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28 September, 2018
On September 19, 2018, the Asset Management Association of China (“AMAC”) released a circular (“Circular”), stating that it will soon accept the filings of Hong Kong institutions intending to advise mainland institutions’ southbound trading under the Stock Connect Program (“Southbound Trading”).
Pursuant to the Interim Provisions on Securities and Fund Operation Institutions’ Engagement of Hong Kong Domiciled Institutions to Provide Securities Investment Advisory Services issued by the China Securities Regulatory Commission (“CSRC”) on June 29, 2018, Hong Kong institutions that intend to provide investment advisory services to either mainland securities companies or mutual fund management companies are required to file their basic information in accordance with the rules of the AMAC.
The filing procedures specified in the Circular are straightforward and there are clear requirements about the information to be filed. There are three filing categories: initial filing, important information change filing, and annual filing. For the initial filing, upon submission of the application materials by Hong Kong institutions, there will be a review period of five working days. Once it has been accepted, the filing information will be publicized on the AMAC website (http://www.amac.org.cn). Any changes to important information should be filed within seven working days, while the time limit for annual filing is six months after the end of the natural year.
Our Observation
The release of the Circular means that Hong Kong licensed institutions are now able to initiate their application for filing in order to meet the requirement to advise the mainland institutions on Southbound Trading. In light of Hong Kong institutions’ keen interest to participate in the mainland’s sizeable wealth management market, we expect that many of them will complete their filings with the AMAC.
As discussed in an earlier Client Briefing dated July 5, 2018, this move to open up marks a significant step in the improvement of China’s cross-border asset management regulations. This type of activity is likely to deepen the cooperation between mainland China and Hong Kong financial markets, and could be a pilot for future opening up of cross-border financial services.
Mainland institutions can engage a Hong Kong investment advisor for either public or private asset management product under their management, however, to date, the mainland institutions that have been allowed to engage such a Hong Kong investment advisor have been limited to securities companies and mutual fund management companies. The question arises whether the scope of mainland institutions will be extended to include other types of asset managers, such as private fund managers or the asset management subsidiaries of commercial banks.
Besides, it is notable that the investment advisory services are limited to providing advice about Southbound Trading, and there is no indication that the scope of services will be extended to other offshore stocks or assets.
In our view, with growing participation in the Stock Connect Programs, the further opening up of financial markets and improving cross-border regulatory cooperation by the CSRC, we expect to see future expansions in both the type of participating mainland institutions and scope of services.
For further information, please contact:
Natasha (Qing) Xie, Partner, Jun He
xieq@junhe.com
