Who does this affect?

Provides a regime to allow distribution of registered managed investment scheme to investors in Hong Kong and Hong Kong authorised funds to investors in Australia.

What do you need to do?

Australian issues need to analyse products to determine if they are suitable for offer in Hong Kong. Hong Kong issuers will need to assess class order 08/506 when it is published by ASIC.

Author
Mark McFarlane  
Partner
Mark McFarlane  
Partner
T +61 2 9296 2478

Sydney
Tim Blue  
John Sullivan  

Hong Kong
Hayden Flinn  (范凱敦)
Richard Mazzochi  (馬紹基)
Minny Siu  (蕭乃瑩)

07 July 2008

Australia-Hong Kong mutual recognition of retail funds - 8 July 2008

The Australian Securities and Investments Commission (ASIC) and the Hong Kong Securities and Futures Commission (SFC) have announced a regime to facilitate the offering of retail funds to investors in each other's market. The announcement opens up new investment opportunities in both markets.

The Hong Kong and Australian funds regimes have been incompatible since the introduction of a single responsible entity structure in Australia. This regulatory development overcomes that incompatibility.

ASIC proposes to issue class order 08/506 in order to facilitate the offering of authorised Hong Kong funds in Australia. The class order conditions are not yet available.

SFC has issued a Circular relating to the offering of Australian registered managed investment schemes. To be offered to retail clients in Hong Kong those schemes must:

  • have an ASIC licensed responsible entity and be registered as a managed investment scheme with ASIC
  • not be a hedge fund as categorised in the Hong Kong’s Unit Trust Code
  • have their assets held by a custodian licensed by ASIC
  • meet in accordance with the Hong Kong’s Unit Trust Code core investment restrictions (not all Australian schemes will be able satisfy these restrictions), monthly dealing requirement (at least monthly unit pricing and transacting) and appointment of a Hong Kong representative and approved person; and
  • have no more than 30% of the interests in the scheme by value can be held by Hong Kong persons.

The offering document to be used in Hong Kong must be approved by the SFC and distribution of offers in Hong Kong must be undertaken by a licensed Hong Kong intermediary. A responsible entity wishing to market a scheme in Hong Kong will need to make certain notifications to the SFC facilitate recognition of Hong Kong legal proceedings.