Some of Hong Kong's financial portals may be operating unlawfully, according to the Securities and Futures Commission (SFC). Web sites that provide recommendations on specific stocks, or receive remuneration, including advertising income, could require a licence, the SFC warned. '[The] Web-based financial information industry raises some important regulatory and investor-protection issues,' said SFC executive director Andrew Procter. 'The SFC wishes to encourage market innovation without comprising investor protection.' The watchdog released a circular yesterday to remind Web operators to observe relevant licensing requirements. The law requires a person who advises others, or issues analyses or reports, concerning the trading of Hong Kong securities or futures to be registered with the SFC as investment adviser, the circular said. It set out some circumstances in which Web sites could be seen as investment advisers. For example, a site may need a licence if it levies any direct charge or takes any indirect advantage - such as through advertising - to give investment advice. Also, a site that provides analytical tools generating recommendations on specific stocks or investments funds could constitute an investment advisory activity. However, the licensing requirements do not extend to sites that only provide generic factual market information, or merely present hyperlinks to other financial Web sites, the SFC said. Those vendors who provide electronic platforms to brokers and charge fees on a transaction basis are also not covered by the requirements. According to industry players, there are about 20 financial portals operating in Hong Kong, and most of them are not registered. Some sites claim to be news organisations, enjoying exemption from licensing requirements for publications. The SFC reminded such portals to make sure they qualified for exemption. According to the Securities Ordinance, periodicals available to the public other than through subscriptions can be exempt. One operator said it would be difficult for the SFC to define which sites needed to register. TheGoldenClick.com, for example, said it was a publication and did not need to register, though the site flashed 'buy' and 'sell' signals for stocks on screen. The portal's chief editor, Amir Steven Johan, said the information was similar to that in newspapers and the site did not charge subscription fees.