Hong Kong Securities and Futures Commission
License No. 1

Basic capital requirements include:

• Paid-up capital: HK$500 million
• Quick funds: HK$300 million (large 1) or HK$30 (small 1)

If exchange trading rights are available, an additional HK$3,000 million margin is required. If margin financing is offered, even higher capital is required. Total capital requirements range from HK$800 million to HK$3,000 million+, depending on the business function mix.

SFC official fee (one-time):

• Licensed corporation application fee: HK$4,740
• RO (Responsible Person) Approval Fee: HK$2,950 per person
• Licensed Representative (LR) application fee: HK$1,790 per person

The annual fees include the annual license fee (HK$12,600), the annual RO fee (HK$4,740 per class), and the annual LR fee (HK$1,790 per person).

Yes, but only for security tokens. Brokers holding a Type 1 license can upgrade to offer trading services for security tokens to their clients, but they must:

• Partnering with SFC-licensed VATPs (such as OSL and HashKey)
• Clients cannot withdraw or deposit fiat currency from their brokerage accounts.
• Comply with the additional requirements of the September 2025 circular.

Non-security tokens (such as Bitcoin and Ethereum) require a VASP license and are not covered by Type 1 licenses. For detailed VA business guidelines, please refer to: https://license.aiying.cc/license-no-1-va-business

The main difference lies in whether or not the client's assets are held:

• Level 1: Can hold client assets (funds and securities), with a minimum capital requirement of HK$300 million.
• Detail 1: Client assets cannot be held; quick funds requirement is HK$30.

Scenarios for Option 1: Wealth management institutions, investment advisory firms, and brokers that only provide trade execution services but do not manage assets. Option 1 can save HK$270 million in quick capital, but the scope of business is limited.

An Omnibus account is a consolidated account opened by a brokerage firm in its own name at an exchange or other brokerage firm to aggregate orders from multiple underlying clients.

• A clear record of underlying customers must be maintained.
• Regular reconciliation with the exchange is required.
• Strict AML/CFT compliance required
• The use of an Omnibus account must be reported to the SFC.

Omnibus accounts are commonly used in multinational brokerage businesses to reduce costs and improve efficiency.

The main responsibilities of an MLRO (Chief Money Laundering Reporter):

• Overseeing AML/CFT compliance
• Report suspicious transactions to SFC
• Develop and update AML/CFT policies
• Train employees to identify suspicious transactions

MLROs can be outsourced to professional compliance consulting firms, costing HK$30-50 annually, saving HK$50-100 compared to hiring them full-time. However, outsourcing an MLRO requires sufficient time and resources to fulfill their responsibilities.

Yes, but you need to resolve the issues that led to the rejection before reapplying. Common reasons for rejection include:

• Insufficient financial resources
• RO/LR does not meet the "suitable candidate" criteria
• Inadequate compliance system
• Unclear business plan

It is recommended to consult a professional advisor before reapplying to ensure all issues have been resolved. A new application fee will be charged for reapplying.

Yes. Many brokerages apply for Type 1 (securities trading), Type 4 (advising on securities), and Type 9 (asset management) licenses simultaneously to provide a full range of services. The advantages of applying for multiple licenses are:

• Save time: One-time approval
• Cost savings: Shared RO and compliance systems
• Business collaboration: Providing one-stop service

However, the capital requirements will be higher, and the highest requirements for all licenses must be met.

A legal entity must be established in Hong Kong. Options include:

• Limited Liability Company: The most common type, an independent legal entity with limited liability.
• Branch Office: A Hong Kong branch of a foreign company, which needs to be registered in Hong Kong.

Virtual offices and shared office addresses are not accepted. A separate physical office is required, with a lease of at least one year.

The license itself cannot be directly transferred, but actual control can be transferred through equity transfer. This is the principle behind "acquiring a shell company".

• Equity changes require SFC approval.
• New shareholders need to pass an assessment of "suitable candidates".
• RO/LR may need to be replaced
• The approval process typically takes 3-6 months.

The cost of acquiring a shell company is typically between HK$500 million and HK$2000 million, depending on the quality of the company's business and its customer base.

It is recommended in principle to establish an "Information Barrier". To prevent conflicts of interest, proprietary traders should not have access to clients' order flow information.

• Physical isolation: Larger brokerage firms require their proprietary trading departments to have separate office space.

• Information isolation: Sensitive information (such as upcoming share placement plans and major client intentions) is strictly prohibited from circulating between departments. This is what is known as the "Chinese Wall".

Yes, it will create a chain reaction through FRR (Financial Resource Rules). Proprietary positions will directly consume company funds.Liquid Capital.

• If a proprietary trading desk purchases a large amount of high-risk securities (such as penny stocks), it is required by regulations to perform a large "haircut" calculation.

• If proprietary trading losses cause quick funds to fall below the statutory requirements (e.g., required to be 500 million, but only 480 million in actual funds), the company must immediately cease all regulated activities and report to the SFC.

Must comply "Short Position Reporting" System. When short positions reach a certain percentage of the total issued shares of the listed company. 0.02% Or market value full HK$3,000 millionAt that time, a report must be submitted to the SFC every week.

No. * Authorized Funds: It can be sold to retail customers (the general public).

• Unauthorized funds (such as private equity funds and hedge funds): usuallyLimited to sales to professional investors (PIs)..

• Cross-border funds: You must comply with the laws of the relevant jurisdiction (such as the mutual recognition of funds between the Mainland and Hong Kong).

