SFC Type 1 Licence: Requirements and How to Apply for Dealing in Securities
An SFC Type 1 licence authorises a corporation to carry on Type 1 regulated activity (dealing in securities) in Hong Kong. Brokers, placing agents, fund distributors and firms that arrange securities trades for clients generally need one. A Type 1 firm must appoint at least two Responsible Officers (licensed individuals approved to supervise the activity) and, in most cases, maintain paid-up share capital of HK$5 million and liquid capital of HK$3 million at all times.
This guide explains what counts as dealing in securities, when Type 1 is combined with other licence types, what the Securities and Futures Commission (SFC) expects of the company and its people, the minimum capital rules under the Securities and Futures (Financial Resources) Rules, how the application runs, and what happens after approval. Paragraph references are to the SFC Licensing Handbook (July 2025) unless another document is named.
What counts as dealing in securities?
Part 2 of Schedule 5 to the Securities and Futures Ordinance (Cap. 571) (SFO) defines “dealing in securities”. In plain terms, it means making or offering to make an agreement with someone else to buy, sell, subscribe for or underwrite securities, or inducing someone to enter into such an agreement. Inducing is enough. A firm does not have to execute the trade itself to be dealing.
“Securities” is defined widely in Schedule 1 to the SFO. It includes shares, debentures, bonds and interests in collective investment schemes, so interests in funds count. Typical Type 1 businesses include:
- Broking. Taking and executing client orders in listed shares or other securities, in Hong Kong or overseas.
- Placing and underwriting. Finding investors for new or existing issues of shares or bonds, or underwriting those issues.
- Fund distribution. Marketing or distributing funds the firm does not manage (Licensing Handbook, paragraph 1.4.19).
- Virtual asset funds and security tokens. Distributing funds that invest in virtual assets, or marketing security tokens that are “securities” under the SFO (Licensing Handbook, paragraphs 1.4.4 and 1.4.6).
The statutory definition also contains exclusions. The ones applicants most often rely on are:
- Acting through a licensed dealer (paragraph (iv)). A person who deals through another person who is licensed or registered for Type 1 is not, for that reason alone, dealing. The exclusion falls away if the person receives a commission, rebate or other remuneration for passing on orders or introducing clients. Referral fee arrangements are the usual trap.
- Dealing as principal with professional investors (paragraph (v)). Trading for the firm’s own account with professional investors, as defined in Schedule 1 to the SFO, is excluded from the definition in defined circumstances.
- Type 9 managers (paragraph (xiv)). A firm licensed for Type 9 (asset management) that deals solely for the purposes of its asset management business does not also need Type 1 for that dealing.
In practice: list every revenue line, introducer arrangement and referral agreement, and map each one to the Schedule 5 definition before deciding which licence types to apply for.
When Type 1 is combined with other licence types
Type 1 and Type 4. A Type 1 firm does not need a separate Type 4 (advising on securities) licence for advice that is wholly incidental to its dealing business (Licensing Handbook, paragraph 1.3.4). This typically covers brokers who advise their own dealing clients. It may not apply where advice is a distinct service, for example one that is charged for separately.
Type 9 managers distributing funds. An asset manager can market funds under its own management on its Type 9 licence alone. That incidental exemption does not extend to funds the manager does not manage. Marketing a third-party fund needs Type 1. Our guide to Type 9 asset management licensing covers the Type 9 side.
Margin financing. A Type 1 firm can provide securities margin financing to its own securities clients without a separate Type 8 licence, but it must meet a higher paid-up share capital figure (Licensing Handbook, paragraph 1.3.7). See the capital section below.
Adding Type 1 to an existing licence can change the capital position sharply. Where a firm holds several licence types, the highest minimum among them applies (Licensing Handbook, paragraph 3.2.17). A Type 9 manager licensed on the condition that it shall not hold client assets has no minimum paid-up share capital and must keep liquid capital of at least HK$100,000. Once it adds Type 1 in the ordinary case, it will usually need paid-up share capital of HK$5 million and liquid capital of HK$3 million. Our guide to SFC licence types and exemptions sets out all thirteen types.
