PrepLicense: HK SFC · Study notes · Paper 4
SFC LE Paper 4: Regulation of Credit Rating Services
Paper 4 covers the regulation of credit rating services: the international background, licensing and registration, the Code of Conduct and internal control requirements.
1. International context for regulating CRAs
After the global financial crisis, major jurisdictions brought credit rating agencies into their regulatory perimeters. Hong Kong created Type 10 regulated activity in that context — understanding the rationale helps make sense of the rules.
2. Framework of laws and regulations
Type 10 sits within the Securities and Futures Ordinance framework, with a Code of Conduct annex written specifically for credit rating services.
3. Regulators
The SFC is the competent authority for credit rating services. Know how its licensing, supervisory and enforcement powers apply specifically to this business.
4. Licensing and registration requirements
Both corporations and individuals carrying on credit rating activities must be licensed. Know the fitness and properness criteria, responsible officer requirements and competence standards.
5. Code of Conduct
Integrity of the rating process, independence and conflicts management are central: methodologies must be published, analyst pay must not be tied to rating outcomes, and relationships with rated entities must be managed.
6. Management, supervision and internal control guidelines
An independent review function, analyst rotation and record-keeping regimes are required, with senior management accountable for oversight.
7. Personal data
Rating work involves substantial non-public information; the Personal Data (Privacy) Ordinance governs its collection, use, retention and security.
8. Anti-money laundering and counter-terrorist financing
The AMLO applies to licensed corporations: customer due diligence, ongoing monitoring and suspicious transaction reporting are required.
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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