Hong Kong may be small in size, but it is the world’s fourth most densely populated sovereign state or territory. It became a British colony after the First Opium War, but in 1984 the Sino–British Joint Declaration paved the way for sovereignty to be handed back to China. It does, however, have its own political and economic system. Hong Kong has gained a reputation for being one of the world’s most significant financial centres, and its currency, the Hong Kong Dollar, is the 13th most-traded currency. No wonder, then, that an increasing number of people living in Hong Kong are looking to Forex trading as a form of investment.
Anyone starting out on their trading journey should make themselves aware of current regulations. Those of you considering Forex trading in Hong Kong need to look for HKSFC Forex brokers.
Regulated Forex brokers in Hong Kong are monitored by the HKSFC
The Hong Kong Securities and Futures Commission is the independent regulatory body responsible for regulating the futures and securities markets in Hong Kong. It has been given a number of areas of responsibility since its creation in 1987, including the following:
- Developing and monitoring compliance with market regulations, including what happens when a regulated company breaks the rules, and in respect of misconduct
- Issuing licences to authorised financial services providers and overseeing their activities
- Giving the go-ahead for new financial products, and supplying information for consumers prior to them being offered to retail investors
- Improving market infrastructure, and acting as a watchdog of market operators
- Monitoring the regulations relating to takeovers and mergers, as well as those relating to the regulation of listing matters for the Stock Exchange of Hong Kong Ltd
- Cooperating with other regulatory bodies
- Assisting consumers and offering help in relation to market operations, consumer rights and responsibilities, and the risk involved with many forms of investment, not just Forex trading.
Unlike many other countries, there are actually four financial regulators in Hong Kong, but they seem to work very well together to maintain a high standard of conduct and reduce the likelihood of financial misconduct and crime.
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The HKSFC takes licensing of Forex brokers in Hong Kong very seriously
Any Forex broker wishing to offer its services to residents of Hong Kong, or those who wish to operate in the country, have to obtain a licence or be registered with the SFC. There are some exceptions, but Forex trading isn’t one of them. Offering leveraged Forex trading without a licence or authorisation is a very serious offence. There are a number of criteria a broker has to meet in order to be issued a licence, including the following:
- Having a proper business structure, effective internal systems, and qualified staff
- Fulfilling certain capital requirements
- Being competent in the provision of a financial service
- Passing an assessment relating to financial status and solvency, industry experience and relevant qualifications
- Satisfying the SFC that they are a fit and able applicant.
The HKSFC has an interesting history
It’s nice to gain an understanding of why and how certain things happen. The HKSFC came along following a turbulent time in the world of finance. It was created following Black Monday, the stock market crash that happened in October, 1987. All over the world stock markets were crashing, and stock values plummeted in a relatively short period of time. It may have started in Hong Kong, but it rapidly spread across Europe and hit the USA when other markets had already lost significant margins. Because of time differences, the event is called Black Tuesday in New Zealand and Australia. Before the end of October, world stock markets had fallen, and in some places, such as Hong Kong, it fell by almost 50%.
A further financial crisis in Asia in 1997 led to the call for more improvements in regulatory frameworks, including those in place in Hong Kong. It all started when the Thai baht collapsed when the Thai government was forced to float the baht following a lack of foreign currency to support its peg to the US dollar. The country also had a problem with its burden of foreign debt, making the country almost bankrupt. It was speculative pressure that was affecting Hong Kong at that time, due to a high rate of inflation. The Hong Kong dollar was defended by more than $1 billion provided by monetary authorities. Hong Kong was also lucky, though, because it had more than $80 billion in foreign reserves. This allowed the Authority to maintain the HK dollar’s peg to the US dollar.
If you choose an HKSFC Forex broker there is a set procedure for handling complaints
As with many other regulatory bodies, there is a set procedure for customer complaints. The Investor Compensation Company Ltd is a wholly owned subsidiary of the HKSFC. It was created to deal with claims made against the Investor Compensation Fund. Part of that includes receiving, assessing and determining whether the claims are valid. It also makes payments and tries to recover any losses. An official order was issued to cover the functions of the Compensation Company, including the following:
- Management and administration of the Compensation Fund
- Inviting claims by way of publishing notices
- When a claim is received, determining whether it has been submitted within the required time limit
- Accepting claims
- Deciding whether there are grounds for compensation
- Requesting that claimants produce certain records
- Issuing Notices of Determination
- Paying out compensation from the fund, and deciding on the order of payments.
It is possible to make a claim against the Compensation Fund when you suffer pecuniary losses as a result of the actions of a HKSFC-regulated Forex broker, or another regulated financial institution.
The HKSFC also receives complaints in relation to market misconduct, or from clients who are dissatisfied with the level of service provided by a regulated institution. The HKSFC is authorised to investigate such complaints and issue penalties if necessary. The penalty can take the form of disciplinary action or a prosecution. The HKSFC does not, however, have the power to act as a legal adviser, and is unable to get involved in private civil disputes or help traders to get their money back.
