Hong Kong SFC proposes enhancements to competency framework of intermediaries and market practitioners

Posted on by

The Securities and Futures Commission (SFC) has launched a consultation on “Proposed Enhancements to the Competency Framework for Intermediaries and Individual Practitioners” on 11 December 2020 (Consultation Paper). The consultation is open for comments for two months. Public comments are required to be submitted to SFC no later than 10 February 2021.

The following key enhancements are proposed:

  • the minimum academic qualification requirements for individuals would be raised and a broader range of academic qualifications would be recognised;
  • applicants would have more flexibility for meeting the industry qualification and regulatory examination requirements;
  • competence requirements for individuals who are to advise on matters regulated by the Codes on Takeovers would be upgraded to address SFC’s concerns about the quality of work performed by some financial advisers on matters regulated by the Codes on Takeovers; and
  • continuous professional training (CPT) requirements for individual practitioners would also be enhanced.

Background

The SFC notes there have been substantial changes in its regulatory landscape since 2003 when the Guidelines on Competence (Competence Guidelines) and the Guidelines on Continuous Professional Training (CPT Guidelines) were issued, which outline the entry and ongoing competence requirements expected of a person engaging in regulated activity (RA). Separately, many other local and overseas regulators have recently updated their competence standards. In view of the development of the financial markets which have been evolving and becoming more sophisticated, the SFC therefore sees it essential to raise the industry’s professional standards bringing its competency framework up-to-date and thus would like to revise and modernize the competence requirements. Details of the proposed changes to the Competence Guidelines and CPT Guidelines are set out in Appendix A and Appendix C of the Consultation Paper respectively.

The SFC also raised concern about the quality of work performed by some financial advisers on matters regulated by the Codes on Takeovers and Mergers and Share Buy-backs (Codes on Takeovers), where certain financial advisers were unaware of or did not understand the requirements under the Codes on Takeovers or relied excessively on their legal advisers in relevant transactions and failed to discharge their own duties and roles. To address this, SFC has proposed to upgrade and set out expressly the competence requirements for individuals who are to advise on matters or transactions falling within the scope of the Codes on Takeovers.

The proposed enhancements would be the first time the competency requirements are revised since 2003 and the proposed changes are fairly extensive.  We outline the key proposed changes and summarise the details in this legal update:

SFC-Consultation-on-Proposed-Enhancements-to-Competency-Framework-Dec2020Download

Proposed implementation timeframe

The SFC has proposed to implement the revised Competence Guidelines and CPT Guidelines at least six months after their publication and in any event no later than 31 December 2021.

Given the proposed implementation timeline, industry practitioners should consider whether to make any consultation response and/or to prepare themselves for the revised competence requirements, and CPT training providers may wish to make corresponding adjustments to their training programs and CPT courses to be ready for the proposed enhancements once they are in force.

Access the SFC’s website here for the full consultation paper: https://apps.sfc.hk/edistributionWeb/gateway/EN/consultation/intermediaries-licensing/openFile?refNo=20CP8