On January 15th 2019, the Commission de Surveillance du Secteur Financier (“CSSF”) agreed to a Memorandum of Understating (“MoU”) with the Securities and Futures Commission (“SFC”) on the mutual recognition of funds. This MoU will allow Luxembourg-domiciled UCITS and Hong Kong public funds to be distributed, marketed and offered in each other’s market.
The MoU will facilitate an easier system for funds in either country to register in the market of the other.
The process has been streamlined and it will now take between 1-2 months for standard application approvals. This significantly reduces the timeline allowing funds to be available to the public in an efficient manner.
For Hong Kong funds wishing to market to retail investors in Luxembourg they must meet the eligibility requirements set out in CSSF streamlining requirements and process for mutual recognition of Hong Kong Funds. Such funds would be considered alternative investment funds and so are subject to the marketing rules set out in Article 45 of the law of 12 July 2013 on alternative investment fund managers, as amended. Such funds must appoint a paying agent in Luxembourg. Following receipt of an application to be authorised to market in Luxembourg, the CSSF has 5 days to respond and one month from receipt of all documents to grant the authorisation to a Hong Kong fund.
The SFC in their circular Mutual Recognition of Funds between Luxembourg and Hong Kong outline the process for Luxembourg UCITS to market to retail investors in Hong Kong.
In addition to the fund having a firm in Hong Kong as its representative, the CSSF must provide the SFC with a certificate confirming eligibility.
The SFC and the CSSF may consider extending the regime to include other types of funds in the future.