UK and Hong Kong regulators establish mutual fund recognition scheme

Funds in Hong Kong will now find it easier to market to UK investors if they can demonstrate broad equivalence.

By Joe Parsons

The financial regulators for the UK and Hong Kong have reached an agreement on the mutual recognition of funds, opening up new avenues of foreign investment.

Funds in Hong Kong will now find it easier to market to UK investors if they can demonstrate broad equivalence, with UK businesses having the same access to Hong Kong.

The UK Financial Conduct Authority (FCA) and the Hong Kong Securities and Futures Commission (SFC) recently signed a memorandum of understanding (MoU) on the mutual recognition of funds.

The funds in scope of mutual recognition are general equity funds, bond funds and mixed funds, as well as certain feeder and exchange-traded funds.

“We think around 500 Hong Kong funds might be eligible to apply. The figure in the UK is higher, with around 2500 UCITs funds potentially eligible,” said Megan Butler, executive director of supervision, investment, wholesale and specialists, FCA in a speech.

“We see this agreement as an important example of supporting open markets by recognising each other’s rulebooks and supervision. Meaning it is the beginning of the sort of approach we want to take in the future.”

The MoU is the latest move to bring the UK market closer to China, with the potential London-Shanghai Connect waiting in the wings.

Hong Kong recently approved the establishment of open-ended fund companies (OFC), providing more flexibility for fund sponsors looking to launch a fund in Hong Kong.

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