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The Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) have signed a Memorandum of Regulatory Cooperation on Mainland-Hong Kong Mutual Recognition of Funds, which will allow eligible Mainland and Hong Kong funds to be distributed in each other’s market through a streamlined vetting process. The scheme will be implemented on 1 July 2015.
The Memorandum also established a framework for exchange of information, regular dialogue as well as regulatory cooperation in relation to the cross-border offering of funds.
"The Mutual Recognition of Funds initiative is a major breakthrough in the opening up of the Mainland’s funds market to offshore funds. It will also open up a new frontier for the Mainland and Hong Kong asset management industries and make available a wider selection of fund products to investors in both markets," the SFC’s Chairman, Mr Carlson Tong said.
"More importantly, this initiative will lay the foundation for the CSRC and SFC to jointly develop a fund regulatory standard, promoting the integration and development of the Asian asset management industry," Mr Tong added.
Further details of the scheme are set out in the joint announcement issued by the SFC and the CSRC and in the SFC Circular issued today (Notes 1 & 2).
Notes:
- Mainland funds applying for SFC authorization must meet the following eligibility requirements:
- the fund is established and managed and operates in accordance with Mainland laws and regulations and its constitutive documents;
- the fund is a publicly offered securities investment fund registered with the CSRC under the Securities Investment Fund Law of the People's Republic of China;
- the fund must be established for more than 1 year;
- the fund must have a minimum fund size of not less than RMB200 million or its equivalent in a different currency;
- the fund must not primarily invest in the Hong Kong market; and
- the value of shares/units in the fund sold to investors in Hong Kong shall not be more than 50% of the value of the fund’s total assets.
At the initial stage, only general equity funds, bond funds, mixed funds, unlisted index funds and physical index-tracking exchange traded funds would be eligible under the scheme.
2. For Hong Kong funds seeking CSRC’s approval under the scheme, please refer to the Provisional Rules for Recognised Hong Kong Funds issued by the CSRC.
