18 February 2021
On 5 February 2021, financial authorities in Mainland China, Hong Kong and Macau, including the People’s Bank of China (PBOC), the China Banking and Insurance Regulatory Commission (CBIRC), the China Securities Regulatory Commission (CSRC), China’s State Administration of Foreign Exchange (SAFE), Hong Kong’s Securities and Futures Commission (SFC), the Hong Kong Monetary Authority (HKMA) and the Monetary Authority of Macau (AMCM), jointly signed a memorandum of understanding (MoU, available here in Chinese) on the upcoming launch of the wealth management connect (WMC) pilot scheme in the Guangdong-Hong Kong-Macau Greater Bay Area. The plan to launch the WMC scheme was announced by the PBOC, the HKMA and AMCM in June 2020 (for more details of the announcement, you may refer to our previous article here).
The MoU consists of seven chapters and 27 articles, covering regulatory information exchange, cooperation in law enforcement, investor protection, and liaison and consultation mechanisms. Key points of the MoU include the following:
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(i) |
Regulation will be based on the jurisdiction where the business is conducted, with an emphasis on compliance with all relevant laws and regulations on wealth management products in Guangdong, Hong Kong and Macau; |
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(ii) |
The PBOC, the CBIRC, and the CSRC agree to provide guidance to Mainland banks on the due diligence of eligible wealth management products; likewise, the HKMA, the SFC and AMCM agree to provide such guidance to Hong Kong and Macau banks; |
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(iii) |
The cross-border flow of funds will be managed in a closed-loop, exclusively for the purposes of investment through the WMC scheme; |
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(iv) |
Measures will be taken to monitor requirements on the aggregate quota and the individual investor quota under WMC; and |
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(v) |
Relevant financial authorities will also provide instructions to banks on investor protection, anti-money laundering / counter-financing of terrorism requirements, and personal data protection. |
The MoU aims to provide the broader framework for the exchange of regulatory information and cooperation in law enforcement among the regulators in the three jurisdictions. It complements the existing regulatory cooperation among the relevant authorities for the launch of WMC. The signing of the MoU is considered to be of great significance to the implementation of the national strategic plan for the construction of the Guangdong-Hong Kong-Macau Greater Bay Area.
The MoU will take effect upon the launch of WMC, which is widely anticipated to take place in the near future. Although the official rules have not been released yet, the HKMA stated in June 2020 that at the initial stage, eligible products will cover mainly simple investment products of relatively low risk.
The WMC scheme will no doubt strengthen the connectivity of the financial markets of Mainland China and Hong Kong. Further to the mutual recognition of funds, WMC represents a new and flexible channel for Hong Kong fund managers to tap into the opportunities presented by the Mainland market. Fund managers have started to review their existing products or plan for new fund launches to take advantage of the scheme, while bank distributors have been working on the standard terms for offering products to investors. Please get in touch with your usual contact to discuss how Deacons can help you in connection with WMC.
For further information, please contact:
Faye Meng, Partner, Deacons
hongkong@deacons.com