What the SFC expects of the company
A full licensed corporation for Type 1 is granted under section 116 of the SFO. The firm must be a company incorporated in Hong Kong, or an overseas company registered with the Companies Registry of Hong Kong (Licensing Handbook, paragraph 3.2.1; SFC Types of intermediary page, accessed 6 November 2026).
Beyond incorporation, the SFC looks for substance:
- Business plan and competence. A proper business structure, internal controls and qualified personnel for the risks of the proposed business, assessed against the Guidelines on Competence, the Code of Conduct and the Management, Supervision and Internal Control Guidelines.
- Fit and proper. The corporation, its substantial shareholders, officers and associated persons must be fit and proper under section 129 of the SFO.
- Managers-in-Charge. The firm must appoint Managers-in-Charge (MICs) of Core Functions and submit an organisational chart. The board must approve the management structure. Changes to MICs must be notified to the SFC within seven business days.
- Premises and records. Premises used for keeping records or documents need SFC approval under section 130 of the SFO before the licence is granted.
- Insurance. A Type 1 firm that will be an exchange participant should be ready to take out insurance under the approved master policy (Licensing Handbook, paragraph 3.2.21; Securities and Futures (Insurance) Rules).
SFC minimum capital requirements for Type 1
The Securities and Futures (Financial Resources) Rules (Cap. 571N) (FRR) set two separate tests that a licensed corporation must meet at all times. Paid-up share capital is the amount shareholders have actually paid for their shares. Liquid capital is the amount by which the firm’s liquid assets exceed its ranking liabilities (FRR, section 2). Put simply, it is what the firm’s readily realisable assets are worth after deducting the liabilities the FRR count.
Required liquid capital is the higher of a fixed floor for the firm’s regulated activities and a variable amount calculated from adjusted liabilities and certain client margin figures (FRR, sections 2 and 6). As a brokerage grows, the variable amount can overtake the floor.
The SFC’s summary table for Type 1 is set out on its Types of intermediary page (last update 30 December 2025; accessed 6 November 2026) and in the Licensing Handbook at paragraphs 3.2.17 to 3.2.18. All figures are in Hong Kong dollars.
| Type 1 business | Minimum paid-up share capital | Minimum liquid capital |
|---|---|---|
| Approved introducing agent or trader | Not applicable | HK$500,000 |
| Provides securities margin financing, or acts as custodian of a private open-ended fund company (OFC) | HK$10,000,000 | HK$3,000,000 |
| Any other case | HK$5,000,000 | HK$3,000,000 |
Source for the table above (accessed 6 November 2026):
- SFC, Types of intermediary and licensed individual
- SFC Licensing Handbook (July 2025), paragraphs 3.2.17 to 3.2.18
- Underlying statutory tables: FRR (Cap. 571N), Schedule 1, Table 1 (paid-up share capital) and Table 2 (required liquid capital), version date 24 August 2025 on Hong Kong e-Legislation. Official Cap. 571N entry: https://www.elegislation.gov.hk/hk/cap571N
How the figures change, and what they do not
Holding client assets does not, by itself, create a separate Type 1 capital tier. Unlike Types 4, 5, 6, 9 and 10, Type 1 has no “specified licensing condition” that lowers the minimums simply because the firm undertakes not to hold client assets (FRR, section 2 definition of “specified licensing condition”). A fund distributor that never touches client money is still in “any other case” (HK$5 million paid-up and HK$3 million liquid capital) unless it qualifies as an approved introducing agent or a trader.
The two low-capital categories are narrow. A trader is a Type 1 or Type 2 licensed corporation that does not hold client assets or handle clients’ orders and, in carrying on its licensed activity, conducts no business other than dealing for its own account (FRR, section 2). An approved introducing agent needs SFC approval under FRR section 58(4). Paid-up share capital is “not applicable” for these firms because FRR section 5 exempts approved introducing agents (other than Type 3) and traders from the paid-up capital requirement. Their liquid capital floor is HK$500,000 under Schedule 1, Table 2.
Securities margin financing raises paid-up capital to HK$10 million. FRR Schedule 1, Table 1 sets paid-up share capital at HK$10,000,000 where the Type 1 corporation provides securities margin financing, and HK$5,000,000 in any other case. Liquid capital remains HK$3,000,000 unless the firm is an approved introducing agent or trader (Schedule 1, Table 2). For a Type 1 firm, “securities margin financing” includes lending to clients to acquire or continue to hold listed securities, including securities listed outside Hong Kong (FRR, section 2).
