Welcome to Herbert Smith Freehills’ monthly private wealth industry updates in Asia.
Every month we survey ten Asian jurisdictions for legal developments concerning trust and estate planning which are of interest to the private wealth industry, and provide a succinct summary in a table format. The jurisdictions covered in the update are Hong Kong, Singapore, China, Taiwan, Japan, India, Malaysia, Indonesia, Thailand and the Philippines. We hope that these updates will prove to be a useful resource to keep private clients, business people, and lawyers abreast of legal updates in the region.
Hong Kong Government and financial regulators announce virtual asset policy stance and upcoming reforms at Fintech Week 2022
The Hong Kong Government and financial regulators made important announcements at the Hong Kong Fintech Week on its policy stance and upcoming reforms on virtual assets (“VAs“). Recognising that VAs are here to stay, proposals have been announced to recalibrate the existing legal and regulatory regimes, with a focus on enabling greater access by retail investors to VA related products and services while mitigating attendant risk.
A lot of the detail can be found in the policy statement issued by the Financial Services and the Treasury Bureau on 31 October 2022, as well as the keynote speech by Ms Julia Leung of the Securities and Futures Commission (“SFC“). Hong Kong will continue to adopt the “same activity, same risks, same regulation” principle, and will put in place the necessary guardrails to ensure the continued innovation of VAs in a sustainable manner.
Further details are provided in our 1 November 2022 briefing.
SFC issues circular on requirements for authorisation of VA Futures ETFs for public offering in Hong Kong
The SFC has issued a circular to set out the requirements for authorisation of exchange traded funds (“ETFs“) that contain exposure to VA primarily through futures contracts (“VA Futures ETFs“) for public offering in Hong Kong.
The SFC has stated that it is prepared to accept applications for authorisation of VA Futures ETFs as it has been observed that there are meaningful developments in the VA ecosystem recently, and some of its initial concerns over VA Futures ETFs have become increasingly manageable and can be adequately addressed with proper safeguards, disclosure and investor education.
In addition to meeting the applicable requirements in the Overarching Principles Section and the Code on Unit Trusts and Mutual Funds in the SFC Handbook for Unit Trusts and Mutual Funds, Investment-Linked Assurance Schemes and Unlisted Structured Investment Products, the circular sets out additional requirements which should be met by VA Futures ETFs seeking SFC authorisation for public offering in Hong Kong. They include requirements relating to:
- Management companies – They should meet specified track record and experience requirements;
- Eligible futures – Only VA futures traded on conventional regulated futures exchanges are allowed, subject to meeting requirements relating to liquidity and roll costs. Initially, only Bitcoin futures and Ether futures traded on Chicago Mercantile Exchange are allowed;
- Investment strategy – The management company is expected to adopt an active investment strategy to allow flexibility in portfolio composition, and meet net derivative exposure requirements;
- Disclosure – The product key facts statement should contain upfront disclosure of the investment objective and key risks associated with investment in VA futures;
- Distribution – As VA Futures ETFs are derivatives products and VA-related products, intermediaries are subject to the applicable requirements under the SFC’s main code of conduct and related guidelines, including the joint circular (with appendices) of January 2022, when providing services to clients; and
- Investor education – The management company should carry out extensive investor education before launching the VA Futures ETF in Hong Kong.
The SFC considers that investment products that invest directly in spot VAs may continue to present investor protection issues. Such products are therefore not permitted in Hong Kong at this stage (but the SFC will keep this under review).
For further details, please refer to our briefing of 1 November 2022.
Updates from Financial Action Task Force
The Hong Kong Monetary Authority and the Insurance Authority have published circulars to authorised institutions, Stored Value Facility licensees and insurance institutions regarding updates from the Financial Action Task Force. The SFC published a similar circular to licensed corporations and associated entities on 2 November 2022. Details of the FATF updates can be found in our previous update.
SGX Group Speech on Green, Social, Sustainability and Sustainability-linked Bonds
Pol de Win, Head of Global Sales & Origination, SGX Group, gave a speech at Environmental Finance’s ESG in Fixed Income Conference 2022, touching on the growth in the issuance of Green, Social, Sustainability and Sustainability-linked Bonds and overcoming challenges such as limited data availability an aggregation, and on SGX Group’s new sustainable bonds initiative.
MAS speeches at COP27
The Monetary Authority of Singapore (“MAS“) Managing Director Ravi Menon made keynote remarks at the Network of Central Banks and Supervisors for Greening the Financial System (“NGFS“) COP27 Finance Day event about ‘How Central Banks and Supervisors are Helping to Green the Financial System’ in which he discussed progress on four of the ten ongoing NGFS initiatives. He also gave a further speech at the COP27 Singapore Pavilion Finance Day on ‘Net Zero – Act Now, Act Fast, Act Together’ in which he gave a quick overview of Singapore’s efforts in three key areas of transition financing – blended finance, carbon markets, and good-quality data.
Notification of the IFSCA (AML, CTF and KYC) Guidelines, 2022
The International Financial Services Centre Authority (“IFSCA“) has published the IFSCA (Anti Money Laundering, Counter Terrorist Financing and Know Your Customer) Guidelines, 2022 (“IFSCA KYC guidelines“). IFSCA has directed all International Financial Services Centre banking units to follow the IFSCA KYC guidelines with immediate effect, and advised that the guidelines/circulars of the domestic financial sector regulators on the issues covered by the IFSCA KYC guidelines shall cease to apply with immediate effect.
BNM supports decarbonisation efforts of small and medium-sized enterprises
In conjunction with the Finance Day at COP27, Bank Negara Malaysia (“BNM“) in collaboration with financial institutions and strategic partners launched the Greening Value Chain (“GVC“) Programme. The GVC programme aims to assist Malaysian small and medium-sized enterprises in implementing impactful, long-term change to green their operations. This can be achieved through offering of technical advice by participating organisations and transition financing from the Low Carbon Transition Facility. The GVC programme employs a blended approach of facilitation, comprising technical training and on-site diagnosis.
BSP underscores need to smooth FX movements
Bangko Sentral ng Pilipinas (“BSP“) Governor Felipe M Medalla has highlighted the need to smooth movements in the foreign exchange (“FX“) rate during the Asset 17th Philippine Summit. He stressed the BSP’s participation in the market focuses on promoting FX rate stability and the country’s broader financial stability, and that it stands ready to provide liquidity and ensure that legitimate demands for foreign currency are satisfied when warranted. The BSP is now deploying Gross International Reserves to sell dollars to help manage FX movements.
BSP Governor co-chairs Financial Stability Board Regional Group Meeting
BSP Governor Felipe M Medalla co-chaired the recent virtual meeting of the Regional Consultative Group for Asia, which discussed financial stability issues affecting the region, including rising commodity prices, the effects of tightening global financial conditions as well as enhancing cross-border payment systems.
The contents of this document are for reference purposes only. Some of the information comes from public sources and this may not be comprehensive, accurate or up to date; where we have relied on third party information and sources, this has not been verified by us. The document does not constitute legal advice, and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication, and any facts in this document should be checked for your specific circumstances at the time you wish to use or refer to them.