SFCSecurities and Futures Commission

The Securities and Futures Commission (SFC) is an independent statutory body established in 1989 to regulate the securities and futures markets in Hong Kong. Although independent of the Government of the Hong Kong Special Administrative Region, the SFC's investigative, disciplinary, and enforcement powers are derived from the Securities and Futures Ordinance (SFO) and subsidiary legislation.

The SFC plays a crucial role as a regulator in one of the world's leading international financial centres, ensuring market integrity, investor protection, and economic stability.

Mission and Values

The SFC's mission is to enhance the fairness, efficiency, and credibility of Hong Kong's securities and futures markets, benefiting investors and the financial industry. The SFC values the proactive approach to supervisory and enforcement efforts, as called for in its regulatory efforts, to build a transparent, competitive, and orderly financial ecosystem that enables sustainable long-term growth in the securities and futures markets.

Key responsibilities

The Securities and Futures Ordinance grants a broad scope of functions to the SFC and covers the following areas:

• Setting and Enforcing Market Regulations - Making rules and conducting investigations into potential contraventions or misconduct in the marketplace.

• Licensing and Supervising Intermediaries - Licensing and supervision of brokers, fund managers, investment advisers, and other financial professionals conducting regulated activities.

• Supervising Market Operators - Supervising exchanges, clearing houses, share registrars, and alternative trading venues on operational resilience, efficiency, and effectiveness.• Approval of Investment Products – To monitor and approve offering documents for retail investment products before they are made public.

• Monitoring Takeovers and Mergers – To monitor corporate control transactions that involve listed companies and ensure good corporate governance is exercised.

• Regulating Listing Matters – To keep an eye on how the Stock Exchange of Hong Kong Limited directs its regulatory judgment.

• Engaging with Various Regulators – To work with local, Mainland, and international regulators to ensure Hong Kong's markets comply with international standards.

• Educating Investors – To provide tools and materials to help investors make choices that fit them, understand market risks, and understand their rights.

Regulatory Network

The SFC works with some of Hong Kong's key financial regulators to assist with rotating and supervising financial stability:

• Hong Kong Monetary Authority (HKMA) – responsible for banking and monetary policy and the Exchange Fund

• Insurance Authority (IA) – responsible for the insurance industry

• Mandatory Provident Fund Schemes Authority (MPFA) – responsible for retirement fund schemes

Together, SFC, HKMA, IA, and MPFA provide a regulated, transparent, and trusted financial system in Hong Kong.

History and Change

Until the mid-1970s, Hong Kong lacked a consistent regulatory system for the securities and futures markets. Following the 1973 market crash, legislation was enacted in 1974 to establish oversight of the industry.This was directed through two commissions (for securities and commodities trading) that were not permanent positions.

In 1987, again, the markets underwent another tumultuous episode (the stock market crash), which resulted in a complete overhaul review of the regulatory system in Hong Kong's securities and futures markets by the Securities Review Committee, headed by Ian Hay Davison, a chartered accountant.

The Committee produced a comprehensive report in 1988 with recommendations for the formation of a single, generic, full-time statutory authority with extensive investigative and enforcement powers, financed fundamentally by the markets themselves.

The SFC was formed in May 1989. Since that time, numerous changes have occurred within regulatory agencies in Hong Kong.

Immediately following the Asian financial crisis of 1997, a reform process commenced, culminating in the enactment of the Securities and Futures Ordinance (SFO), which took effect on 1 April 2003. The SFO consolidated and modernized Hong Kong's regulatory framework, allowing the SFC to manage evolving financial risks and to grow towards international standards.

Funding and Independence

From the early 1990s, the SFC has been financially independent of the government; therefore, it is funded by licensing fees and transaction levies, not public funds. The cost-independent status means that the SFC can be independent and impartial from government; the focus of SFC decision-making exists solely to ensure fair market operation and positive investor confidence.