Oversight - SFC consults on investor identification regime

On 4 December 2020, the Hong Kong Securities and Futures Commission (SFC) published a consultation paper (Consultation Paper) on proposals to:

• implement an investor identification regime for the securities market in Hong Kong at the trading level (HK Investor ID Regime) for any securities listed and/or traded on the Stock Exchange of Hong Kong Limited (SEHK)’s trading system, except securities traded on the odd lot and special lot markets (In-Scope Securities); and
• introduce an over-the-counter securities transactions reporting regime for ordinary shares and units in real estate investment trusts (REITs) listed on the SEHK (OTC Securities Transactions Reporting Regime).

The SFC defined “the HK Investor ID Regime” in the Consultation Paper as “the arrangements, information systems, data, data storage, operator and relevant regulatory requirements collectively involved in achieving the proposed objectives”. The SFC invited the public to submit comments on the Consultation Paper by 4 March 2021.

The SFC proposes to introduce the HK Investor ID Regime by the first quarter of 2022 at the earliest and the OTC Securities Transactions Reporting Regime by the third quarter of 2022 at the earliest. The SFC further proposes to reflect the proposals in the Consultation Paper by adding new paragraphs 5.6 and 5.7 to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct) respectively. The SFC has included an indicative draft of the new paragraphs 5.6 and 5.7 to the Code of Conduct in Appendix 4 of the Consultation Paper.

The purposes of this Oversight are to: (i) provide an overview of the SFC’s proposals relating to the HK Investor ID Regime and the OTC Securities Transactions Reporting Regime; (ii) outline the steps which licensed corporations and registered institutions (collectively Regulated Intermediaries) need to take in order to implement the HK Investor ID Regime and the OTC Securities Transactions Reporting Regime; and (iii) highlight some practical considerations for the Regulated Intermediaries to consider.