You can see the rules and regulations in other jurisdictions.
If a corporation deals with the public in Hong Kong, its activities are subject to Hong Kong law. Securities-related products or services provided by these corporations will be regulated by the SFO. The SFO is silent on whether the regulated activities are subject to any geographical requirements, but it is generally accepted that the SFO will apply to activities conducted in Hong Kong. Despite not conducting any regulated activities in Hong Kong, a corporation may still be subject to the Section 103 of the SFO if it has any marketing activities in the city. The term 'actively market' is not technically defined, so the decision will depend on the situation at hand. Factors that may indicate this include telephone/in-person contact with an investor based in Hong Kong, as well as any campaigns or products tailored specifically for a Hong Kong audience (such as pricing in HKD or localised advertising). The corporation may be required to register or license with the SFC if it is marketing to Hong Kong, and may even be subject to the Prospectus Requirements and the SFC Authorisation Requirements under the C(WUMP)O and the SFO, unless one of the exemptions mentioned above applies.1
Memoranda of understanding (MOUs) between Hong Kong and other jurisdictions, such as China, Switzerland, France, Luxembourg, the United Kingdom and Thailand (with China being the first to sign the MOU with Hong Kong), have enabled a mutual recognition system for eligible funds to be passported into and out of these countries. The specific types of funds eligible for mutual recognition along with their structure are determined in each MOU. For instance, France stipulates that a fund must have a minimum net asset value attributable to Hong Kong investors; the UK prohibits leverage above 100 per cent of the net asset value; and Luxembourg requires its fund manager to possess at least HK$10 million in capital. Moreover, foreign funds wishing to be offered in Hong Kong must appoint an appropriate company as its representative there and engage a licensed intermediary responsible for any marketing activities associated with the fund.1
As with Section 114 of the SFO, the restriction on carrying out regulated activities does not distinguish between foreign and local corporations. In order to provide cross-border regulated services and products to the Hong Kong public, corporations need to obtain licences from the SFC.1
A Section 117 temporary licence may be available to foreign corporations, who are already licensed or regulated in another jurisdiction. Valid for up to three months or up to six months within any two-year period, the SFC assesses whether the foreign corporation is subject to similar regulatory requirements monitored or enforced by its local regulator and which would allow it to take disciplinary action in Hong Kong. There are restrictions, however; not all regulated activities are allowed, and client assets cannot be held by the licensee.1
In September 2021, the Cross-boundary Wealth Management Connect (Cross-boundary WMC) Scheme was initiated in the Guangdong–Hong Kong–Macao Greater Bay Area. This allows qualified citizens from mainland China, Hong Kong and Macao in the GBA to invest in banking wealth management products provided by financial institutions within each other's region, through a funds flow path that has been established between their respective banking systems. It provides individual investors with an efficient and straightforward way to open and manage cross-border investment accounts and select appropriate products.1
The Cross-boundary WMC comprises of two components, the Southbound and Northbound Schemes. Eligible GBA residents are able to invest in low-to-medium risk wealth management products offered by Hong Kong and Macao banks through designated channels by taking part in the Southbound Scheme. Similarly, eligible residents of Hong Kong and Macao can participate in the Northbound Scheme to invest in wealth management products distributed by mainland China banks via prescribed methods. Investors need to open a bank account with a cross-border remittance feature based at their place of residence, as well as an investment account with a bank from the other market; these need to be linked together. Furthermore, funds between the two markets are subject to quota and closed looping control.1
Section 103 of the SFO only affects invitations to invest made within Hong Kong. There is no legal impediment if a genuine inquiry from a Hong Kong investor to an overseas corporation is made, though the response must be specific to the enquiry for there to be exemption from this regulation. This process is often referred to as 'reverse enquiry'.1
Comprehensive legal services for businesses on corporate, tax law, cryptocurrency legislation, investment activities
