Circular to management companies of SFC-authorised unit trusts and mutual funds – Updated guidance on streamlined measures for SFC-authorised funds

On December 22, 2023, the Securities and Futures Commission (SFC) issued a circular to inform that it has updated various documents, including FAQs, checklists, and guidances for SFC-authorized funds after a thorough review and engagement with market participants. The aim was to improve operational efficiency particularly in the authorization process without compromising investor protection. The key changes include the following:
(1) Appointment of investment delegates: The SFC has simplified the processing of applications for approval of „investment delegates (fund managers)“ by categorizing applications as „standard“ or „simple“ depending upon the fact whether or not the fund is an SFC-authorized fund (already). Additionally, the prior SFC approval requirement for appointing an investment delegate managing other SFC-authorized funds has been removed.
(2) UCITS funds: UCITS funds without Hong Kong investors are exempt from reporting pricing errors. There’s also a simplified reporting process for breaches by UCITS funds supervised by their home regulator, requiring fund managers to file a standard form with the SFC.
(3) Post-authorization notifications: Requirements for post-authorization notifications have been simplified. This includes informing investors about fund dealing suspensions on the fund’s website, shorter notices for changes with written consents from affected investors, and eliminating the need for a separate notice for the fund’s annual report, if relevant disclosures are in the offering documents.
(4) Derivative investments: The SFC has removed the prior approval requirement for reducing a fund’s derivative investments. Further guidance on calculating funds‘ net derivative exposure has been provided by the SFC.
(5) Disclosure guidance: The SFC has clarified that the disclosure guidance in the „Guide on Practices and Procedures for Application for Authorization of Unit Trusts and Mutual Funds“ is non-mandatory. It’s intended for reference purposes only to aid in preparing funds‘ offering documents.