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Hong Kong Launches Regulatory Sandbox

The Hong Kong Securities and Futures Commission (SFC) launched a regulatory sandbox on 29 September. The sandbox provides a confined regulatory environment for qualified firms to operate regulated activities under the Hong Kong Securities and Futures Ordinance (SFO) before FinTech is used on a fuller scale to the wider public. The SFC emphasises the importance of the integrity of the market and investors’ interests, and says it will not compromise regulatory requirements which are key to investor protection. For example, a qualified firm operating in the sandbox must be fit and proper and must comply with the applicable financial resources requirements.

The features of the sandbox are:

  • Eligibility: available to both licensed corporations and start-up firms that intend to carry on a regulated activity under the SFO. The qualified firm must utilise innovative technologies and be able to demonstrate a genuine commitment to carry on regulated activities through the use of FinTech.

  • Licensing conditions: may be imposed by the SFO and may include limiting the types of clients which the firm may serve or the maximum exposure of each client.

  • Closer monitoring and supervision by the SFC: designed to benefit qualified firms and the investing public by enabling such firms to refine their business models and address any risks arising from the conduct of the regulated activities at the initial stage.

  • Investor protection measures: qualified firms are expected to have adequate investor protection measures in place to address actual or potential risks or concerns identified when they operate in the sandbox.

  • Exit: Once a qualified firm has demonstrated that its technology is reliable and fit for purpose, and its internal control procedures have adequately addressed the risks identified, the firm may apply to the SFC for removal or variation of the licensing conditions imposed.

Copyright 2017 K & L Gates

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Jonathan Lawrence, KL Gates Law Firm, Restructuring and Insolvency Attorney
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Jonathan Lawrence has been a finance partner in the London office since 2005.

Alongside his general banking and finance work, he concentrates his practice on restructuring & insolvency matters -- Legal 500 UK 2016 Corporate restructuring and insolvency “K&L Gates LLP … maintains a ‘quality team’ that includes ‘impressive’ team head Jonathan Lawrence”.

Mr. Lawrence also plays a leadership role in the firm’s global Islamic Finance practice -- Legal 500 UK 2016 Islamic Finance “K&L Gates LLP is...

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