Why do Hong Kong asset management companies/fund managers generally need to hold both Type 9 and Type 4 licenses?

In Hong Kong, although the fund itself does not require a license, the fund manager does need one. To manage funds or assets in Hong Kong, asset management companies/fund managers usually need to obtain the SFC’s Type 9 regulated activity (Asset Management) license.

In asset management activities in Hong Kong, asset management companies/fund managers are required to pay profits tax from the management fees and performance fees they collect.

As a result, many companies set up funds or other legal entities overseas to manage assets in order to avoid paying profits tax.

For example, many companies set up asset management companies in the Cayman Islands or other tax havens to collect client management fees, thus avoiding paying a large amount of profits tax.

At the same time, many asset management companies want to operate in Hong Kong to gain more market information and investment opportunities.

In this case, the best solution is to set up asset management companies in both Hong Kong and the Cayman Islands. The Hong Kong fund manager/asset management company appoints the Cayman Islands fund manager/asset management company to manage the fund. The Hong Kong fund manager/asset management company then provides “investment advice and introduces investment opportunities” to the overseas fund manager/asset management company. This approach achieves tax avoidance while also accessing more investment opportunities in Hong Kong.

In this situation, as the Hong Kong asset management company/fund manager provides advice and introduces investment opportunities to other fund managers rather than directly managing assets and not touching clients’ assets, they also need to obtain a Type 4 regulated activity (Advising on Securities) license.

How can we help?

2CExam provides HKSI LE, IIQE, EAQE and SQE related exam preparation materials. We sell mock question banks for HKSI LE Papers 1, 2, 3, 5, 6, 7, 8, 9, 12 in Chinese and English; and bibles for HKSI LE Papers 1, 2, 6, 7, 8 in Chinese. We also offer 1 on 1 tutorial services. Besides, we have also made free tutorial videos for HKSI LE Papers 1, 2, 6, 7, 8, 12 and posted on public channels such as Youtube/ Bilibili/ Tencent/ Iqiyi. 2CExam has been an exam training expert for years. Should you need any help please visit www.2cexam.com or contact us through:

Phone +852 2110 9644 Email: [email protected] Wechat: hk2cexam WhatsApp: +852 9347 2064