The Security and Futures Commission (SFC) signed a Memorandum of Regulatory Cooperation concerning Mutual Recognition of Funds between the Mainland and Hong Kong (the “scheme”) on May 22, 2015. The scheme allows mutual access to investment funds between the PRC and Hong Kong.
This platform will now allow offshore funds to be open to investors in the PRC and in return open up greater access for retail and institutional investors to invest in the PRC funds market. PRC fund managers will also gain from the scheme, as access to Hong Kong investors will expose them to an international platform, helping them develop their capability to manage assets and serve customers abroad and to compete globally.
Currently, 100 Hong Kong funds and 850 PRC funds are eligible to trade mutually. In total, the accessible Hong Kong funds will have around RMB300 billion in assets, while the total accessible Mainland funds will have roughly RMB2 trillion in assets.
The scheme, however, has its limitations which will take time to refine:
Criteria for Recognition
Distribution of Retail Funds
Application Process and Required Documents
The SFC has now begun accepting applications, and Hong Kong may see the first approved Mainland fund start selling as soon as the third quarter of this year.
In the meantime, regulators will be working with the industry to prepare them for the scheme.
Please see link here for more details on the scheme.
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