Circular to Management Companies of SFC-authorised Exchange Traded Funds (“ETFs”) – List of Potential Events Triggering Ongoing Disclosure

The Securities and Futures Commission of Hong Kong (SFC) has issued a new circular addressed at managers of exchange traded funds (ETFs). In this circular, the SFC outlines the key changes in an ETF that must be notified to investors in order to enable them to make informed investment decisions and to stay up-to-date on the key characteristics of a fund. Such changes include, but are not limited to the following:
– Changes in the ETF’s replication strategy, collateral policy, or financial condition.
– Legal actions or disciplinary proceedings against the ETF or its trustees, custodians, or management company.
– Replacement or significant changes in the underlying index or calculation methodology.
– Litigation involving the ETF or related entities.
– Specific risks related to synthetic replication strategies, such as default in derivative instruments or financial issues with counterparties.
– Cessation of market making activity or suspension of unit creation and redemption.
– Changes in tax or regulatory requirements affecting the ETF’s net asset value.
– Material breaches of the ETF’s constitutional documents.
Each fact, so the SFC, should be considered individually and should be decided on a case-by-case basis. In case of doubt, firms should contact the relevant case officer of the SFC and / or the Hong Kong Stock Exchange (HKEX).