Oversight: SFC consultation conclusions on competency requirements

On 18 June 2021, the Securities and Futures Commission of Hong Kong (SFC) published Consultation Conclusions on the Proposed Enhancements to the Competency Framework for Intermediaries and Individual Practitioners (Consultation Conclusions). Prior to this, the SFC had issued on 11 December 2020 its Consultation Paper on the Proposed Enhancements to the Competency Framework for Intermediaries and Individual Practitioners (Consultation Paper). In the Consultation Paper, the SFC proposed to amend its Guidelines on Competence (Competence Guidelines) and Guidelines on Continuous Professional Training (CPT Guidelines) which supplement the SFC’s Fit and Proper Guidelines. The Consultation Conclusions set out the SFC’s approach and will update the competency requirements for all SFC licensed or registered intermediaries.

Under the Securities and Futures Ordinance (SFO), in considering whether a person is “fit and proper” for licensing purposes, the SFC is required to assess, among other things, the individual’s (i) educational or other qualifications or experience having regard to the nature of the functions he or she will perform, (ii) ability to carry on the regulated activity under the SFO (RA) competently, honestly and fairly and (iii) reputation, character, reliability and financial integrity. The Fit and Proper Guidelines were also first published in 2003 when the SFO came into force and last revised in 2013. These outline the matters that the SFC will normally consider in determining whether a person is “fit and proper”. The Competence Guidelines and CPT Guidelines set out the entry and ongoing competence requirements respectively expected of a person engaging in RAs. The finalised version of the revised Competence Guidelines and CPT Guidelines are appended to the Consultation Conclusions.

Both the entry competence requirements and continuous professional training (CPT) requirements stem from the fitness and properness requirements. The objective of the entry competence requirements, as stated by the SFC, is to ensure a person is equipped with the necessary technical skills and professional expertise to be “fit”, and is aware of the relevant ethical standards and regulatory knowledge to be “proper” in carrying on RAs. In respect of ongoing requirements, the CPT requirements aim to ensure that individuals remain “fit” by undergoing training that enhances their technical skills and professional expertise, and “proper” by regularly reinforcing the relevant ethical standards and regulatory knowledge. Given that executive officers (EOs) and relevant individuals (ReIs) of registered institutions (i.e. banks engaging in RAs) have been required to meet the same competence and CPT requirements as responsible officers (ROs) and licensed representatives (LRs) of SFC licensed corporations respectively since the implementation of the new licensing regime under the SFO in 2003, the SFC intends the amendments in the Consultation Conclusions to apply to EOs and ReIs as well (having discussed the Consultation Paper and Consultation Conclusions with the Hong Kong Monetary Authority).

This Oversight provides an overview of the finalised changes to the competency framework. It first discusses the amendments to the Competence Guidelines and the CPT Guidelines and compares them against the relevant current requirements. It then looks at the practical implications of the changes.