Hong Kong’s Securities and Futures Commission (SFC) has proposed new rules to clamp down on unregulated entities using misleading names.

The aim is to reduce public confusion and protect investors from mistaking unlicensed firms for regulated financial institutions. The consultation launched today proposes to expand the list of restricted names under the Securities and Futures Ordinance (SFO).

According to the regulator, the updated list would cover a broader range of terminology commonly used by virtual asset trading platforms (VATPs), including terms like “exchange,” “trading platform,” and references to “virtual assets” or “clearing facilities.”

Extending Rules to the Crypto Sector

The move comes as more unregulated crypto platforms attempt to adopt names that suggest official status. The SFC warns that such practices can give the impression that these entities operate under the commission’s oversight when they do not.

To address this, the proposed restrictions will apply not only under the SFO but also under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), which houses parts of the VATP regulatory framework.

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The SFC’s proposal aims to cover a wider range of terms that may create confusion, including variations and synonyms of "exchange" and names that imply an association with established financial institutions. By tightening the definitions, the regulator seeks to close loopholes that have allowed some entities to appear more credible than they are.

Focus on Investor Protection

The SFC emphasized that the new rules would enhance transparency and investor protection. By making it harder for unlicensed platforms to use regulated-sounding titles, the regulator hopes to steer retail investors away from firms operating outside of legal frameworks.

The public consultation is reportedly open, and feedback will guide the final scope and implementation timeline. Meanwhile, following heightened cases of SMS phishing scams, SFC issued new guidance aimed at safeguarding investor accounts, by mandating companies to sign up for the free SMS Sender Registration Scheme to enable clients verify message authenticity.

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“The SFC fully supports a globally coordinated and multi-pronged approach to addressing the growing phenomenon of unlawful finfluencers and their wide followings on social media,” commented Julia Leung, the SFC’s Chief Executive Officer and Chair of the IOSCO Asia-Pacific Regional Committee.

“Working in concert with our regulatory counterparts will enhance the SFC’s own effectiveness in safeguarding market integrity and protecting the investing public through supervisory oversight, enforcement actions, and investor education.”

Source: Finance Magnates