HONG KONG: Circular on Mutual Recognition of Funds (MRF) between Switzerland and Hong Kong

Friday December 2 2016

The Securities and Futures Commission (SFC) and the Swiss Financial Market Supervisory Authority (FINMA) have signed a Memorandum of Understanding on Switzerland-Hong Kong Mutual Recognition of Funds and Asset Managers (MoU), which will allow eligible Swiss and Hong Kong public funds to be distributed in each other’s market through a streamlined vetting process.

The MoU also established a framework for exchange of information, regular dialogue as well as regulatory cooperation in relation to the cross-border offering of public funds.

The Memorandum provides a recognition of asset managers as well as a framework for mutual recognition of publicly offered funds in both markets.

In general, funds that are seeking SFC authorisation or have received SFC authorisation for public offering in Hong Kong have to comply with the SFC Handbook for Unit Trusts and Mutual Funds, Investment-Linked Assurance Schemes and Unlisted Structured Investment Products (SFC Handbook), and the circulars, guidelines and other requirements as may be issued by the SFC. On the basis of these principles, if an eligible Swiss fund complies with the relevant Swiss laws and regulations, it is generally deemed to have complied in substance with the relevant SFC requirements and will enjoy a streamlined process of authorisation for Public Offering in Hong Kong.

To ensure proper investor protection and consistency with existing Hong Kong SFC-authorised funds, the Circular sets out the additional requirements with which an eligible Swiss fund has to comply when applying for SFC authorisation for Public Offering in Hong Kong under the MRF.

Eligibility requirements and types of eligible funds

Recognised Swiss Funds applying for SFC authorisation must be established, domiciled and managed in accordance with Swiss laws and regulations and its constitutive documents.

Recognised Swiss Funds applying for SFC authorisation must fall within one or more than one of the following eligible fund types:

• general equity funds, bond funds and mixed funds;
• feeder funds;
• funds of funds or unit portfolio management funds;
• money market / cash management funds (MMFs);
• index funds;
• structured funds;
• funds that invest in financial derivative instruments; and
• index tracking exchange traded funds.

The sale and distribution of a Recognised Swiss Fund in Hong Kong must be conducted by intermediaries properly licensed by or registered with the SFC.  The sale and distribution of a Recognised Swiss Fund in Hong Kong shall comply with the applicable Hong Kong Laws and Regulations relating to distribution of funds.

Click on the above link to view the Circular.