Can an individual holding a Type 1 license from the Securities and Futures Commission (SFC) also serve as a Responsible Officer (RO) for Type 4 and Type 9 licenses?

Question: Currently holding a Hong Kong Type 1 regulated activity (1st license – Securities Trading) licensed representative license and having several years of experience. Now passed the Hong Kong Securities and Futures Practitioners Qualification Exam Paper 6 (HKSI LE Paper 6). Can they become a Responsible Officer (RO) for Type 1 regulated activity (1st license – Securities Trading) and Type 9 regulated activity (9th license – Asset Management)?

Answer:

This question can actually be divided into two questions:

Can they become a Responsible Officer (RO) for Type 1 regulated activity (1st license – Securities Trading)?

Can they become a Responsible Officer (RO) for Type 9 regulated activity (9th license – Asset Management)?

According to the SFC’s “Guidelines on Competence,” to become a Responsible Officer (RO), one must meet the following four requirements:

1.Education/Professional Qualification

The requirements for education for Responsible Officers (ROs) and licensed representatives are the same. If the applicant currently holds an SFC Type 1 license, their education level should at least be a Level 2, or Grade E or above, in English/Chinese and Mathematics in the Hong Kong Diploma of Secondary Education Examination, which meets the license application requirements for ROs.

2.Relevant Industry Experience

If the applicant has 3 years of relevant securities industry experience within the 6 years immediately preceding the application date, they can meet this requirement.

According to the SFC’s Circular on Clarifying Competence Requirements for Existing Licensees Intending to Provide Asset Management Services, the SFC will consider the applicant’s accumulated work experience in the financial industry when assessing whether they meet the experience requirements.

For example, if a Type 1 licensee is currently permitted to conduct asset management activities that are wholly incidental to their trading activities (such as discretionary account management), the SFC will consider the relevant experience when assessing the individual’s application to become a Responsible Officer for Type 9 regulated activities.

The SFC will also recognize other industry experience, such as research, private equity, and proprietary trading, as relevant experience.

Please note that the so-called industry experience does not only refer to the applicant’s license record and work experience in Hong Kong, experience accumulated in other countries or regions can also be taken into account.

3.Management Experience

Within the past 3 years of industry experience, the applicant for Responsible Officer also needs to have 2 years of management experience. Management experience refers to the experience of leading subordinates, and generally speaking, managing more than one subordinate is considered management experience.

4.Passing Local Regulatory Framework Examinations

For individuals applying to become Responsible Officers, the prescribed local regulatory framework examinations are related to each type of regulated activity.

For example, if one wants to engage in Type 9 regulated activity (Asset Management), they need to pass the Hong Kong Securities and Futures Practitioners Qualification Exam Paper 6 (HKSI LE Paper 6);

If one wants to engage in Type 1 regulated activity (Securities Trading) or Type 4 regulated activity (Advising on Securities), they need to pass the Hong Kong Securities and Futures Practitioners Qualification Exam Paper 2 (HKSI LE Paper 2).

Local regulatory framework examinations usually cannot be exempted.

Therefore, if the above RO applicant:

• Has more than 3 years of securities industry experience + 2 years of experience managing subordinates in their many years of work as a licensed representative,
• Has passed the Hong Kong Securities and Futures Practitioners Qualification Exam Paper 2 / HKSI LE Paper 2, they can apply to become a Responsible Officer for Type 1 regulated activity (1st license – Securities Trading).

Whether they can apply to become a Responsible Officer for Type 9 regulated activity (9th license – Asset Management) depends on whether they have relevant industry experience in asset management.

That is, if they engaged in related asset management activities while conducting Type 1 regulated activities, the SFC may consider the relevant asset management experience as experience for Type 9 regulated activities when applying for RO.

In this case, if the above RO applicant has more than 3 years of asset management industry experience + 2 years of experience managing subordinates in their many years of work as a licensed representative, and their passing of the Hong Kong Securities and Futures Practitioners Qualification Exam Paper 6 (HKSI LE Paper 6) is still within the 3-year validity period when applying for the license, they can also apply to become a Responsible Officer for Type 9 regulated activity (9th license – Asset Management).

However, if the applicant did not engage in any asset management-related activities while conducting Type 1 regulated activities and has no asset management experience at all, it is recommended to gain relevant industry experience before applying for the RO of Type 9 regulated activities.

Relevant industry experience can be obtained by becoming a licensed representative for Type 9 regulated activities or by engaging in any asset management activities.

In summary, the more prudent course of action for this applicant would be to first determine whether their work experience includes 3 years of asset management experience and then decide whether to take the HKSI LE Paper 6 exam.

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