Portfolio managers and trustees

Portfolio managers and trustees need an SFMA licence before carrying out their activity on a commercial basis. Once licensed, they are monitored through a supervisory organisation.

The licensing regime applies to firms and individuals that manage assets for clients under a mandate or act as trustees in a professional capacity. The purpose is to ensure that client assets are handled by properly organised, qualified and supervised providers.

Licensing requirements

Applicants must show that they have a suitable legal and organisational structure, qualified management, appropriate risk controls, compliance arrangements, adequate financial resources and clear rules for handling client mandates. They must also demonstrate that the persons responsible for management and supervision meet fit and proper expectations.

Before submitting an application, the applicant usually prepares its internal regulations, mandate templates, risk policies, outsourcing arrangements and evidence of affiliation with a supervisory organisation. The licensing file should explain the business model and how the firm will comply with the applicable law in daily operations.

The review also looks at how client portfolios are monitored, how investment restrictions are observed, how conflicts of interest are handled and how documentation is retained. Trustees should describe how trust assets are separated, administered and reported, and how decision-making responsibilities are allocated.

Ongoing supervision

After licensing, portfolio managers and trustees are not supervised day to day directly in the same manner as large prudential institutions. They are supervised by an authorised supervisory organisation, which monitors compliance and reports relevant matters to SFMA.

Affiliation with a supervisory organisation must be maintained after licensing. The firm should provide the organisation with the information it needs, submit to reviews and remedy deficiencies within the required deadlines. Repeated or serious failures can be escalated to SFMA and may affect the licence.

Changes

Material changes must be notified or approved as required by law. These can include changes in ownership, management, organisation, supervisory organisation affiliation or the scope of activity. Firms should keep their licensing basis current and communicate changes before they create supervisory concerns. A planned merger, sale, change of control, transfer of mandates or termination of activity should be assessed from a regulatory perspective before clients are affected.

Authorisation route

The licensing route for portfolio managers and trustees is built around a complete application file and affiliation with a supervisory organisation. Applicants must show that the business model, client base, mandate types, internal organisation and financial resources are compatible with the duties under the Financial Institutions Act and Financial Institutions Ordinance.

The public registers distinguish authorised portfolio managers from authorised trustees. They also identify domestic group companies that are licensed and supervised directly by the authority under the FinIA. These lists help clients, counterparties and supervisory organisations verify status.

Supervisory organisation monitoring

Once a portfolio manager or trustee is licensed, ongoing monitoring is carried out through a supervisory organisation. The firm remains responsible for complying with law, maintaining affiliation, submitting information and remedying findings. The supervisory organisation reviews the firm and escalates serious matters where required.

Notifications and changes

Changes can concern responsible persons, ownership, organisation, the supervisory organisation, business activity, outsourcing or the decision to stop regulated work. A change should be assessed before it is carried out because some changes require approval while others require notification. The licensing basis should always match the way the firm actually operates.