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SFC consults on investor identification

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The Securities and Futures Commission (SFC) today launched a consultation on proposals to introduce investor identification for the securities market in Hong Kong (Note 1).

Under the proposed investor identification regime, licensed corporations and registered institutions would submit clients’ names and identity document information to a data repository (Note 2). This will allow the SFC to identify investors who place securities orders (Note 3).

“Effective, timely market surveillance is key to maintaining the integrity of the Hong Kong securities market,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “The proposed investor identification measures will make our market supervision more robust and promote the investor confidence which is essential for Hong Kong to thrive as a premier international financial centre.”

The proposed requirements would apply at the trading level to on-exchange orders for securities listed or traded on the Stock Exchange of Hong Kong (SEHK) as well as reportable off-exchange trades of these securities. A separate securities transactions reporting regime is proposed for over-the-counter (OTC) securities transactions in ordinary shares and real estate investment trusts listed on SEHK.

Market participants and other interested parties are invited to submit their comments to the SFC on or before 4 March 2021 via the SFC website (www.sfc.hk), by email ([email protected]), by post or by fax to 2521 7917.

Notes:

  1. Introducing an investor identification regime for the Hong Kong market was one of the SFC’s strategic priorities outlined in its Annual Report 2018-19  released in June 2019. Investor identification measures are in place in other major overseas markets including in the United States, Europe, Australia and Singapore. The proposed regime is expected to be implemented in 2022 at the earliest.
  2. Before submitting an individual client’s name and identity document information to a data repository, licensed corporations and registered institutions must comply with the Personal Data (Privacy) Ordinance by obtaining the client’s express consent to do so and ensuring that the client is fully aware of the purposes for which the personal data is to be used. Clients who have not provided the required consent could continue to sell or withdraw their securities but would not be able to make further securities purchases or deposits.
  3. Currently, the trading system used by SEHK only captures information about exchange participants and not the identities of the clients instructing securities orders. Under the proposed regime, each on-exchange securities order and off-exchange trade reported to SEHK will be tagged with a Broker-Client Assigned Number (BCAN) which is unique to each client. Where necessary, this will enable the SFC to map the order or trade to the client identity information stored in a data repository together with the BCAN.

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Regulator Information

Abbreviation: SFC
Jurisdiction: Hong Kong

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