In June 2024, the Securities and Futures Commission ("SFC") welcomed the public consultation paper published by the China Securities Regulatory Commission ("CSRC") on proposed rule amendments for implementing enhancements to the Mainland-Hong Kong mutual recognition of funds ("MRF") scheme.
If you would like more information about the implementation of the MRF scheme in Hong Kong, please contact one of our funds lawyers.
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Overview
Enhancing the MRF scheme was one of the five measures announced previously by the CSRC to help strengthen the Mainland's capital market cooperation with Hong Kong. The amendments address a longstanding wish of asset managers in Hong Kong for the scheme to be more flexible and provide more diversified product choices to Mainland investors. The amendments are part of the continuing development of the MRF scheme.
The draft proposals in the CSRC's consultation paper include relaxing the sales restrictions for recognised Hong Kong funds in the Mainland and allowing the delegation of the investment management functions of recognised Hong Kong funds to overseas asset management companies within the same group.
On sales restrictions, the value of units of a recognised fund sold to investors in the host market was capped at 50% of the fund's total assets, but such cap will be relaxed to 80% after the enhancement. Whereas on delegation of investment management functions, such functions could not be delegated to a firm outside the home market, but after the enhancement, recognised Hong Kong funds can delegate such functions to an overseas entity within the same group located in a jurisdiction that has entered into a memorandum of understanding on regulatory cooperation with the CSRC. In turn, recognised Mainland funds can delegate such functions to an overseas entity within the same group located in a jurisdiction under the SFC's acceptable inspection regime.
The SFC will continue to work closely with the CSRC to formulate and implement the measures and the launch date and further details of the enhancements will be announced in due course.