The SFC is unlikely to be satisfied that an individual is fit and proper to be licensed or to remain licensed if he holds a directorship in, or is engaged in the business of, a company other than his principal (the “Company”), where such directorship or engagement will likely prejudice the interests of investors due to conflicts of interest, confidentiality concerns or other factors.
Engagement in the business of a company not only refers to directorship or employment, but may also include, for example, providing consultancy services or having an ownership or beneficial interest in the company.
Conflicts of interest may arise as a result of competing business interests, objectives or obligations of the individual, his principal and the Company. Confidentiality concerns may arise as a result of the individual’s possible access to non-public or sensitive information in light of his roles with his principal and/or the Company.
As set out in section 129(1) of the SFO, in considering whether a person is fit and proper, the SFC shall have regard to a number of factors, including the person’s ability to carry on the regulated activity competently, honestly and fairly. Therefore, in considering whether an individual’s involvement in the Company will affect his fitness and properness to be licensed or to remain licensed, the SFC will take into account factors such as:
- the business natures (e.g. scope of services and clientele) of his principal and of the Company (the “Firms”);
- his roles and duties, as well as reporting lines, in the Firms;
- his time allocation in performing his roles and duties in the Firms, and whether he can properly manage his time in carrying on (and, where applicable, supervising) the regulated activity for his principal;
- any measures imposed by the Firms to effectively manage and monitor on an on-going basis any potential and actual conflicts of interest arising from his dual capacities in the Firms;
- any measures imposed by the Firms to effectively address confidentiality concerns arising from his possible access to non-public or sensitive information in light of his roles and duties in the Firms;
- whether and on what basis the Firms take the view that there will not be conflicts of interest arising from his dual capacities; and/or
- whether the Firms consent to his dual capacities.
By way of example, the SFC will likely have concern if a licensed individual is also an executive director of a listed company which is not of the same group of companies as his principal. The SFC will likely have less concern if the Company is in the same group of companies as the individual’s principal, the individual plays a non-executive role with limited involvement in the business or daily operation of the Company, or the individual owns the Company which is purely used for holding his own property investments.
As the circumstances of each case vary, the above factors are not necessarily exhaustive. Each case will be considered having regard to its particular circumstances.