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5 Facts to Know About the Fund Administration Industry in Hong Kong in 2022
Financial Services is one of the key industries that make Hong Kong one of the world’s leading international financial institutions. And despite the ongoing global challenges, Hong Kong still holds various opportunities for top fund administrators.
If you are interested in extending your business into the Hong Kong fund investment industry, read on to learn more about what’s new in the country’s financial services zone. You can also check the
1. Governing Bodies
The primary regulatory framework for fund management in Hong Kong is the
Fund managers must abide by the Code of Conduct for Persons Licensed by or Registered with the SFC and follow the
2. Open-ended Fund Company (OFC) Structure
An overseas corporate fund may then be registered by the SFC provided it satisfies the conditions set out by the SFO on qualifying OFCs. In this way, the SFO can facilitate the re-domiciliation of overseas corporate funds to Hong Kong using the OFC structure.
For Hong Kong-based fund managers, the incorporation of a fund in the form of OFCs comes with advantages. One of the advantages is the lower operating cost compared to establishing and maintaining an offshore fund. Another advantage is that the OFC structure may be used by different types of funds.
A grant scheme for OFC funded by the government of Hong Kong was established by the SFC. With the purpose to promote the use of the OFC structure in incorporating funds into the country, the grant scheme covers up to 70% of eligible expenses incurred in the re-domiciliation of a qualifying OFC and paid to Hong Kong-based service providers.
Our team at Lanturn can provide you with
3. Limited partnership fund (LPF) Regime
LPFs have no minimum capital requirements on their partners and are not subject to investment restrictions. Qualifying LPFs can acquire tax exemption from Hong Kong profits tax provided they are able to meet the conditions under the
An LPF must consist of one general partner (GP) and at least one limited partner (LP). The LPF will also require an investment manager, or the GP can be appointed as the investment manager or any other capable party. The parties must be governed by its limited partnership agreement (LPA). Unlike the OFC the establishment of an LPF does not require the approval of the SFC Hong Kong. An LPF can be registered straight to the Companies Registry of Hong Kong provided that all the needed legal requirements have been met.
With Hong Kong’s rapidly developing fund administration industry, a fund administrator must constantly adhere to every relevant regulatory requirement while keeping clients on track with the performance of their investments. If you are a Hong Kong fund manager wishing to be able to concentrate more on portfolio management and keeping tabs on every investment opportunity that comes your way,
4. The Management and Disclosure of Climate-Related Risks by Fund Managers
Last August 2021, the SFC issued the Management and Disclosure of Climate-related Risks by Fund Managers
Under the scope of this new regulation are fund managers managing collective investment schemes (CISs). The SFC took on a
The disclosures should be released through various channels such as websites, newsletters or reports. Disclosures can be made across channels to bring fund investors’ attention to the information and changes relevant to them and reviewed at least annually. The information disclosed should be proportionate to the degree climate-related risks are considered during the investment and risk management process. According to the 2021 circular, large fund managers will be given a 12-month transition period to provide the baseline requirements (20 August 2022) and a 15-month transition period for them to comply according to the enhanced standards (20 November 2022). All other fund managers are provided with a deadline of 20 November 2022 to comply with the baseline requirements.
5. Online Investment Services
Last 31 Aug 2022, the SFC released their findings on a
According to the review, the most commonly offered products (98% of the LCs) were online trading of equities and exchange-traded funds followed by the selling and distribution of CISs. Unfortunately, there were deficiencies in following the standard for non-face-to-face client onboarding procedures, cybersecurity and online trading, distribution and marketing.
The circular shows that technological changes and improvements will remain a part of the fund administration industry of Hong Kong. As both older, mature investors and new younger investors will move toward online investment platforms, a balance of the human touch and technology must be found to provide clients with the best user experience.
The SFC review shows that a need for better identity verification procedures must grow alongside the evolving technological investment landscape. You can speak with
It is significant to note that with the rise of Environmental, Social, and Governance (ESG) Investing, regulatory amendments like the management and disclosure of climate-related risks will become more common. Though at the moment, Hong Kong is still in the process of developing consistent ESG policies and practices.
We would love to have the chance to discuss with you the above regulatory standards and fund services that might be applicable to your business.
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