United States
Hong KongThe structure of the SFO: every Part, and what it governs
The Securities and Futures Ordinance is organised into Parts, each a self-contained regime: Part II the SFC, Part V licensing, Part VI client assets and capital, Part VII conduct, Parts VIII to XI enforcement and appeals, Part XII compensation, Parts XIII to XIVA misconduct and inside information, Part XV disclosure.
The Ordinance consolidated ten separate statutes into one. That is why it reads the way it does. Each Part is effectively a former ordinance wearing a new number, self-contained, with its own vocabulary and its own enforcement route, and the seams are still visible if you look. Once you see the statute as a collection rather than a narrative, navigating it becomes a matter of knowing which drawer to open.
The map
| Part | Subject | What it does |
|---|---|---|
| I | Preliminary | Definitions. Securities, futures contract, collective investment scheme, and the other terms the rest of the statute relies on |
| II | The SFC | Constitution, regulatory objectives, functions, powers and duties of the Commission |
| III | Exchanges, clearing houses and controllers | Recognition of exchange companies, clearing houses, exchange controllers, investor compensation companies, and automated trading services |
| IIIA | OTC derivative transactions | The reporting, clearing and related requirements for over-the-counter derivatives |
| IV | Offers of investments | Authorisation of advertisements, invitations and documents offering investments to the public |
| IVA | Open-ended fund companies | The OFC structure and its regulation |
| V | Licensing and registration | Who must be licensed or registered, how, and the fit and proper requirement |
| VI | Capital, client assets, records and audit | The framework under which the SFC's financial resources, client money, client securities and records rules are made |
| VII | Business conduct | Statutory conduct obligations applying to intermediaries |
| VIII | Supervision and investigations | Powers to require records, require answers, and apply for search warrants |
| IX | Discipline | Revocation, suspension, reprimand, fine, and prohibition orders against regulated persons |
| X | Intervention and proceedings | Restricting a firm's business, freezing assets, and applications to the court |
| XI | Securities and Futures Appeals Tribunal | Review of specified SFC decisions |
| XII | Investor compensation | The Investor Compensation Fund and claims arising from a default |
| XIII | Market Misconduct Tribunal | The civil route for market misconduct |
| XIV | Offences relating to dealings in securities and futures | The criminal counterpart |
| XIVA | Disclosure of inside information | The obligation on listed corporations to disclose inside information |
| XV | Disclosure of interests | Substantial shareholder, director and chief executive notifications |
| XVI - XVII | Miscellaneous and consequential | Administrative and transitional provisions |
Section numbering in a statute this size changes with amendment, and secondary sources disagree with each other more often than you would hope. Part-level citation is stable and it is the level the licensing exam works at. Where a section number genuinely matters for professional work, check the current text on e-Legislation.
Reading the Parts in the order a firm meets them
The numbering roughly follows a firm's lifecycle, and it is worth internalising in that order rather than numerically. Licensing comes first because nothing else applies until a firm is inside the perimeter. Then the prudential and client-asset obligations, then conduct, then the escalating enforcement ladder.
- Get in. Part V. Licence or registration, responsible officers, fit and proper.
- Stay solvent and keep client property safe. Part VI, plus the rules made under it.
- Behave. Part VII, plus the SFC codes that sit alongside it.
- Be watched. Part VIII. Inspections, information gathering, investigations.
- Be punished. Part IX. Sanctions against regulated persons.
- Be stopped. Part X. Intervention where assets or clients are at risk.
- Appeal. Part XI. Review by the tribunal of specified decisions.
The remaining Parts sit outside that lifecycle because they are market-wide rather than firm-specific. Compensation, misconduct, inside information and disclosure of interests apply to the market as a whole, and Part IV applies to whoever is making an offer regardless of whether they are an intermediary at all.
The Parts that generate the most confusion
Part III and Part IIIA. The first is about recognised market infrastructure. The second is the over-the-counter derivatives regime bolted on later. They share a number and almost nothing else.
Part IV and Part IVA. Public offers of investments, and open-ended fund companies. Again, adjacent numbering, different subjects. If a stem mentions an offering document, you are in Part IV; if it mentions an OFC structure, Part IVA.
Parts XIII, XIV and XIVA. Civil misconduct, criminal offences, issuer disclosure. Three regimes, three different targets. Most of that content is examined under Topic 9 of the syllabus rather than here.
What Part I is actually for
Definitions are boring and they are load-bearing. Whether something is a security, whether an arrangement is a collective investment scheme, and whether an instrument is a futures contract determine which regime applies at all, and those determinations are made in Part I. You do not need to recite the definitions. You do need to know that when a question turns on whether something is within the perimeter, the answer comes from the defined terms rather than from commercial intuition.
How to use this map
An opinion. Print the table, put it somewhere you will see it, and do not open the Ordinance again until you have done fifty practice questions. Recognition of Part names is a skill built by repetition against varied scenarios, and reading the statute does not build it. Candidates who spend their Topic 3 study time on the primary source consistently do worse than candidates who spend it on items.
The concession: this map is a teaching device, not a legal analysis. Real regulatory questions cut across Parts constantly, and a practitioner dealing with, say, a client asset shortfall will be reading Part VI, the rules made under it, Part X, and the Code of Conduct at the same time. The tidiness is ours. The statute is messier.
From here, the Parts worth their own page are Part V on licensing, Part VI on client assets and records, and the enforcement chain in Parts VIII to XI.
Common questions
How many Parts does the Securities and Futures Ordinance have?
The Ordinance is organised into numbered Parts running from Part I, the preliminary and definitions, through to the miscellaneous and consequential provisions at the end, with several lettered insertions such as Part IIIA and Part XIVA added by later amendment. The current list is on Hong Kong e-Legislation.
Which Part of the SFO deals with licensing?
Part V. It sets out who must be licensed or registered to carry on a regulated activity, the categories of licence and registration, approval of responsible officers, and the fit and proper requirement that applies both on application and continuously thereafter.
What is the difference between Part III and Part IIIA?
Part III covers recognised market infrastructure: exchange companies, clearing houses, exchange controllers, investor compensation companies and automated trading services. Part IIIA is the over-the-counter derivatives regime, added later, dealing with reporting, clearing and related requirements for OTC transactions.
Where do the SFC's client money and client securities rules come from?
They are subsidiary legislation made under the Ordinance, with Part VI providing the framework. That is why the rules are examined under Topic 4 of the Paper 1 syllabus while the enabling Part is examined under Topic 3. Same subject matter, two different levels of the legal hierarchy.
Why do study guides avoid citing SFO section numbers?
Because section numbering shifts with amendment and secondary sources frequently disagree. Part-level citation is stable and matches the level at which the licensing examination is written. For professional purposes, always confirm a section reference against the current text on Hong Kong e-Legislation.