Hong Kong’s SFC is considering changes to its Investor Compensation Regime

April 28, 2018 at 12:18 AM

The Hong Kong Securities and Futures Commission (SFC) has announced that it has launched a two-month consultation on proposed changes to the Investor Compensation Regime (ICR).

The Securities and Futures Commission (SFC), is the independent statutory body charged with regulating the securities and futures markets in Hong Kong.

The ICR was first presented in 2003 in conjunction with the Securities and Futures Ordinance, and it gives the opportunity for retail investors to get the compensation from defaulting, non-compliant companies. These financial companies must be authorized or licensed in Hong Kong, and the investor should be trading in exchange-traded products.

The main points of the proposal are about increasing the compensation limit from $150,000 to $500,000 per investor. It also states that the non-mainland-based investors will still be able to get the compensation if they trade under the Stock Connect schemes.

The reason for this big leap is the rise in client assets. As the Hong Kong’s securities and futures markets has been growing and developing, so the value of the assets has also grown  significantly. The information about the total value of client assets held with the intermediaries in the period from 2014 and 2017 shows that the value has increased more than twice, from $598 billion to $918 billion.

This proposal would give the opportunity for the SFC to provide compensation payments in specific circumstances of the delays or any kinds of concerns. One of the goals of the regulator is to bring the ICR into the international level, as the compensation offered by ICR is substantially smaller than similar offers in the EU, UK, USA, and Canada.