SFC concludes consultation on introduction of new regulated activity for depositaries of public funds

The Securities and Futures Commission of Hong Kong, SFC, has published a conclusion paper regarding its consultation on a „Proposed Amendments to Subsidiary Legislation and SFC Codes and Guidelines to Implement the Regulatory Regime for Depositaries of SFC-authorised Collective Investment Schemes“.
To recall, on September 27, 2019, a consultation was launched by the Commission on a proposed new regulatory regime for depositories of SFC-authorized Collective Investment Schemes (CIS). Specifically, the SFC proposed to require depositories (custodians) to register with or be licensed by the SFC, thereby introducing a new „regulated activity“ (RA13) for such market participants. The consultation paper also outlined the intended requirements for RA13, ranging from licensing obligations, to conduct requirements, to capital requirements.
In a first conclusion paper published on February 22, 2022, the SFC summarized the responses it had received on the consultation which were mostly positive as regards the upcoming registration requirement and only sought minor clarifications as to the „proposed licensing scope and conduct requirements“. Therefore, the SFC determined to proceed as planned and subsequently issued a second consultation paper on proposed amendments to subsidiary legislations and guidelines to implement the new licensing framework. This second consultation was part of the conclusion paper.
This conclusion paper now summarizes the feedback that the SFC has received to the proposed modifications to secondary legislation (please see the list above) and publishes the final revisions to above noted rules, regulations, and guidelines as they will be implemented and applicable from October 2, 2024.
In brief, the respondents were supportive of the proposed changes to the noted subsidiary legislation. Questions primarily arose as to the definition or better interpretation of certain terms, e.g. „client assets“ and „associated entities“, to the „scope of the oversight function under the proposed approach to defining RA 13“, and to the requirements of depositaries, e.g. the safeguarding of proceeds from subscription, distribution, or redemption of CIS shares, under Schedule 11 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
To conclude, the SFC states it will proceed as proposed and will make no further changes. However, it will issue a set of frequently question and answers to clarify the addressed issues.