The new SFC circular in a brief
As per the Hong Kong regulator’s document, the Chinese State Administration of Foreign Exchange (SAFE) took action against the Forex brokers in China Mainland for appealing to local investors to participate in margin trading with foreign currencies outside the China Mainland on behalf of a trading platform operated by an offshore shareholder of the company.
The authority advised that the Mainland authorities have not approved any institution to engage in forex margin business either directly or on an agency basis on the Mainland.
The regulator stressed that it is illegal for any unauthorized firm to conduct forex margin trading or for any client, whether an organization or individual, to entrust an unapproved institution to do so.
SFC warns investors not to engage in illegal trading
The SFC has become aware, that some Hong Kong regulated Forex brokers or their related parties, offer Forex trading to investors using borrowed funds or similar services through simplified Chinese websites and provide free phone numbers to investors from mainland China for request.
The authority warns licensed organizations not to engage in unauthorized or illegal trading in Forex margin on the Mainland or to help other individuals or Mainland investors in such activities.
SFC reminds licensed organizations and their controlling organizations to take all necessary measures to verify the legitimacy of the services to ensure that their activities comply with SFC laws and regulations, as well as the applicable requirements of other jurisdictions.
The Hong Kong regulator warns Forex brokers in China to carefully review the legality of their activities in accordance with the laws and regulations of Mainland China. Any non-conforming actions should be immediately terminated and notified to the SFC.
Penalties for Hong Kong regulated Forex brokers
As the Hong Kong authority reports, any violation of the laws or regulations of other jurisdictions may lead to call into question the suitability of a corporation to obtain or maintain a license in Hong Kong. Failure to take appropriate action may lead to regulatory action.
The SFC may impose conditions on risk management on licensed enterprises and their controlling entities, and in cases where the situation justifies this, the SFC will take measures that may include issuing notices of restrictions and suspending or revoking the license of the licensed enterprise.
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