Hong Kong Securities And Futures Commission Proposes Changes To The Open-Ended Fund Companies Regime

The Securities and Futures Commission (SFC) today launched a consultation on enhancements to the open-ended fund companies (OFC) regime (Note 1).

The proposed changes would allow licensed or registered securities brokers to act as custodians for private OFCs (Note 2) and expand the investment scope for private OFCs to include loans as well as shares and debentures of Hong Kong private companies.

"The proposed enhancements seek to encourage more private funds to set up in Hong Kong," said Ms Christina Choi, the SFC’s Executive Director of Investment Products. "This in turn will help further the SFC’s strategy to develop Hong Kong as a full-service international asset management centre and preferred fund domicile."

The SFC also proposes to introduce a statutory mechanism for the re-domiciliation of overseas corporate funds to Hong Kong and require OFCs to keep a register of beneficial shareholders to enhance anti-money laundering and counter-terrorist financing measures (Note 3).

The proposed enhancements would involve changes to the Code on Open-ended Fund Companies, the Securities and Futures Ordinance and the Securities and Futures (Open-ended Fund Companies) Rules. Details are set out in the consultation paper.

The public is invited to submit their comments to the SFC on or before 20 February 2020.

Notes:

1. The OFC regime came into effect on 30 July 2018.
2. The SFC proposes to allow intermediaries licensed or registered for the regulated activity of dealing in securities to act as custodians of private OFCs provided that the intermediary meets certain requirements as set out in the consultation paper.
3. Requirements are proposed to be imposed on OFCs for the keeping of a register of beneficial shareholders similar to the requirements for conventional companies under the Companies Ordinance (Cap. 622).