The Hong Kong Securities and Futures Commission (“SFC”) recently issued a circular clarifying that insurers, corporate insurance brokers and individual insurance intermediaries are not required or permitted to be licensed by the SFC under the provisions of the Securities and Futures Ordinance (“SFO”) (Chapter 571 of the Laws of Hong Kong) to engage in promoting, offering or selling investment linked assurance schemes (“ILAS”) to the Hong Kong public (the “Circular”).

ILAS are, in general, life policies issued by insurers under Class C linked long term insurance business, as defined in Part 2 of the First Schedule to the Insurance Companies Ordinance (“ICO”) (Chapter 41 of the Laws of Hong Kong). A key feature of these policies is to link the return or benefit under the policies with fluctuations in the value of certain securities.

In this regard, the SFC takes the view that interests in ILAS are not securities and that the underlying funds of ILAS are not acquired for or on behalf of policy holders. Accordingly, the activities of promoting, offering and selling ILAS to the public do not constitute the carrying on of a regulated business as listed in Part 1 of Schedule 5 of the SFO (i.e. dealing in securities or advising on securities) which require an SFC licence.

The Circular only deals with the licensing issue arising out of the promotion, offering or sale of ILAS. It does not affect the requirement under section 105 of the SFO that ILAS and the issue of any advertisement, invitation or document related to that ILAS must be authorised by the SFC and the requirement under section 114 of the SFO that a person who carries on a business of dealing in securities or advising on securities must be licensed by the SFC.

For more information please click here to see the Circular.