FAQs – Publicly offered investment products: Pooled Retirement Funds

The Securities and Futures Commission of Hong Kong (SFC) published revised frequently asked questions (FAQs) relating to Pooled Retirement Funds (PRF). The FAQs address various issues, ranging from the application process for a PRF product, to the documents to be provided in this context and corresponding time limits, to the authorization of marketing material and permitted sales and marketing practices of PRFs.
In comparing this latest revised version with the previous version, we have identified the following changes:
(1) the addition of new FAQ 7A and
(2) the modification of existing FAQ 11A which read as follows – as quoted:
(1) FAQ 7A: Under what circumstance(s) may Product Providers shorten the written notice period to scheme participants for 10.1 Scheme Change(s)? (page 15)
Answer: Normally, one month’s prior written notice is expected to be provided to scheme participants for 10.1 Scheme Change(s), whereas a shorter notice period may be permitted where the proposed scheme changes are of demonstrable benefit to scheme participants as provided under 10.11 of the PRF Code (with respect to Note (2) to 11.2 of the UT Code) or otherwise agreed by the SFC. A shorter notice period is acceptable for 10.1 Scheme Change(s) if the Product Provider has obtained written consent from all of the scheme participants. In case of doubt, early consultation with the SFC is encouraged.
(2) FAQ 11A: Do scheme changes involving (a) an appointment of investment delegate(s) which are currently managing other existing SFC-authorized fund(s) and (b) the removal of investment delegate(s) require prior approval from the SFC pursuant to paragraph 10.1(b) of the PRF Code? Would prior notice be required to be provided to the investors regarding these changes? (page 19)
Answer: The SFC adopts a streamlined approach in respect of certain changes in investment delegate(s) of SFC-authorized PRFs. Under the streamlined approach, prior approval is not required from the SFC under paragraph 10.1(b) of the PRF Code in respect of the following types of changes in investment delegate(s), subject to the following applicable requirements being met:
a. Replacement of existing investment delegate(s)/ appointment of new investment delegate(s)
– The new investment delegate(s) is/are currently managing other existing SFC-authorized fund(s); and belong(s) to the same corporate group as the (i) management company or (ii) (in the case of delegation by the immediate delegate of the management company to the new subinvestment delegate(s)) the immediate delegate of the management company; and
– Confirmation(s) and undertaking(s) as set out in the Compliance Checklist which are applicable to the change(s) are duly completed and properly executed and submitted to the SFC.
b. Removal of investment delegate(s)
– The management company confirms that the confirmation(s) / undertaking(s) previously provided remain(s) valid; and
– The investment delegate(s) to be removed was/were not appointed and delegated at all times with the investment management functions subject to the authorization conditions imposed by the SFC.
For the avoidance of doubt, the above streamlined arrangements do not apply to changes in investment delegate(s) which will involve newly proposed all-time investment management delegation arrangements or result in a change in any alltime investment management delegation arrangements currently adopted by the PRF(s).
Although the SFC’s prior approval is not required under the above streamlined approach, it is generally expected that one month’s prior written notice should be provided to the scheme participants. As part of the filing of the scheme changes, the management company is required to file the “Filing Form for Notice of Scheme Change(s) falling within 10.1B of the Code on Pooled Retirement Funds (PRF Code) and Do Not Require SFC’s Prior Approval” together with the duly completed and properly executed confirmation(s) and undertaking(s) as set out in the Compliance Checklist which are applicable to the changes. These changes will be subject to post-vetting by the SFC.