On 4 October 2019, Hong Kong's Securities and Futures Commission (SFC) published the Proforma Terms and Conditions for Licensed Corporations which Manage Portfolios that Invest in Virtual Assets ("VA Terms and Conditions"). These VA Terms and Conditions set out the principles and requirements to be observed by SFC licensed corporations when managing portfolios (or portions of portfolios) that invest in "virtual assets"1 and meet a de minimis threshold (as described below).
A broad outline of the VA Terms and Conditions was introduced on 1 November 2018 in the SFC's Regulatory Standards for Licensed Corporations Managing Virtual Asset Portfolios, which formed part of the measures developed by the SFC to protect the interests of investors in virtual asset portfolios or funds. An overview of this framework is set out in our client alert The Dawn of Virtual Assets Regulations: New measures for crypto funds activities, Sandbox plans for crypto-exchanges.
The VA Terms and Conditions are largely principles-based. They substantially replicate the existing regulatory requirements applicable to licensed/registered intermediaries (asset managers) under the Fund Manager Code of Conduct (FMCC), with variations to address the specific business models of virtual assets portfolio managers and the unique features and risks associated with virtual assets. The VA Terms and Conditions will be imposed on applicable managers in the form of a licensing condition.