In addition to the circular on further streamlining the post-authorisation measures for UCITS funds which we discuss in a separate article (available here) , the Securities and Futures Commission (SFC) has also updated the FAQs on Post Authorization Compliance Issues of SFC-authorized Unit Trusts and Mutual Funds (FAQs) applicable to SFC authorised funds (including both UCITS funds and non-UCITS funds) with effect from 28 November 2025 regarding certain post authorisation requirements.
We set out below some of the key changes to the FAQs and their implications for fund managers’ consideration.
1. Expanded List of Non-Material Changes and Notice Requirements
The SFC has updated the FAQs to clarify certain existing illustrative examples of non-material changes and add additional illustrative examples of non-material changes which do not require the SFC’s prior approval. Provided that the following changes are able to satisfy the overriding principles and requirements as set out in Question 9 under Section 2 of the FAQs, they will not require the SFC’s prior approval:
- Derivatives usage: reduction in derivative exposure or changes to their purpose (i.e. whether derivatives are used for hedging and/or investment purposes), provided that the fund’s net derivatives exposureremains up to 50%;
- Fees and charges: increases in fees and charges up to the permitted maximum level as disclosed in offering documents;
- Distribution policies: changes or adoption of fixed dividend rate (as disclosed in offering documents), provided they do not result in structural decumulation of capital for that existing or new fixed distribution rate share class;
- Dealing frequency: change in dealing frequency, which is of demonstrable benefits to investors and in compliance with the provisions of Chapter 6 of the Code on Unit Trusts and Mutual Funds (UT Code); and
- Dealing deadline / payment period: changes in dealing deadline and/or settlement/payment periods for the subscription or redemption of units/shares of a scheme, which are of demonstrable benefits to investors, or are necessary to comply with regulatory, fiscal or other statutory or official requirements, or are consequential to the proposed change in investment objective, policies and restrictions, and are in compliance with the provisions of Chapter 6 of the UT Code (including ensuring forward pricing).
The SFC also set outs their expectation of at least one month’s prior notice to be given to existing investors for certain non-material changes, including those mentioned above.
2. Changes of Investment Delegates
For non-UCITS SFC-authorised funds:
- Removal of investment delegate: SFC’s prior approval is not required, provided that the management company can confirm that the confirmation/undertaking previously provided to the SFC remains valid.
- Appointment of investment delegates: SFC’s prior approval is required if the investment delegate is (a) not currently managing any SFC-authorised funds; or (b) currently only managing SFC-authorised UCITS funds and the proposed delegate is (i) not located in an inspection regime acceptable jurisdiction or a jurisdiction with mutual recognition arrangement with the SFC and (ii) not an affiliate of the management company.
Regardless of whether or not the SFC’s prior approval is required for change of investment delegate, it is generally expected that one month’s prior written notice should be provided to investors for the changes set out above.
3. Withdrawal of Authorisation
The SFC may, upon application by the management company, on a case-by-case basis, approve withdrawal of authorisation of the non-Hong Kong fund before the end of the three-month notice period where the fund has ceased to accept new subscription in Hong Kong and all Hong Kong investors have fully redeemed their holdings during the notice period.
As for withdrawal of authorisation after termination or merger of an SFC-authorised fund which still has residual assets or unclaimed client assets, as opposed to the previous position where the managers can only apply for withdrawal of authorisation when they are able to confirm no assets and liabilities in the relevant fund, the SFC may now consider such application on a case-by-case basis taking into account non-exhaustive factors such as:
- Clear disclosure of appropriate handling procedures for unclaimed assets in the termination or merger notice;
- Nature and extent of the residual assets; and
- Nature of beneficial owners; etc.
The above updates reflect the SFC’s ongoing commitment to streamlining its post-authorisation requirements to enhance efficiency while maintaining robust investor protection.
For further information, please contact:
Vincci Ip, Partner, Deacons
vincci.ip@deacons.com
