Investment Dealers Overview

Overview

Offerings of Investments are provided for under the Investment Dealers (Licensing) Ordinance 2001 (IDLO) and the Mutual Funds Ordinance 1998 (MFO) which give the Financial Services Commission (the Commission) responsibility for the licensing, supervision and regulation of Investment Dealers and Mutual Fund and Mutual Fund Administrators respectively.

Investment Dealers and Mutual Funds are also regulated by the Commission in accordance with The Financial Services Commission Ordinance 2007; Proceeds of Crime Anti-Money Laundering and Prevention of Terrorist Financing Regulations 2010; the Anti-Money Laundering and Prevention of Terrorist Financing Code 2011; and the Company’s Ordinance as amended.

Investment Dealers

An Investment Dealer as defined in the Investment Dealers (Licensing) Ordinance 2001 is a person (meaning an individual or entity) who:

• trades on behalf of customers;
• act as a fund manager;
• solicits subscriptions for new issues of Investments; and
• offers advice about investments by way of a business.

Investments under the IDLO include:

• Commodities trading;
• corporate bonds;
• equities;
• government and local authority bonds;
• units in collective investment schemes;
• warrants, covered warrants, options, futures, forward contracts, contracts for differences, swaps, and spread bets and any similar securities or derivatives; or
• synthetic products which replicate or substantially replicate any of the foregoing.

Categories of Regulated Investment Dealers

The IDLO in Section 8 provides for the licensing of a company or partners in a partnership to be licenced as:

• Investment advisers (“adviser’s licence”);
• Investment dealers acting in an execution only capacity (“execution only licence”);
• Investment dealers (“full licence”). Holders of the full licence may; offer advice, trade on behalf of customers, act as fund manager (see below) and solicit subscriptions for new issues of investments; and
• Fund managers who trade in investments on behalf of mutual funds (“fund managers licence”).

No person may act as an investment dealer without a licence. It is an offense which carries a fine of $25,000 or a term of 2 years imprisonment or both.