PrepLicense: HK SFC · Study notes · Paper 18
SFC LE Paper 18: Regulation of Providing Depositary Services
Paper 18 covers the regulation of depositary services: Type 13 licensing, depositary duties and internal controls.
1. Type 13 regulated activity
Providing depositary services for relevant collective investment schemes is its own regulated activity — know what it covers and what falls outside.
2. Depositary eligibility requirements
Capital standards, the nature of the institution, experience and staffing, and the requirement to remain independent of the fund manager.
3. Duties of the depositary or trustee
Safekeeping assets, overseeing the manager's compliance with investment restrictions, verifying NAV calculation, and reporting breaches when found.
4. Independence and conflicts of interest
Where depositary and manager sit in the same group, concrete functional separation and governance arrangements are required, with disclosure to investors.
5. Custody and registration of assets
Assets must be registered in the correct name and segregated from the depositary's own assets; where sub-custodians are used, due diligence is required and responsibility is retained.
6. Valuation oversight
The depositary independently checks the basis and outcome of NAV calculation and requires correction of pricing errors.
7. Internal controls and records
Auditable checking, reconciliation and exception-handling procedures are required, with senior management accountable.
8. Reporting and AML
Material breaches must be notified to the SFC promptly, alongside customer due diligence and suspicious transaction reporting under the AMLO.
Sources and how to use these notes
These notes are organised around the syllabus areas published by HKSI Institute and are conceptual summaries — use them to build a framework and to revise quickly before the exam. For specific provisions, numeric thresholds and question weightings, rely on the latest official HKSI study material and the SFC source texts.
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