Yes. Even if you don't take customer orders, you still need at least 2 ROThese two ROs must demonstrate that they possess extensive trading experience and a deep understanding of risk management, particularly market risk and liquidity risk.

The application cycle depends on the business function:

• Trading of underlying securities: 8-12 months
• +Exchange trading rights: 12-16 months
• Margin financing: 12-16 months
• +VA business upgrade: 16-24 months

The preparation phase typically takes 2-6 months, while the approval phase takes 6-18 months.

Yes. Acquiring an existing licensed company ("shell company") is a faster way to obtain a license, typically taking 3-6 months. Advantages include:

• Shorter processing time: No need to apply from scratch
• Existing operating history and customer base
• A compliance system and team have been established.

However, thorough due diligence is required to ensure the company has no historical compliance issues. Acquisition costs typically range from HK$500 million to HK$2000 million, depending on the company size and business quality.

Margin trading is the provision of financing to clients to purchase securities, with the clients using the securities as collateral and the licensed corporation collecting interest. This is the core function of leveraged trading.

Additional supervision requirements:

• Comply with the SFC's "Guidelines on Securities Margin Financing Activities"
• The total amount of margin loans shall not exceed five times the capital.
• A single client's margin loan shall not exceed 40% of the shareholder's funds.
• Daily monitoring of customer margin ratios
• Establish a forced liquidation mechanism

If margin financing of security tokens is involved, additional requirements of the September 2025 circular must be met, including stricter risk disclosure and financing ratio limits.

Exchange trading right refers to the right to trade directly on the Hong Kong Stock Exchange, rather than through other brokerage firms.

• A separate application needs to be submitted to the Hong Kong Stock Exchange.
• A deposit of HK$3,000 million is required.
• A more advanced system and staffing configuration are required.

If you do not need exchange trading rights, you can trade through other brokers, saving HK$3,000 million in margin.

The main differences between RO (Responsible Person) and LR (Licensed Representative):

• RO: Responsible for overseeing and managing the company's operations; requires 5+ years of experience; at least 2 people required.
• LR: Responsible for executing specific business activities, requires 2+ years of experience, and at least 3 people are needed.

ROs must be full-time, while LRs can be part-time. All ROs and LRs need to pass an SFC-recognized qualification exam (such as the HKSI LE exam).

Yes, but you need to notify the SFC immediately and resubmit the RO approval application. Changing the RO may extend the processing time because the SFC needs to re-examine the background and qualifications of the new RO. It is recommended to ensure the stability and commitment of the RO before applying.

The SFC typically requires businesses to commence operations within six months of license approval. If operations do not commence within six months, the SFC may request an explanation or even revoke the license. If an extension is required, an application must be submitted to the SFC in advance with a valid reason.

Yes. Foreign companies can apply through the following methods:

• Establish a wholly-owned subsidiary in Hong Kong
• To establish a branch office in Hong Kong (requires Hong Kong registration).

Regardless of the method chosen, a physical office in Hong Kong is required, along with a local Retailer/Legacy Officer (RO/LR) and compliance with all Hong Kong regulatory requirements. The background of the foreign parent company will also be reviewed by the SFC.

Shareholders can be individuals or companies. The SFC will review the background of all shareholders, including:

• Financial Status: Does the company have sufficient funds to support its business operations?
• Integrity record: Are there any negative records or lawsuits?
• Business experience: Do you have relevant industry experience?

If the shareholder is a company, the SFC will review the company's ultimate beneficial owner (UBO). Shareholders holding more than 10% of the shares need SFC approval.

You can apply to the SFC to change your license type from Small 1 to Large 1. The following conditions must be met:

• Supplementing quick capital: from HK$30 to HK$300 million
• Upgrade compliance system: Add client asset custody function
• Increase insurance coverage: Purchase customer asset insurance
• Update business plan: Explain the reasons for the upgrade and risk management measures.

Upgrade approval typically takes 3-6 months. It is recommended to upgrade only after the business has reached a certain scale to avoid unnecessary capital tied up.

Client priority is essential. According to the SFC Code of Conduct, licensed corporations must ensure that customers' orders are prioritized.

• Violation scenarios: If a company discovers that a major client wants to buy a certain stock, and its proprietary trading desk buys it at a low price (front-running), this constitutes market misconduct.

• Compliance requirements: The company must have clear order timestamp records to prove that its proprietary trading desk did not profit from clients' non-public information.

There is no nominal limit, but in reality it is subject to the "business plan". When applying for license plate number 1, you need to submit a Business Plan to the SFC.

• If your original plan was "pure brokerage business," and you suddenly want to transition to "high-frequency proprietary trading," you must...Prior written notification to SFC And update the business plan.

• Regulatory agencies will assess whether your risk management personnel are capable of monitoring proprietary risks and whether your system can prevent unauthorized transactions.

It's not illegal, but it must be "disclosed". As a distributor, License No. 1 Corporation must disclose its fee schedule in writing to clients before a transaction if it receives commissions or rebates from fund managers; otherwise, it will be in violation of its Code of Conduct.

There is a strict review process for the "allocation list". As a Type 1 licensee, you must ensure that the placement targets are qualified investors (usually PIs). Furthermore, the SFC strictly prohibits "fictitious placements"—that is, placing shares to related parties or "nominals" of the issuer to create false trading activity.

Yes, but that would become either combination 1 or combination 2. If you do both of these things at the same time, SFC will affect your "Conflict of Interest"Management places extremely high demands on you. For example, how do you prove that the company is not using customer order flow to profit from its own front-running? This usually requires physical office segregation."