SFC Consultation conclusions on investor identification regime

Introduction

On 10 August 2021, the Hong Kong Securities and Futures Commission (SFC) published consultation conclusions (Consultation Conclusions) regarding (1) the implementation of an investor identification regime for the securities market in Hong Kong at the trading level (HK Investor ID Regime) for any securities and derivatives listed and/or traded on the Stock Exchange of Hong Kong Limited (SEHK)’s trading system, except (i) securities traded on the odd lot and special lot markets of the SEHK (save for underlying orders in an executed aggregated order) and (ii) transaction(s) reported via the SEHK’s trade amendment system (In-Scope Securities); and (2) the introduction of 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). Derivatives will include callable bull/bear contracts, derivative warrants and inline warrants, but not stock options and futures as these are traded on Hong Kong Futures Automated Trading System. Prior to this, on 4 December 2020 the SFC published a consultation paper regarding the above (Consultation Paper).

The SFC expects to introduce the HK Investor ID Regime by the second half of 2022 and the OTC Securities Transactions Reporting Regime by the first half of 2023. The SFC will add 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 a finalised version of the new paragraphs 5.6 and 5.7 of the Code of Conduct in Appendix C of the Consultation Conclusions.

The purposes of this Oversight are to: (i) provide an overview of the SFC’s finalised proposals relating to the HK Investor ID Regime and the OTC Securities Transactions Reporting Regime; (ii) outline the steps which relevant licensed corporations and registered institutions (collectively Relevant 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 Relevant Regulated Intermediaries to consider.