Regulation of Money Brokers
The Banking Ordinance provides that no person shall act as a money broker unless that person is approved by the Monetary Authority under the Ordinance.
"Money broker" is defined to mean a person who, for reward, carries on the business in or from Hong Kong, or provides to persons in Hong Kong the service, of negotiating, arranging or facilitating, whether by electronic means or otherwise, agreements between other persons -
- in respect of the making of deposits of any currency; the purchase or sale of any currency; or the purchase or sale of an instrument specified in a notice under section 2(14)(a) of the Ordinance by the Monetary Authority
- one of which is an authorized institution
- as agent for, or as the provider of a dealing service to, not less than one of those persons.
It follows from the above definition that the money broker need not necessarily be resident, or be carrying on a business in Hong Kong. The requirement to be approved will apply if the money broker is resident abroad but is providing a service to persons in Hong Kong (one of whom is an authorized institution).
However, the legislation is not intended to cover persons such as investment advisers, securities dealers, solicitors and professional accountants who may technically act as money brokers (e.g. in arranging to place deposits on behalf of their clients), but in a way which is wholly ancillary or incidental to their main business. The Monetary Authority may also specify a person, or a class of persons that the legislation does, or does not apply in notices under section 2(14)(c) and section 2(14)(b) of the Ordinance.
The approval criteria for money brokers, which are set out in the Eleventh Schedule to the Ordinance, require that:
- the identity of controllers is known
- the directors, controllers and the chief executive of the institution must be fit and proper persons
- the institution should be financially sound with a minimum paid-up capital of HK$5 million (or an equivalent amount in any other approved currency)
- the institution should maintain adequate accounting systems and systems of control
- its business should be conducted with integrity, prudence and competence.
The Banking Ordinance empowers the Monetary Authority to attach conditions to the certificate of approval of money brokers, to vary, add, or delete such conditions, to conduct examinations on approved brokers and to obtain information from them.
The Guide to Authorization issued by the HKMA describes the authorisation regime for money brokers and to explain how the HKMA will interpret the minimum criteria for approval of money brokers as set out in the Eleventh Schedule to the Ordinance.