FAQs – Publicly offered investment products: Presentation Materials on Open-ended Fund Companies

On April 21, 2023, the Securities and Futures Commission (SFC) published revised guidelines in form of a presentation about open-end fund companies. The presentation aims to provide basic information to market practitioners concerning the establishment of and all matters related to open-end funds (OF). It cover topics such as
– regulatory authorities responsible for oversight (including regulations involved);
– the corporate structure of an open-end funds company (OFC) set up in Hong Kong;
– the application process for establishing an OFC and OF;
– post-establishment issues such as filings when changes occur or the establishment of sub-funds;
– fees applicable to OFs, i.e. application fees or fees for filing for changes; and
– benefits of choosing to establish an OFC; and (g) the tax exemption framework for private OFs. Details may be viewed in attached document.
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This latest revised version contains modifications throughout the document. Most amendments are minor in nature (editorial changes: addition of one word or two, rephrasing, etc.). However, there are some changes worth pointing out, namely:
(1) A new form (OFCN1) has been added to be filed with the companies registry (CR) for firms seeking to participate in the re-domiciliation scheme (page 26).
(2) Under the heading „Practical tips and common misconceptions“ (page 31), the following frequently asked question (FAQ) has been revised to read – as quoted:
Q: Can multiple custodians be appointed and what would be the rights and liabilities of each custodian?
– Appointment of multiple custodians is permitted, including by the appointment of a different custodian for each sub-fund
– Where multiple custodians are to be appointed, the instrument of incorporation and/or custodian agreement of the OFC should include relevant provisions – e.g. to ensure all scheme property must be duly entrusted to the custodian(s) of the OFC and demarcate the rights and liabilities of each custodian clearly
– Each custodian appointed by an OFC is subject to the duty to take reasonable care, skill and diligence to ensure the safe keeping of the scheme property of the OFC that is entrusted to it (section 112ZA(4) of the SFO)
– Each custodian should also observe the custody requirements in the OFC Code, including to:
– hold in its custody the scheme property that is entrusted to it which can be so held and maintain a proper record of all other scheme property entrusted to it;
– ensure it has sufficient experience, expertise and competence in safekeeping the asset types; and
– maintain adequate internal controls and systems
– May refer to OFC FAQs Question 23 for more details.
(3) Under the heading „Practical tips and common misconceptions“ (page 32), the following FAQ has been added and reads – as quoted:
Q: Can multiple sub-custodians be appointed?
– Custodians can delegate their custody tasks to one or more subcustodians – i.e. appointment of multiple sub-custodians is permitted
– A custodian shall exercise due care in the selection, appointment and ongoing monitoring of its delegate(s).
(4) Under the heading „Appeal and benefits of the OFC regime“, subheading „Mutual recognition of funds“ (page 37), the regulatory authority of Malaysia has been added.
(5) Under the heading „Further information“ (page 43), there’s now a link and overview of the SFC’s dedicated website for OFCs.