Hong Kong - SFC’s Consultation On Investor Identification & Over-The-Counter Securities Transactions

Updated: Feb 26

On 4 December 2020, the SFC published a consultation paper on proposals to (1) implement an investor identification regime at trading level for the securities market in Hong Kong and (2) introduce an over-the-counter securities transactions reporting regime for shares listed on the Stock Exchange of Hong Kong. The deadline for the consultation period is fast approaching and currently set to be 4 March 2021. Investor Identification Regime With Hong Kong’s securities market experiencing significant growth, both in market volume and complexity, in the past two decades, challenges faced by regulators in market surveillance have also grown considerably. To enhance the effectiveness of market surveillance and to reduce compliance costs incurred by intermediaries in dealing with enquiries from regulators, the SFC proposes to introduce an investor identification regime at the trading level by assigning unique identification codes to market participants to help with identifying the originators of the orders and trades. Licensed corporations and registered institutions will be required to provide a client’s name and identification information when submitting on submitting orders for execution (on-exchange order) or reporting off-exchange trades. This proposed regime is in line with developments in major jurisdictions such as US, Europe, Australia, Singapore and Mainland China. Over-the-counter Securities Transactions Reporting Regime To combat the abuses of transactions not recorded by the SEHK as an on-exchange orders, or transactions not required to be reported to the SEHK as off-exchange trades in manipulation schemes, the second section of the consultation papers proposes an Over-the-counter Securities Transactions Reporting Regime. This reporting regime is intended to be complementary to the Investor Identification Regime. Licensed corporations and registered institutions will have reporting obligation to the SFC, whether acting as principal or agent, (1) when the licensed corporations and registered institutions makes a transfer of shares that is effected by an OTC Securities Transaction in respect of which stamp duty is chargeable in Hong Kong (whether as principal or agent); or (2) when there is a deposit to or withdrawal from the licensed corporations and registered institutions of physical certificates of shares.

For further information, please contact: Charing Yu, Associate, Hauzen LLP info@hauzen.hk

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