The real test begins after obtaining the Hong Kong SFC license: Annual Maintenance Complete Pitfall Avoidance Guide

Many people think that obtaining SFC’s licenses No. 1, 4, and 9 means everything is settled. In fact, that’s just the starting point. The so-called “indefinite license” may seem permanently valid, but hidden behind it is ongoing compliance pressure. A small oversight, like delaying tax payments by a month, can escalate into regulatory risks.

The Three Most Common Pitfalls

Pitfall 1: Misinterpreting “Indefinite Term” as “One and Done”

Indefinite ≠ Permanent Iron Rice Bowl. SFC’s supervision of licensed institutions is dynamic; each year, they assess: Are you still suitable to hold the license?

The standards are only three—none can be missing:

• Responsible personnel and company reputation must remain good
• Net capital on the books must always meet the standard
• All regulatory requirements must be completed on time

Any slip in one of these areas risks license suspension or even revocation immediately.

Pitfall 2: The Annual Fee Payment Timing Trap

The annual fee must be paid within one month after the anniversary date. The consequences of late payment are severe:

• Less than 1 month late: 10% fine
• 1-2 months late: 30% fine
• 2-3 months late: 50% fine
• 3-4 months late: temporary suspension
• Over 4 months late: direct revocation

For many institutions, incurring a 30-50% surcharge for just a few weeks overdue is already painful. Even more frustrating, some companies, due to small issues like delaying tax payments by a month, disrupt the entire payment process, ultimately missing the deadline and falling into a worse passive situation. This detail is often overlooked.

Pitfall 3: Overdue by Three Months on the Annual Declaration Form and No Rescue

Licensed companies must submit the annual declaration form via the WINGS system within one month after the anniversary date. This is not optional; it’s a necessary condition for license renewal. Over three months late, the license is suspended; over four months late, it is directly revoked.

Don’t Just Focus on the SFC; Company-Level Compliance Also Matters

Before dealing with SFC’s requirements, Hong Kong companies must also keep up with the Companies Registry and the IRD:

Companies Registry:

• Annual return must be filed within 42 days after the anniversary of incorporation
• Changes in directors, company secretary, or address must be reported within 15 days
• Delays incur extra fees; repeated delays suggest poor management

IRD:

• Profit tax return must be filed on time
• If there are employees, employer’s return must also be submitted
• Financial statements must be audited by a registered accountant

Poor handling of these basics can seriously damage your credibility in the eyes of the SFC.

SFC Checklist: These Tasks Must Not Be Missed

Four Annual Must-Do Tasks:

1. Pay Annual Fee on Time: Within one month after the anniversary date, no delays.

2. Submit the Annual Declaration: Via WINGS system, also within one month. Late submission leads to suspension → revocation.

3. Complete Continuing Education: Each licensed representative must complete 10 hours of training annually, with at least 5 hours related to business. Responsible personnel must also undergo an additional 2 hours of regulatory training. Within 12 months of first licensing, complete 2 hours of “Professional Ethics” training covering integrity, client interests, etc. Continue with 2 hours of ethics or compliance training each calendar year. Keep training records for at least three years.

4. Submit Financial Resources Declaration: Monthly or semi-annual submissions based on business type. This is direct evidence of meeting minimum capital requirements. Companies engaged in categories 1, 4, 9 should pay special attention to their respective capital thresholds.

5. Annual Audit of Accounts: Submit audited annual accounts within four months after the fiscal year-end. Note that SFC’s audit standards are stricter than tax audits, focusing on financial robustness and client fund safety.

Five Daily Maintenance Tasks:

• Display valid license prominently at the place of business
• Have at least two responsible persons (one must be an executive director) directly supervising operations, with at least one always on duty
• Notify SFC of major changes in company name, address, directors, or shareholding structure within seven business days (via WINGS)
• For virtual asset businesses, update anti-money laundering manual annually, including high-risk jurisdiction lists, customer due diligence procedures, suspicious transaction standards, etc.
• For high-risk virtual asset clients (large transactions, high-risk regions, complex structures), conduct annual re-verification, re-assessing identity and source of funds

Three Special Reminders for Virtual Asset Businesses

First: Anti-Money Laundering System Must Be Alive, Not Dead

It’s not a one-time setup; it must be continuously updated according to regulatory environment changes. High-risk jurisdictions list changes, customer risk levels evolve, and your AML manual must keep pace.

Second: Don’t Only Screen High-Risk Clients at Account Opening

Due diligence at account opening is just the first step. High-risk clients must be re-verified annually. Reconfirm identity, update source of funds, assess if risk levels have changed, and document all.

Third: IT Systems Should Not Become Compliance Black Holes

Virtual asset businesses rely heavily on technology systems. Systems must ensure: all transactions are traceable, cybersecurity measures are in place, and suspicious transactions can be monitored. It’s recommended to conduct quarterly self-inspections and keep records of these checks.

How to Turn These Requirements into Action?

Step 1: Build Your Own Compliance Calendar

Don’t wait for the SFC to remind you. List all annual compliance tasks—what documents to submit, responsible persons, contents, deadlines. Turn reactive responses into proactive planning.

Step 2: Use Tools to Assist Execution

Adopt compliance management software with automatic reminders. Integrate WINGS platform with internal systems to reduce manual errors.

Step 3: Standardize All Processes

Create templates and checklists for each periodic task to ensure consistent, standardized execution, avoiding gaps due to personnel changes.

Step 4: Regularly Review

Every quarter or half-year, review the implementation of your compliance calendar, identify issues promptly, and fix loopholes.

Final Word

Holding a license is like having a health certificate. Annual check-ups (fees, declarations, audits) must be done on time; daily habits (training, reporting, supervision) must be maintained. If the entire compliance process falls apart due to small issues like delaying tax payments by a month, the cost of remedial actions will multiply. Instead of passively risking penalties, it’s better to plan ahead.