The SFC is Hong Kong’s regulatory body for the securities and futures markets. It is an independent organization, the main responsibilities of which cover the supervision of the above said markets, the promoting of a healthy trading environment, customer protection and the showcasing of Hong Kong as an attractive financial market and centre within China.
The independent status of the organization is quite peculiar: it is considered to be a branch of the Government, but in reality it is not that. Its activity is solely governed by the laws concerning securities and futures.
The need for such an authority became clear in 1987, following the stock market crash. As a measure meant to dampen the impact of a similar future event, the SFC was created in 1989.
As one of the four authorities which provide full regulatory coverage for one of the world’s top financial hubs, the SFC has a very well defined place and mission. The other HK regulators are the Monetary Authority, the Mandatory Provident Fund Schemes Authority and the Office of the Commissioner.
Although we already touched on this issue above, it is well worth taking a second look at the tasks of the SFC, especially in light of the fact that the authority is in charge of the Hong Kong Stock Exchange, the 7th largest stock exchange in the world.
In addition to the already stated regulatory objectives of the authority, it also:
– fights crime and misconduct in the said markets
– informs and educates the public about the ways of the securities and futures industry
– actively works on reducing the systemic risks in the vertical
– helps the Government maintain the financial stability of Hong Kong
From a legal perspective, the SFC’s activity is governed by the Securities and Futures Ordinance (SFO).
In addition to regulating brokers, advisors, fund managers and intermediaries dealing with a wide range of financial products, the SFC also regulates Automatic Trading Service providers, exchanges, listed companies, investment products as well as regular market participants – meaning investors, too.
In regards to that latter category, the SFC keeps eyes on suspicious market movements, and it can even suspend the trading of various stocks altogether, for the sake of maintaining the orderly nature of the market in the face of disturbance.
In the same breath, it is also compelled to investigate market-disrupting behavior and the breaching of the law, and to act against the perpetrators of such activity.
The regulatory philosophy of the authority sets the guidelines in regards to how it performs the above-detailed regulatory work.
The SFC is supposed to be “firm but fair”, it needs to focus on risk, while forming close partnerships with the regulated parties.
First and utmost though, the authority does not aim to dictate, its preferred course of action being negotiation. To facilitate this approach, an open dialogue needs to exist between the regulator and the regulated, on all levels.
The bottom line: as one of the world’s most exigent financial regulators, the SFC is definitely not one of the plausible “shortcuts” for those looking to grab up a cheap and quick online brokerage license.
Below is a list of brokers that are SFC regulated
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