Family offices that intend to manage assets in Hong Kong have to be licensed, although there is no specific licensing regime for them. The rubric set out by the Securities and Futures Ordinance is based on activities. If the services provided by a family office are regulatable, or if they can benefit from any of the available carve-outs, it need not ask the regulators for a licence.

The Securities and Futures Commission, however, has evidently had trouble with family offices holding themselves out as offerors of regulatable services in the recent past. Indeed, it has published a reminder to firms of their obligations when it comes to obtaining and earning licences. As discussed below, a  company or family office set up as a business to manage assets which include securities or futures contracts may be required to hold a licence for Type 9 activity (asset management).

An exemption operates here for groups of companies, albeit a narrow one. A firm (which may be a family office) need not be licensed for Type 4 (advising on securities), Type 5 (advising on futures contracts), Type 6 (advising on corporate finance) or Type 9 (asset management) activity if it provides the relevant advice or services solely to its wholly-owned subsidiaries, any company which holds all its issued shares, or any other wholly-owned subsidiaries of that holding company.

The licensing of asset management services in Hong Kong does not hinge on whether clients are families. The relationships among the beneficiaries of a family trust or between the members of a family therefore have no bearing on the need for a licence. For example, a family office can manage assets for people who are not strictly “family members” (e.g. ex-spouses and in-laws). If a family office intends to provide other services, perhaps acquiring financial assets on the orders of the family, it should ascertain whether they constitute other types of regulatable activity, such as Type 1 (dealing in securities), and decide whether it needs a licence for them.

Single family offices

The way in which a single family office operates can lead to different consequences under the licensing regime. For example, in cases where a family appoints a trustee to hold the assets of its familial trust and the trustee operates a family office as an internal unit to manage the trust assets, the family office does not need a licence because it does not "provide asset management services" to a so-called third party. Similarly, if the family office is established as a separate legal entity which is wholly-owned by a trustee or a company that holds the assets of the family, it does not need a licence as it qualifies for the intra-group carve-out as full discretionary investment manager of the securities or futures contracts portfolio.

Multi-family offices

A multi-family office (MFO) serves more than one high-net-worth family. The type of SFC licence it requires depends on the services that it wants to provide in Hong Kong. If an MFO provides services to clients who are not related entities, it will not be able to make use of the intra-group carve-out. If an MFO is granted full discretionary investment authority, its asset management activity might resemble that of a licensed asset management company and it might therefore require a licence for Type 9 activity. If it has not been delegated full discretionary investment authority and only provides advice about investments in securities and executes securities transactions, it may have to be licensed for other types of activities such as types 1 and 4. If the assets include futures contracts, it may also require licences for types 2 and 5.