 exemptions, including principal/intra-group transactions, VA use as payment for goods/services, chaperone via SFC-regulated dealers, VA...
• Further Consultations: New regimes for VA advisory (aligned with Type 4) and asset management (aligned with Type 9), without deeming provisions for pre-existing entities; VA managers may face custody...

Suggested Considerations

• Pre-Application Engagement: Contact SFC immediately for discussions on VA custodian licensing, especially for existing VATPs/banks holding keys.
• License Applications: Prepare applications for VA dealer/custodian licenses once regimes commence; appoint responsible officers/managers-in-charge meeting fit-and-proper criteria, implement cold wallet infrastructure, private key controls, insurance, audits, and business continuity plans.
• Custody Segregation: Existing intermediaries/VA dealers must transition client VA custody to SFC-licensed VA custodians; cease use of non-compliant overseas providers.
• Compliance Mapping: Review operations against Type 1/Type 13 financial resources, core function authorizations, and exemptions; assess staking/MPC services for custody capture.
• Monitor Further Consults: Track incoming VA advisory/management regimes and adjust for no deeming provisions.

References

• [1] tannerdewitt.com/aspire-looking-back-and-ahead-on-the-reg...
• [2] slaughterandmay.com/insights/new-insights/hong-kong-proce...
• [3] gibsondunn.com/hong-kong-concludes-consultations-on-regul...
• [4] reedsmith.com/articles/fstb-and-sfc-consult-on-proposed-l...
• [5] sidley.com/en/insights/newsupdates/2026/01/hong-kong-to-f...
• [6] fstb.gov.hk/fsb/en/publication/consult/doc/VAdealing_cons...
• [7] kwm.com/hk/en/insights/latest-thinking/hong-kong-virtual-...
• [8] info.gov.hk/gia/general/202512/24/P2025122400265.htm