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What Kind of Talents Are in Shortage in Hong Kong?

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Hong Kong, an international financial center tied for London, is in urgent need for financial talents; therefore, many companies turn to recruitment agency for help. Why these talents are in shortage? After the 2008 financial crisis, global private equity and hedge funds have become popular, but Hong Kong has always focused on securities, bonds and derivatives, neglecting other alternative investments, which has resulted in talent shortage challenges in private equity and hedge funds. Under these talent battles, to conduct a financial service regulated activity in Hong Kong with assistance from company with a valid financial license is needed. 

What is Financial License? 

Regulated activities as defined by the Securities and Futures Ordinance are as follows:

  • Type 1   Dealing in securities 
    • Trading/broking stock options for clients
    • Trading bonds for clients
    • Buying / selling mutual funds and unit trusts for clients
    • Placing and underwriting of securities 
  • Type 2    Dealing in futures contracts       
    • Trading / broking index or commodities futures for clients
    • Buying / selling futures contracts for clients
  • Type 3    Leveraged foreign exchange trading  
  • Type 4   Advising on securities
    • Giving investment advice to clients relating to the sale / purchase of securities
    • Issuing research reports / analyses on securities
  • Type 5   Advising on futures contracts
  • Type 6   Advising on corporate finance 
    • Acting as sponsor for listing applicant in an initial public offering
    • Advising on the Codes on Takeovers and Mergers and Shares Repurchases
    • Advising listed companies on compliance of Listing Rules
  • Type 7   Providing automated trading services 
  • Type 8   Securities margin financing
  • Type 9   Asset management
    • Managing a portfolio of securities or futures contracts for clients on discretionary basis
    • Managing funds on discretionary basis
  • Type 10  Providing credit rating services

Why company and talent are closely related? Because as a qualified full licensed corporation, you should appoint not less than two responsible officers (RO) to directly supervise the conduct of each regulated activity you apply for. Moreover, you should haveat least one responsible officer available at all times to supervise the business in Hong Kong. It takes long time to train the talents, especially for some ROs of popular license, so some companies need recruitment agency to search these people.

Among the ten types of licenses, type 1, 2, 4, 6, 9 are the most popular license now, but type 6 and 9 licenses are in demand but remained scarce.

Hong Kong Exchanges and Clearing Limited (HKEX) is one of the world’s major exchange groups, and a leading IPO market that help many mainland enterprises to operate business abroad. Compared with 2016, the total number of listed companies on the HKEX increased by 145 in 2017, and the total market value of listed companies increased by 37.31%. In addition, Xiaomi Corporation (01810. HK) raised HK$24 billion on the HKEX, making it total market value up to HK$480 billion.

If the company intends to list in Hong Kong, it needs help from experienced companies or intermediaries to assist in preparing the listing. Normally, listing in Hong Kong is estimated to take 7 to 15 months, but there are still some complicated procedures to finish.

Specific approval criteria for full licensed corporation:

  • You must be a company incorporated in Hong Kong or an overseas company registered with the Companies Registry of Hong Kong.
  • You should have proper business structure, good internal control systems and qualified personnel to ensure the proper management of risks that you will encounter in carrying on your proposed business.
  • You should appoint not less than two ROs to directly supervise the conduct of each regulated activity you apply for.
  • You should appoint at least one responsible officer available at all times to supervise the business in Hong Kong.
  • At least one of your proposed responsible officers must be an executive director as defined under the SFO.
  • All your executive directors must seek the SFC’s approval as responsible officers accredited to your corporation.

Type 6 – Advising on Corporate Finance

There are only about 300 Type 6 institutions in Hong Kong, with around 4000 license holders. To be a responsible officer Type 6, he has to fulfil basic elements as follows:

  • Educational or other qualifications or experience 
    • Passed one of the recognized industry qualifications(Basic element)
      • Pass Licensing Examination for Securities and Futures Intermediaries (LE) Paper 7 and Paper 11 organized by the Hong Kong Securities Institute (HKSI).
  • Can be Compensated by 
    • Degree in Accounting, Business Administration, Economics, Finance or Law; or other degree (with passes in at least two courses in the above disciplines); or
    • Internationally recognized professional qualifications in Law, Accounting or Finance2; or
    • Passes in English or Chinese, and Mathematics in HKCEE or equivalent3 plus an additional 2 years relevant industry experience4; or
    • An additional 5 years relevant industry experience.
  • Possesses 3 years relevant industry experience over the 6 years immediately prior to the date of application
  • Has a minimum of 2 years proven management skill and experience 
  • Passed one of the recognized local regulatory framework papers 
    • Licensing Examination for Securities and Futures Intermediaries(LE) Paper 1 (not applicable for full licensed representatives) and Paper 5 organized by the Hong Kong Securities Institute (HKSI).

To be a responsible officer for Type 6, he should fulfil the element of 3 years relevant industry experience on IPO and mergers and share repurchases. Many people do not meet the requirements that make RO Type 6 short-staffed.

Type 9 – Asset Management

To be a responsible officer Type 9, he has to fulfil basic elements as follows:

  • Educational or other qualifications or experience 
    • Passed one of the recognized industry qualifications(Basic element)
      • Pass Licensing Examination for Securities and Futures Intermediaries (LE) Paper 7 and Paper 12 organized by the Hong Kong Securities Institute (HKSI).
  • Can be Compensated by 
    • Degree in Accounting, Business Administration, Economics, Finance or Law; or other degree (with passes in at least two courses in the above disciplines); or
    • Internationally recognized professional qualifications (e.g. CFA, CEP, etc.)
    • Passes in English or Chinese, and Mathematics in HKCEE or equivalent3 plus an additional 2 years relevant industry experience4; orAn additional 9 years relevant industry experience.
  • Possesses 3 years relevant industry experience over the 6 years immediately prior to the date of application
  • Has a minimum of 2 years proven management skill and experience 
  • Passed one of the recognized local regulatory framework papers 
    • Pass Licensing Examination for Securities and Futures Intermediaries(LE) Paper 1 (not applicable for full licensed representatives) and Paper 6 organized by the Hong Kong Securities Institute (HKSI).

In addition, private placement agencies with Hong Kong Type 9 License can benefit from overseas investment, asset allocation and tax incentives:

Overseas Investment

It helps you to expand the scope of investment target, which involve financial products such as overseas equity assets and derivatives; Based on relatively rational overseas investment markets, it creates a better investment environment for domestic private placement agencies that pursue the valuable investment.

More Choice for Domestic Customers on Asset Allocation

It can satisfy different needs of customers and provide more diversified services for high-net-worth individuals.

Tax Incentives

Establishing fund management companies in Hong Kong can enjoy the competitive tax policies and further reduce the tax burden. In recent years, more and more domestic agencies have entered into the Hong Kong market by running companies to attract overseas investment, therefore, many private placement agencies are interested in applying for Type 9 license. In the first five months of 2018, nearly 200 people have been licensed for Type 9, with a total number of licensed individuals over 3,700. However, since it is still in shortage with such large market demands, the salary for Type 9 ROs is rising.

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