The Securities and Futures Commission (SFC) has entered into a memorandum of understanding (MoU) with Commission de Surveillance du Secteur Financier (CSSF) on Luxembourg-Hong Kong mutual recognition of funds (MRF).
Image: SFC and CSSF have entered into MoU on Luxembourg-Hong Kong mutual recognition of funds. Photo: courtesy of Securities and Futures Commission.
The MRF will enable Hong Kong public funds and Luxembourg UCITS funds to distribute in each other’s market via streamlined process.
The deal also allowed to create a framework for exchange of information and regular dialogue, in addition to regulatory cooperation related to the cross-border offering of eligible Hong Kong public funds and Luxembourg UCITS funds.
SFC CEO Ashley Alder said: “The new cooperation framework expands our MRF network following Mainland China, Switzerland, France and United Kingdom. It further strengthens our ties and regulatory cooperation with Luxembourg, a major hub for fund domicile.
The MoU offers a framework for mutual recognition of covered funds provided, as well as marketed and distributed to retail investors in Luxembourg and to the public in Hong Kong.
MRF operates on various principles, including Hong Kong covered fund must meet the eligibility requirements and comply with all of the applicable requirements.
Hong Kong covered fund should be authorized by the SFC in Hong Kong, and has to be operated and managed as per the relevant laws and regulations in Hong Kong.
The sale and distribution of the Hong Kong covered fund in Luxembourg must comply with the applicable laws and regulations in Luxembourg.
The The Hong Kong covered fund must be general equity fund, bond fund or mixed fund, and must not use leverage exceeding 100% of the fund’s net asset value as calculated under the commitment approach provided under the Code on Unit Trusts and Mutual Funds (UT Code).
In addition, the Hong Kong covered fund should not invest in physical commodities such as precious metals or commodity based investments or real estate, crypto-assets or crypto-currencies and certificates representing the assets.
CSSF Luxembourg director general Claude Marx said: “Hong Kong and Luxembourg have a long history of cooperation in the area of mutual fund distribution. The new memorandum of understanding is an important step for the mutual recognition of investments funds in our respective jurisdictions, and demonstrates the excellent cooperation between our two supervisory authorities.”