In 2009, the Securities and Futures Commission (SFC) and the Securities Commission Malaysia (SC) established a mutual recognition framework restricted to Shariah-compliant Islamic Collective Investment Schemes (Islamic CIS).
On 23 July 2026, both regulators entered into a Memorandum of Understanding (MoU) to strengthen cooperation and information exchange to facilitate an expanded mutual recognition of funds (MRF) scheme and a simplified dual Initial Public Offering (IPO) listing framework.
On the same day, the SFC issued an updated Circular on Mutual Recognition of Funds (MRF) between Malaysia and Hong Kong (Circular), which supersedes the SFC’s Circular on Mutual Cooperation on Development of Islamic Capital Market and Islamic Collective Investment Schemes by the SFC and the SC dated 9 November 2009.
Key Requirements
A Malaysian Fund (i.e. a Malaysia domiciled fund that is eligible for or has received SFC authorisation under the MRF) seeking the SFC’s authorisation under the MRF must comply with the additional requirements set out in the Circular, a summary of which is set out below.
1. Eligible Malaysian Fund
The Circular expanded the types of Malaysian Fund eligible under the MRF scheme beyond Islamic CIS, and now also includes certain exchange traded funds (ETFs) and futures-based leveraged and inverse (L&I) products. Hence, following the enhancement, the types of eligible Malaysian Fund include (i) Islamic unlisted general equity funds, sukuk funds, mixed funds, funds that invest in other schemes and guaranteed funds; (ii) Islamic feeder funds, (iii) Islamic unlisted money market funds; (iv) Islamic unlisted index funds); (v) passively managed index tracking ETFs, other than those investing in digital assets; and (vi) futures-based L&I products (other than those investing in commodities or digital assets, and single stock L&I products) subject to a maximum leverage factor of 2x to -1x. Such ETFs and L&I products must be listed on the MAIN Market of Bursa Malaysia Securities Berhad.
Eligible synthetic ETFs are limited to those taking the form of an unfunded structures, while eligible commodity ETFs must invest in physical commodities.
2. Use of leverage
The use of leverage (arising from derivatives) by the Malaysian Fund is capped at 100% of the fund’s net asset value as calculated under the commitment approach save that for eligible Malaysian leveraged products, such leverage is capped at 200% of the fund’s net asset value.
3. Hedging arrangements
The Malaysian Fund must not have share classes with hedging arrangements other than currency hedging.
4. Malaysian Management Company
The Malaysian Fund must be managed by a Malaysian Management Company, which must comply with certain prescribed requirements including being licensed by the SC to manage CIS in accordance with section 58(1) of the Capital Markets and Services Act 2007 (CMSA) and have paid up share capital and non-distributable capital reserves of HK$10 million or its equivalent in Malaysian Ringgit.
5. Malaysian Fund’s trustee/custodian
The Malaysian Fund must have a trustee/custodian that is qualified and approved by the SC to act as a trustee/custodian for Malaysian CIS authorised or approved for public offering.
6. Application process
Applicants are encouraged to consult the SFC’s Investment Products Division before filing. The application must include an eligibility certificate sent directly from the SC to the SFC confirming compliance with the eligibility requirements listed in Annex B to the Circular, without which the SFC will not process the application.
Malaysian REIT
In addition to the Circular, the SFC also issued the Circular on Cross-listings of Malaysian Real Estate Investment Trusts in Hong Kong on the requirements for Malaysian REIT (i.e. a real estate investment trust domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad that is eligible for or has received SFC authorisation under MRF) seeking the SFC’s authorisation for offering to the public in Hong Kong by way of a secondary listing on The Stock Exchange of Hong Kong Limited under the MRF.
Conclusion
The Malaysia and Hong Kong MRF will facilitate greater cross-border investment and enable investors in these jurisdictions to gain access to a wider variety of fund choices. It also creates new capital raising opportunities for fund managers.
