On January 7 2020, the Securties and Futures Commission (the "SFC") issued two circulars to clarify the licensing requirements for private equity ("PE") firms and family offices in Hong Kong. New and existing PE firms and family offices in Hong Kong should take note of these circulars to ensure compliance with the SFC's licensing requirements. We issued an article on 17 January 2020 covering these topics.

Since then, the SFC issued an FAQ on 8 September 2020 seeking to provide additional guidance on the licensing requirements on family offices.

The SFC reiterated its view that there is no specific licensing regime in Hong Kong for family offices. Whether a family office needs to be licensed under the Securities and Futures Ordinance (the "SFO") does not hinge on whether the entity calls itself a 'family office'. Instead, the SFC considers that the following key factors must be present to give rise to licensing obligation:

1. the services provided by the family office constitute one or more regulated activities under the SFO;
2. the family office is carrying on a business in the provision of such services; and
3. that business is being carried on in Hong Kong.

These three key factors apply equally to the analysis of licensing obligations for single family offices and multi-family offices, but in the latter case, the licensing consequences of sharing office premises, administrative infrastructure and human resources would require particular consideration.

Family offices are reminded that the definition of type 9 regulated activity contains an intra-group carve-out, such that the provision of services solely to its related entities is exempt from a licensing obligation. The SFC also said that it is not their intent to regulate genuine family office arrangements which are not being run as a business. This means that, amongst other factors to be considered, a family office is unlikely to be considered as carrying on a business if it neither receives any income (other than reimbursement of operating expenses from the family) nor pursues profits as its business objective. As such, certain family offices can be operated without any SFC licence.

However, an important message from the SFC is that there is no definition of "carrying on a business in Hong Kong" under the SFO. It is largely a question of fact and will need to be determined on a case-by-case basis. For instance, we will need to consider whether the person is performing an occupation or a duty with requires attention, whether the activity involves continuity, etc.