Private OFC custody is in the SFC summary at HK$10 million paid-up. The SFC Types page and Licensing Handbook table also apply the HK$10,000,000 / HK$3,000,000 row where the corporation acts as custodian of a private open-ended fund company. That OFC custodian limb appears in the SFC’s consolidated summary (and is tied to the Code on Open-Ended Fund Companies eligibility and related requirements in the Licensing Handbook at paragraphs 1.4.28 onwards). Applicants proposing private OFC custody should read the OFC Code alongside the FRR and confirm the current figure on the SFC Types page before filing.
Multiple licence types take the highest figure. If the firm is licensed for more than one regulated activity, paid-up share capital and required liquid capital are each the highest amount among the applicable activities (FRR, sections 5 and 6; SFC FRR FAQ Q9 to Q10, accessed 6 November 2026).
At application stage, the SFC also asks for a projection of operating expenses for the first six months after licensing. If excess liquid capital will not cover those expenses, the applicant must show where further funding will come from (Licensing Handbook, paragraph 3.2.20; SFC Types page). Once licensed, the firm must notify the SFC within one business day if liquid capital falls below 120% of required liquid capital (FRR, section 55(1)(a)), and it must file financial resources returns on the timetable in the FRR.
We have not independently re-derived every haircut and variable required liquid capital formula in this article. Firms calculating liquid capital for a live return should work from the current Cap. 571N text and, where needed, professional FRR advice. The fixed floors in the table above are the figures the SFC publishes for licensing planning and are the ones applicants most often need first.
People requirements: Responsible Officers and licensed representatives
A licensed corporation must appoint not less than two Responsible Officers to directly supervise each regulated activity it applies for. At least one Responsible Officer must be available at all times to supervise the business. At least one of the proposed Responsible Officers must be an executive director as defined under the SFO. All executive directors who actively participate in or directly supervise the regulated business must be approved as Responsible Officers (Licensing Handbook, paragraphs 3.2.3 to 3.2.7; SFC Types page, accessed 6 November 2026).
The SFC generally expects the Managers-in-Charge of Overall Management Oversight and of the Key Business Line function to seek approval as Responsible Officers for the activities they oversee.
For exchange participants of The Stock Exchange of Hong Kong Limited, the SFC generally expects at least two Responsible Officers to be locally available at all times to supervise the brokerage business (Licensing Handbook / SFC Types page, further guidance on exchange participants).
Individuals who carry on regulated activities for the firm must be licensed representatives accredited to it. Responsible Officers are licensed representatives who have also been approved under section 126 of the SFO. Competence is tested under the Guidelines on Competence: academic or professional qualifications, relevant industry experience, recognised industry qualifications or extra Continuous Professional Training (CPT), management experience (for Responsible Officers), and the local regulatory framework paper, subject to the exemptions in paragraph 4.4 of those Guidelines.
Our guide to Responsible Officers explains the role and appointment process. Where the founding team does not already have enough qualified Responsible Officers, our recruitment guide covers how firms fill that gap.
How to apply for a Type 1 licence
Corporate and individual applications are submitted online through WINGS-LIC (SFC Application procedures page, last update 30 December 2025; accessed 6 November 2026).
In outline, a new Type 1 licensed corporation application typically involves:
- Confirm the licence scope. Match the real business (broking, placing, third-party fund distribution, virtual asset fund distribution, and any intended margin financing or OFC custody) to Type 1 and any other types needed.
- Build the corporate and people package. Hong Kong company (or registered overseas company), board and shareholding, at least two proposed Responsible Officers who appear to meet competence requirements (with one of them fully competent), MICs, business plan, policies and controls, and the six-month expense projection.
- File on WINGS-LIC. Form 1, Forms 5 and 6 for at least two Responsible Officers, Supplements 1 to 3 as applicable, Questionnaires 1 and 2 where required, and supporting documents. Pay the application fee when WINGS requests it. (This article does not list fee amounts; see the SFC Application procedures page for the current schedule.)
- Respond to SFC questions. Incomplete applications, thin business plans, Responsible Officers who fall short on competence, missing visa applications where a Hong Kong employment visa is required, and capital that has not yet been injected are common reasons the SFC returns or delays an application.
