INTERNATIONAL: SFC and CSRC Sign Agreement on Mainland-Hong Kong Mutual Recognition of Funds

Tuesday May 26 2015

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.

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.

Click here for requirements of Hong Kong funds seeking CSRC’s approval under the scheme.

Click on the link above for further details.