17 June, 2015
On 22 May 2015, the SFC and the China Securities Regulatory Commission (CSRC) entered into a Memorandum of Regulatory Cooperation on Mainland-Hong Kong Mutual Recognition of Funds (MRF) and agreed on the implementation principles and the mode and operation of the MRF. Through the MRF, the CSRC and SFC will allow mainland China and Hong Kong funds that meet the eligibility requirements to follow streamlined procedures to obtain authorization or approval for offering to retail investors in each other’s market — effectively opening up the vast Chinese retail investor market to Hong Kong-licensed fund managers who meet the eligibility criteria.
On the same date, the CSRC and SFC detailed the eligibility requirements that must be met for fund managers and funds to benefit from the MRF in their respective markets. These requirements relate to the type of fund, minimum assets under management, the maximum portion of the fund that may be distributed in mainland China or Hong Kong, and the track record of the fund and the fund manager. Each Hong Kong fundproposing to benefit from the MRF must appoint a mainland Chinese agent (which must be an entity registered with the CSRC) to act on its behalf within mainland China, and must follow certain application procedures and operational requirements. The CSRC and SFC also have established cooperation mechanism for cross-border regulation and enforcement to ensure that mainland and Hong Kong investors will receive equal protection.
The MRF scheme will be implemented on 1 July 2015. The initial investment quota for the MRF will be RMB 300bn for in and out fund flows each way (i.e., RMB 300bn “north-bound” with respect to Hong Kong funds distributed in mainland and RMB 300bn “south-bound” for mainland funds distributed in Hong Kong).
For further information, please contact:
Christopher Betts, Partner, Skadden
christopher.betts@skadden.com
Edward Lam, Partner, Skadden
edward.lam@skadden.com
Alec Tracy, Partner, Skadden
alec.tracy@skadden.com
Will Cai, Partner, Skadden
will.cai@skadden.com