The SFC’s published expected processing time for a licensed corporation application by a new industry participant is approximately 15 weeks for a complete and straightforward case. Licensed representative applications are about 8 weeks and Responsible Officer applications about 10 weeks. Timing varies with complexity, follow-up questions, visas and capital injection (SFC Application procedures page, accessed 6 November 2026).
Our end-to-end guide to applying for an SFC licence walks through the five stages we usually run with founders: licence choice and Responsible Officer fit, company setup, visas, recruitment and the application itself.
After approval: ongoing obligations
Once licensed, a Type 1 firm must, among other things:
- Maintain financial resources. Keep paid-up share capital and liquid capital at or above the FRR minima at all times, and submit financial resources returns on the FRR timetable.
- Notify changes. Notify the SFC of changes to MICs, premises, certain particulars and other events within the prescribed periods. Some changes need prior approval (for example adding a regulated activity or becoming a substantial shareholder).
- Keep people competent. Licensed individuals must complete Continuous Professional Training. Our CPT guide sets out the hours and record-keeping rules.
- Meet conduct and AML standards. Comply with the Code of Conduct, Internal Control Guidelines and anti-money laundering and counter-financing of terrorism requirements. Our AML/CFT guide.
- File the annual return and keep the public register current. Check the SFC public register after approval and whenever particulars change.
Common reasons Type 1 applications stall
- A thin business plan. Too little detail on how orders are received, executed and settled, where client assets sit, and who supervises each step.
- Responsible Officers who fall short. Industry experience that does not match Type 1 dealing, “name only” appointments, or no executive director among the Responsible Officers.
- Gaps in compliance and AML/CFT arrangements. Policies that exist on paper but cannot be evidenced in workflow, systems or staffing.
- Capital timing. Paid-up capital or liquid capital not in place when the SFC is ready to approve, or a funding plan that does not cover the six-month expense projection.
- Inconsistency across workstreams. Licensing, company filings and visa applications that describe different roles or ownership stories.
How Heinbro helps
A Type 1 application touches licensing advice, company setup, company secretarial work, Responsible Officer recruitment, visas and the WINGS filing itself. We handle those workstreams in-house, which is the point for foreign founders and for firms adding Type 1 to an existing licence: one team keeps the business plan, the people package and the corporate record aligned. We have over 15 years’ experience handling these applications.
To discuss a Type 1 licence or an addition of Type 1 to an existing licence, contact Heinbro at heinbro@heinbro.com or +852 2811 1708. Our licensing services page.
Frequently asked questions
What is an SFC Type 1 licence?
It is the licence a corporation needs to carry on a securities dealing business in Hong Kong. It covers buying, selling, subscribing for and underwriting securities, and inducing clients to do so. Brokers, placing agents and distributors of third-party funds are the most common holders.
Do I need a Type 1 licence to distribute my own funds?
No, not if you are licensed for Type 9 and the funds are under your management. The SFC treats dealing solely for the purposes of that asset management business as covered by Type 9. If you market funds that someone else manages, you need Type 1 as well.
How many Responsible Officers does a Type 1 firm need?
At least two for Type 1, with at least one available at all times. At least one must be an executive director, and every executive director who actively participates in or directly supervises the business must be a Responsible Officer. Exchange participants are generally expected to have two Responsible Officers locally available at all times.
How much capital does a Type 1 firm need?
In most cases, HK$5 million paid-up share capital and HK$3 million liquid capital. Margin financing or private OFC custody raises paid-up capital to HK$10 million. An approved introducing agent or trader needs no paid-up minimum and HK$500,000 liquid capital. Figures: SFC Types page and Licensing Handbook, accessed 6 November 2026.
How long does a Type 1 licence application take?
About 15 weeks for the corporation, which is the SFC’s published expected processing time for a licensed corporation application by a new industry participant. Follow-up questions, Responsible Officer or shareholder changes, visas and capital injection can all extend it.
What is the difference between Type 1 and Type 4?
Type 1 covers dealing in securities. Type 4 covers advising on securities. A Type 1 firm can give advice that is wholly incidental to its dealing business without a Type 4 licence. A firm that charges separately for advice, or advises without dealing, needs Type 4.
