Hong Kong's Securities And Futures Commission Formally Adopts Initiatives To Enhance Fund Authorization Process After Pilot-Run

Following a successful six-month pilot period ending on 8 May 2016, the Securities and Futures Commission (SFC) today announced that it will proceed to formally adopt its initiatives to enhance the authorization process for new fund applications (Revamped Process) and for new Mandatory Provident Funds (MPF) and Pooled Retirement Fund (PRF) products (Notes 1 & 2).

The Revamped Process will also be extended to applications made by Mainland Funds seeking authorization under the mutual recognition of funds arrangement between the Mainland and Hong Kong (MRF Applications) (Note 3).   

The SFC has been closely monitoring the operation of the Revamped Process during the six-month pilot period and has engaged in open dialogue with industry participants to seek their feedback on the process since its launch in November last year (Note 4).

"The overall efficiency of the authorization process has been greatly enhanced since the launch of the pilot initiatives, which has been broadly supported by the industry," said Ms Julia Leung, the SFC’s Executive Director of Investment Products.

"With an improved quality of fund applications and more timely responses from applicants, we are also pleased to see that a reduction in the overall processing time for new fund applications has been achieved without compromising investor protection," Ms Leung added (Note 5).

Separately, the six-month application lapse policy for MPF and PRF products will also be formally adopted with effect from 9 May 2016 after consulting the Mandatory Provident Fund Schemes Authority (Note 6).

Notes:

1. The SFC today issued a Circular entitled “Circular to management companies of SFC-authorized unit trusts and mutual funds – Formal adoption of revamped fund authorization process” containing further details on the formal adoption of the Revamped Process by the SFC in processing new fund applications. For details regarding the initial launch of the Revamped Process, please refer to the SFC’s Circular issued on 9 October 2015 entitled “Circular to management companies of SFC-authorized unit trusts and mutual funds - Launch of pilot revamped fund authorization process”.
2. The SFC today issued a Circular on “Formal adoption of the six-month application lapse policy for SFC-authorized mandatory provident fund (MPF) products and pooled retirement funds (PRFs)” containing details on the formal adoption of the six-month application lapse policy by the SFC in processing new MPF and PRF products. For details regarding the initial launch of the pilot initiatives to enhance the authorization process for new MPF and PRF products, please refer to the SFC’s Circular issued on 9 October 2015 entitled “Circular to applicants of SFC-authorized Mandatory Provident Fund (MPF) products and pooled retirement funds (PRFs) – Application lapse policy”.
3. MRF Applications received by the SFC on or after 9 May 2016 will be processed under the Revamped Process and will initially be classified as Non-standard Applications until further notice. For details, please refer to the SFC’s Circular issued today entitled “Circular to management companies of SFC-authorized unit trusts and mutual funds – Formal adoption of revamped fund authorization process”.
4. The SFC has engaged in a dialogue with applicants and a technical working group comprising representatives from relevant asset management industry participants. The working group was established in June 2015 as a platform for the SFC to consult the industry on the Revamped Process.
5. During the six-month pilot period, the average processing time under the Revamped Process for Standard Applications and Non-standard Applications is 1.2 months and 2.4 months respectively, in line with the target timeframe. As set out in the Circular entitled “Circular to management companies of SFC-authorized unit trusts and mutual funds - Launch of pilot revamped fund authorization process”, "Standard Applications" will be fast-tracked with an aim that SFC authorization (if granted) will be given on average between one to two months from the take-up date of the applications. "Non-standard Applications" will be processed under an enhanced process with an aim that SFC authorization (if granted) will be given on average within two to three months from the take-up date of the applications.
6. For details regarding the arrangement for MPF products relating to the default investment strategy, please refer to the SFC’s Circular issued on 12 January 2016 entitled “Circular to applicants of SFC-authorized mandatory provident fund products related to Default Investment Strategy (“DIS”)”.