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Regulators in Hong Kong and on the mainland are in the final stages of preparations to launch a long-awaited bilateral fund recognition scheme.
It would allow international fund managers based in the city to sell their products on the mainland and mainland fund managers to sell theirs in Hong Kong.
“We [Hong Kong and mainland regulators] have reached agreement on the framework of the scheme,” Xu Hao, who is in charge of fund management supervision at the China Securities Regulatory Commission, told a forum in Hong Kong on Wednesday morning.
Six essential guidelines have been agreed – the types of funds to be added to the scheme, qualifications of the asset managers, application procedures, management of the funds, requirements for fund distribution, and an information disclosure and buyer protection mechanism – Xu said.
Foreign asset managers will need to register with Hong Kong’s Securities and Futures Commission and domicile their funds in Hong Kong to be able to distribute their products under the scheme.
Meanwhile, the first batch of funds that will be approved to be sold on the mainland and vice versa should be “simple-structured, transparent” products, Xu said.
Issues that remain to be resolved include requirements for the size of the fund managers and how long they have been established, the proportion of local investors in the fund products, and how to protect investors under China’s capital account controls, Xu said.
“We are literally in the final stretch of the journey,” said Alexa Lam, deputy chief executive of the SFC, who has been working with Xu to design the scheme.
The CSRC, SFC and the State Administration of Foreign Exchange established a special working team in March to work on the mechanism for mutual recognition and since then have had meetings periodically to discuss technical issues of the scheme, Xu said.


Hong Kong and mainland regulators close to launching bilateral fund recognition scheme

Under the scheme, the border will be no barrier to sales of qualified funds between Hong Kong and the mainland. Photo: Felix Wong

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