Securities and Futures Ordinance - Consultation on the Securities and Futures (Fees) Rules

The Securities and Futures Commission today publishes for public consultation a draft of the Securities and Futures (Fees) Rules (the draft Rules). It is proposed that the draft Rules should be made under section 395 of the Securities and Futures Ordinance (5 of 2002) when it commences.

It should be noted that the Commission has previously consulted the public on the proposed licensing fees for the new licensing regime under the Ordinance. The Consultation Document on Proposed Licensing Fees under the Securities and Futures (Fees) Rules was released on 8 March 2002 and the related Consultation Conclusions were released today. As the draft Rules only seek to implement the outcome of that consultation on licensing fees, comments are not being solicited on the level of the licensing fees or the principles relating to the licensing fees provisions.

The Commission is therefore inviting comments on the draft Rules, but not on (i) the amount of the fees set out under "Fees Under Part V of the Ordinance" (except for items 43(e)-(j) and 44) in Schedule 1 to the draft Rules and (ii) the principles in respect of the transitional provisions on licensing fees which are found in Schedules 3 and 4 to the draft Rules.

In particular, the Commission seeks comments on the following proposals:

1. Fees in respect of investment products - With the adoption of a single notion of "collective investment scheme" in Part IV of the Ordinance, it is intended to streamline and rationalize the fee structures in order to ensure that there is a level playing field for all collective investment schemes in respect of the fees required to be paid to the SFC, regardless of whether they are structured in the form of a trust, corporation or policy contract.

Under the existing Securities and Futures Commission (Fees) Rules (the existing Rules), the underlying funds of unit trusts and mutual fund corporations are treated as separate investments and thus subject to additional fees, whereas sponsors of investment-linked assurance schemes and MPF schemes do not need to pay any fees for their underlying funds. Although these investments are structured differently, they are functionally similar in nature. Accordingly, the SFC is proposing to streamline and rationalize the fee structures for all collective investment schemes. The new fee structures will require underlying funds of all collective investment schemes to be subject to certain fees. However, the SFC does not intend to double-charge for the common underlying funds which are already maintained by, or within, another authorized scheme.

2. Fees in respect of the disclosure of interests - Part XV of the Ordinance sets out requirements in respect of disclosure of interests. The fee payable for exemption from the provisions of Part XV of the Ordinance is the same fee payable under section 2A of the existing Securities (Disclosure of Interests) Ordinance. One new fee has been added. This is the fee for the approval of persons as approved lending agents under the provisions of the Securities and Futures (Disclosure of Interests - Stock Borrowing and Lending) Rules.

3. Fees in respect of requirements applicable to intermediaries - The fees in respect of requirements applicable to intermediaries remain basically unchanged under the draft Rules, although the fee scale under the existing Rules which ranges from $4,500 to $8,000 is to be standardised. Associated entities of intermediaries will also be required to pay these fees upon making an application for modification, waivers, approvals and recognition for the purposes of the different sets of rules setting out requirements in respect of capital, client assets, records and audit for intermediaries.

4. Fees in respect of providing Automated Trading Services (ATS) under Part III of the Ordinance - In February 2002, the consultation conclusions and the final Guidelines for the Regulation of ATS under Part III of the Ordinance were published after taking into account the public's comments. The proposed fees for the provision of ATS under Part III of the Ordinance cover the cost of processing an application for authorization to provide ATS as well as the ongoing costs of maintaining the authorization. Upon the commencement of the Ordinance, existing approved overseas exchanges that wish to continue to provide ATS in Hong Kong may need to be authorized as ATS providers under Part III of the Ordinance. Applicants for authorization will be required to pay the application fee and, once authorized, the ongoing annual fee.

The public is invited to submit comments in writing before close of business on 24 August 2002. They may be sent -

The SFC has sent copies of the Consultation Document to licensed intermediaries via the FinNet communication network. Copies of the consultation document are also available at the SFC's office and on the SFC's website at www.hksfc.org.hk.