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Hong Kong Financial Regulator Warns Risks of STO Investment and Intermediaries’ Compliance

Abstract : In Hong Kong, security tokens are likely to be securities and so subject to the local securities laws. Anyone who markets and distributes securities tokens which are essentially securities is required to be licensed or registered for regulated relevant activities.

ChainDD
ChainDD

Mar 29

March 29 (ChainDD) In its Statement on Security Token Offerings released on March 28, the Securities and Futures Commission of Hong Kong (SFC) reminded about the legal and regulatory requirements applicable to parties engaging in security token offerings (STOs), and again reminded investor to be wary of the risks related to virtual assets, including tokens associated with STOs (security tokens).

Accordint to SFC, in Hong Kong, security tokens are likely to be securities and so subject to the local securities laws. Anyone who markets and distributes securities tokens which are essentially securities is required to be licensed or registered for regulated relevant activities. It is a criminal offence for any person to engage in regulated activities without a licence unless an exemption applies.

SFC noted that intermediaries which market and distribute such kind of security tokens are required to ensure compliance with all existing legal and regulatory requirements. They should offer such tokens solely to professional investors, conduct proper due diligence, and provide information in relation to STOs to clients in a clear and easily comprehensible manner.

Moreover, Intermediaries are reminded to discuss with the SFC before engaging in any activities relating to STOs. They have to implement adequate systems and controls to ensure compliance with the requirements before they engage in the distribution of STOs, otherwise, their properness to remain licensed or registered may be affected, and may result in SFC’s disciplinary action.

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