SFC removes spate of asset management licences

Data

In August, the Hong Kong regulator removed nine licences and year-to-date, a total of 23 Type 9 licence holders have de-registered. But what are the reasons behind it?

Nine firms operating in Hong Kong had their asset management licences (Type 9) removed last month, according to data from the Securities and Futures Commission (SFC).

These firms include CBRE Clarion Securities, which manages globally-listed real assets, and real estate manager Savills Investment Management, which just appointed a new Asia-Pacific CEO this year, who will be joining the firm later this year in Singapore.

August licence removals

CBRE Clarion Securities

East Purple Capital Company

iBest Consultants

Newtonian Capital Management

Savills Investment Management

Sinovation Capital Asset Management Company

Sofaer Global Research (HK)

Splendor Capital Management (Hong Kong)

Wealth Oasis Asset Management Company

Source: SFC. Type 9 (asset management) licences

 

The numbers are way above the monthly average of firms de-registering from the SFC. Since 2018, only around 2-3 firms had their asset management licences removed.

Licence removals in 2019

Number of firms with Type 9 licences

Total number of firms with SFC licences removed

January

2

12

February

3

4

March

2

8

April

1

3

May

2

7

June

2

6

July

2

4

August

9

18

TOTAL

23

62

Source: SFC

 

Licence removals in 2018

Number of firms with Type 9 licences

Total number of firms with SFC licences removed

January

3

5

February

1

2

March

3

3

April

2

3

May

June

3

5

July

2

4

August

1

4

September

3

7

October

2

November

4

4

December

1

2

TOTAL

23

41

Source: SFC

 

In total, 18 firms, including those not holding Type 9 licences, have been de-registered last month and cannot do any regulated-type activity in Hong Kong.

FSA sought more information from the SFC, but the regulator was not able to reply in time for publication.

It could be anything

There are a number of reasons for the surge of de-registered Type 9 companies.

It could indicate that both the asset and wealth management industries are still undergoing a period of consolidation in the region,  especially at a time when operating and compliance costs have gone up.

A number of wealth management firms have consolidated in the past two years, which include the closing of Edmond de Rothschild Asset Management’s branch in Hong Kong, which includes private banking and asset management businesses, Indosuez Wealth Management’s acquisition of the private banking division of Credit Industriel et Commercial (CIC)National Australia Bank’s sale of its private wealth business in Hong Kong and Singapore to OCBC and LGT Group acquiring ABN Amro’s private banking business in Asia.

Even asset management giant Vanguard closed its Singapore office last year and consolidated operational and client activities in Hong Kong.

It could also indicate the difficulty in asset gathering, especially in Hong Kong where the fund industry is saturated, with nearly 2,000 SFC-registered mutual fund products being sold to investors.

A number of ETF providers operating in Hong Kong, for example, have had difficulty raising assets. Others have chosen to exit the ETF industry, including Commerzbank, Enhanced Investment Products and GF International Investment Management.

Last year was also a difficult period for asset managers. For the full year 2018, mutual funds sold in the SAR had net outflows of $512.4m, according to data from the Hong Kong Investment Funds Association (HKIFA).

However, the sentiment has improved this year, as mutual funds during the first half had net inflows of $9.1bn, mostly coming from fixed income funds, which compares to $2.24bn during the same period last year.

Meanwhile, a removal of a licence could just indicate an update or clean-up in the firms’ legal entities. For example, in January, the SFC licences of BNP Paribas Asset Management Kong and BNP Paribas Dealing Services in Hong Kong were removed as both legal entities were combined into one single entity, which now holds the licences of the previous entities, according to SFC records.

Despite the number of firms de-registering from the SFC, new firms continue to register in Hong Kong. Last month, 12 firms received asset management licences from the regulator, according to SFC records.

Licence additions 2019

Number of firms with Type 9 licences

Total number of firms with new SFC licences

January

24

38

February

14

21

March

16

20

April

15

23

May

12

19

June

23

31

July

14

25

August

12

17

Source: SFC

 

 

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