On 07 Aug 2024, the HKMA revised completion instructions for the Return of Securities Related Activities (Form MA(BS)14), clarifying reporting requirements for authorized institutions under the SFO. The updates standardize definitions, exclude proprietary trading from dealing reports, and establish strict rules to prevent double-counting of accounts and income across regulated activities. The revised instructions mandate biannual submissions, specify transaction reporting methodologies, and detail requirements for asset management, equity-linked instruments, and underwriting activities.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction
On 07 Aug 2024, the Hong Kong Monetary Authority (HKMA) issued revised completion instructions for the Return of Securities Related Activities (Form MA(BS)14), clarifying reporting requirements for authorized institutions under the Securities and Futures Ordinance (SFO). The revision focuses on enhancing accuracy in reporting regulated activities, definitions, and transactional data.
General Reporting Requirements
The revised instructions mandate that all authorized institutions (AIs) registered under the SFO submit the return biannually within 21 days after June and December, with deadlines adjusted for public holidays. Amounts must be reported in HK$ to the nearest thousand, using the closing middle market T/T rates for foreign currency conversions. The instructions explicitly exclude proprietary or house trading from dealing in securities and futures contracts reporting, requiring such activities to be reported separately under Part II Item 3.
Key Definitions and Clarifications
The revised instructions standardize critical terms under the SFO, including defining 'discretionary accounts' as those where institutions make investment decisions on behalf of clients, and 'cash clients' as non-margin clients. Crucially, they clarify that 'dealing in securities' encompasses back-to-back principal-to-principal transactions but excludes proprietary trading. The instructions also specify that asset management services provided not wholly incidental to Type 1/2 activities must be reported solely under Type 9 (Item 7), not under Type 1 or 2, to prevent double-counting of accounts and transactions.
Specific Reporting Rules
For income reporting (Item 119), the instructions require net income calculation by deducting identifiable direct costs from total income, with explicit safeguards against double-counting. Income from Type 4/5/6/9 activities wholly incidental to Type 1/2 must be reported only under the relevant Type 1/2 items, while income from Type 1/2 activities solely for Type 9 must be reported under Type 9. The instructions further mandate reporting equity-linked instrument minimum investment sizes (Item 1(1)(a)-(c)) and underwriting transaction volumes (Item 3(1)(a)-(b)), with each mandate counted as a single transaction upon agreement execution.
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