27 July, 2016
The SFC formally adopted the revamped fund authorisation process in April 2016 (circular) and the Guide on Practices and Procedures for Application for Authorization of Unit Trusts and Mutual Funds(Guide) has been revised to provide general guidance in relation to, among other things, the minimum disclosure (Minimum Disclosure Requirements) for a fund’s offering documents including the Key Facts Statements (KFS). Existing SFC-authorised funds are expected to be already in compliance with the Minimum Disclosure Requirements and therefore their offering documents are not required to be revised, unless (i) there is an application for authorisation of a new sub-fund under the existing SFC-authorised umbrella fund; or (ii) there are scheme changes to an SFC-authorised fund and the offering documents have to be revised.
In the case of a new sub-fund application, the offering document of the existing SFC-authorised umbrella fund is expected to be revised and updated for compliance with the Minimum Disclosure Requirements to the extent the existing disclosure in the offering document applies to the new sub-fund under application.
In the case of scheme changes and revision of offering documents of an existing SFC-authorised fund, the SFC would expect the revised offering documents to comply fully with the Minimum Disclosure Requirements and a confirmation may be required from the product issuer, including a confirmation that the fund will not invest 30% or more of its NAV in any particular type of asset classes or investments or markets save as otherwise disclosed in the KFS. In order to provide this confirmation, the product issuer must consider the investment objective and policy of the relevant fund – in particular any hidden flexibility of investing 30% or more in a market, country / region or asset class, and enhance the disclosure of their existing investment policy and risk factors accordingly. For instance, a global fund may need to enhance the description of its investment policy by disclosing the possibility / flexibility of investing 30% or more in a single country / region / emerging markets.
Product issuers are reminded to comply with the Minimum Disclosure Requirements and consider its impact on timing when updating / revising the offering documents of their existing funds.
For more information, please contact:
Alwyn Li, Partner, Deacons
alwyn.li@deacons.com.hk
