SFC publishes consultation conclusions on further restricting the use of misleading names by unregulated entities to protect investors

The SFC publishes consultation conclusions on legislative proposals to further restrict the inappropriate use of names by unregulated entities that may mislead the public into believing they are regulated entities. Respondents to the consultation broadly supported expanding the existing list of restricted titles under the Securities and Futures Ordinance and introducing similar provisions under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). Respondents also proposed establishing a mechanism that would enable faster updating of the list of restricted titles. The SFC agrees and has made corresponding amendments to the proposals. Having considered market responses, the SFC will proceed to finalise the legislative amendments to the Securities and Futures Ordinance and the AMLO, with the goal of submitting a bill to the Legislative Council for deliberation and approval. It is understood that section 34 of the Securities and Futures Ordinance currently sets out a list of names that may only be used with the SFC's approval (such as "stock exchange" and "commodity exchange"). The proposals will expand the scope of this section to include: (i) titles currently in more common use other than "exchange"; (ii) titles that more aptly describe certain financial products regulated under the Securities and Futures Ordinance; (iii) titles that more specifically refer generally to clearing operations; and (iv) titles that contain well-known or established business names or abbreviations. The new provisions under the AMLO will focus on virtual asset trading platforms and virtual assets that are not related to securities or futures contracts and that can be traded or settled through virtual asset trading platforms. Mr Leung Chung-yin, Executive Director of the SFC's Market Supervision Division, said: "The broad support for the proposals highlights the importance of protecting investors from potentially misunderstanding an entity's regulatory status because of certain names. The proposed amendments will strengthen the relevant restrictions and allow the list of restricted titles to be updated more swiftly. As the terminology used in financial markets and by market participants continues to evolve, this will further enhance investor protection."