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Other Voices: SFC issues guidance to private equity firms and family offices on licensing issues

Thursday, January 23, 2020

By: Anne-Marie Godfrey, Akin Gump Strauss Hauer & Feld LLP

In recent years, the Hong Kong Securities and Futures Commission (SFC) has increasingly focused on private equity funds' obligation to be licensed under the Securities and Futures Ordinance (SFO). In February 2019, the SFC's Licensing Handbook was updated to specifically note that private equity and venture capital firms may, depending on the nature of their business activities, be required to obtain a Type 1, Type 4 or Type 9 license. The latest pronouncements from the SFC contained in its circular dated January 7, 2020, titled "Circular to Private Equity Firms seeking to be Licensed," seeks to further clarify the circumstances in which it would expect private equity firms and its personnel to be licensed under the SFO, as summarized below.

Licensing triggers depend on a private equity firm's activities in Hong Kong and discretionary investment authority

Where a private equity firm is granted full discretionary investment authority with respect to the funds under its management, it would generally be expected to obtain a Type 9 license. In determining whether "full discretionary investment authority" has been granted, the SFC will consider facts such as the firm's proposed investment decision-making process, roles of the proposed licensed individuals and their involvement in such process and the documenting of investment authority delegation.

Additionally, underlying investments falling within ......................

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