Securities And Futures Commission (SFC)

What Is the Securities And Futures Commission?

The Securities And Futures Commission (SFC) is a non-governmental statutory body responsible for regulating Hong Kong's securities and futures markets. The SFC was established by the Securities and Futures Commission Ordinance (SFCO). The commission is independent and not under the purview of the Government of the Hong Kong Special Administrative Region. It is funded by licensing fees and transaction levies.

Understanding the Securities And Futures Commission (SFC)

The SFC administers the laws governing Hong Kong's securities and futures markets and facilitates the development of these markets. The SFC's statutory objectives are to maintain and promote fairness, efficiency, competitiveness, and transparency in the securities and futures markets; promote public understanding of investing and corporate finance policy; protect investors by enforcing regulations; reduce crime and misconduct and reduce the risks to Hong Kong's financial stability.

The History of the SFC

The markets in Hong Kong were unregulated until 1974. After a stock market crash in 1973, there was legislation to introduce a new system to oversee the stock and commodity trading industry. An additional stock market crash in 1987 prompted the formation of the six-member Securities Review Committee. In May 1988, the Committee recommended that a single, independent statutory body regulate the markets and, in May 1989, the Securities and Futures Commission Ordinance (SFCO) was enacted, which created a new regulatory framework for Hong Kong's markets.

The Asian Financial Crisis of 1997 prompted additional regulations and, in May 1989, the SFC was created following the enactment of the Securities and Futures Commission Ordinance (SFCO). By April 2003, the SFCO and nine other securities and futures-related ordinances were consolidated into the Securities and Futures Ordinance (SFO).

Since the SFC's inception, the number of listed companies in the Hong Kong markets has grown from 290 in 1989 to more than 1,700 while the number of licensees has increased from about 1,900 to almost 39,000.

SFC Organization and Operations

Hong Kong's SFC's operational units include corporate finance, policy, China and investment products, enforcement, supervision of markets, licensing and intermediaries supervision. Each of the SFC's operational units is supported by the legal services department and corporate affairs division. The SFC regulates licensed corporations and individuals. According to the commission, its activities include the following:

1. Setting and enforcing market regulations and investigating any breaches or misconduct;
2. Licensing and supervising market participants that fall under the SFC's regulatory responsibility;
3. Managing market operators such as exchanges, clearing houses, share registrars, and alternative trading platforms;
4. Authorizing investment products and providing associated documents to investors;
5. Overseeing takeovers and mergers of public companies and of The Stock Exchange of Hong Kong Limited's regulation of listing matters;
6. Assisting local and overseas regulatory authorities; and
7. Educating investors on markets including their risks, rights, and responsibilities.