Hong Kong’s SFC was among the first securities regulators anywhere to issue dedicated generative-AI guidance — and the result is one of the clearer supervisory positions in Asia: no new statute, but specific written expectations that examiners can hold firms to.

The SFC circular: a risk-based lens with named high-risk uses

The SFC’s circular to licensed corporations of November 2024 applies a risk-based lens to generative AI. Uses classed as high-risk — notably generating investment recommendations or advice to clients — attract stronger expectations around senior management responsibility, model testing, output review and third-party vendor risk [1].

The naming matters. Where other regulators leave “high-risk” to interpretation, the SFC put the core advisory activity — AI output reaching a client as a recommendation — explicitly in the top tier. A licensed firm using a language model anywhere near client-facing advice should assume the strongest expectations apply: senior management owns it, the model is tested, the output is reviewed, and the vendor is diligenced.

The HKMA’s parallel track for banks

The HKMA issued parallel guidance for banks on consumer-protection aspects of generative AI in August 2024, alongside a sandbox for supervised experimentation. Between the two regulators, Hong Kong’s position is unusually legible: the expectations are written down, they are specific, and they arrived early.

What this means in practice

The SFC’s expectations map directly onto the converged core in the overview: a named accountable senior manager, meaningful review of client-facing output, vendor due diligence, and the records to evidence all of it — plus Hong Kong’s particular emphasis on model testing for high-risk uses.

For firms serving clients across borders from Hong Kong, the usual layering applies: the SFC circular sets the local floor, and EU-resident or US-resident clients bring GDPR, EU transparency obligations and SEC substantiation expectations on top — the mechanics are in AI governance for cross-border financial advisers. A baseline built to the strictest regime satisfies the SFC’s circular almost by construction.

This article is for informational purposes only and does not constitute regulated financial advice, legal advice, or a compliance opinion. Consult a qualified compliance professional for advice specific to your firm.

Sources

[1] Securities and Futures Commission of Hong Kong, ‘Circular to licensed corporations — Use of generative AI language models’, 12 November 2024. Available at: https://apps.sfc.hk/edistributionWeb/gateway/EN/circular/openAppendix?refNo=24EC55&appendix=0