Similar to the mutual recognition of funds scheme between Mainland China and Hong Kong (Mainland-HK MRF), Securities and Futures Commission (SFC) has announced the mutual recognition of funds programme between Switzerland and Hong Kong (Swiss-HK MRF): the press release of 2 December 2016 is available here. Whilst the SFC does not impose any specific requirements for fund domiciles, Swiss-HK MRF streamlines the vetting process of public funds in both jurisdictions, thus creating new opportunities for fund management companies.
In order to be eligible for Swiss-HK MRF, funds seeking approval must be domiciled, managed, and have been approved for retail distribution in the home jurisdiction. The manager must be appropriately licensed by the home regulator to conduct asset management activities and have a clean regulatory history for the past three years. As with the Mainland-HK MRF scheme, a local representative or agent must be appointed in the host jurisdiction. The operators of the funds must ensure proper investor protection as well as fair and equal treatment.
Types of Funds
The type of Swiss funds that are eligible for SFC approval and distribution in Hong Kong under the mutual recognition initiative is much broader than the Mainland-HK MRF. Apart from the usual equity funds, bond funds, mixed funds, index tracking funds, and ETFs, the Swiss-HK MRF scheme also permits the offering of the following Swiss funds in Hong Kong: feeder funds, fund of funds, money market funds, structured funds and funds that use financial derivatives for investments extensively. A similar list of eligible funds has also been published by the Swiss regulator for Hong Kong domiciled SFC-authorised funds seeking authorisation in Switzerland.
Since the announcement of the Swiss-HK MRF scheme, there has been a lot of interest and excitement in the market. Switzerland is a reputable and highly regarded private banking centre, and Hong Kong based fund management companies will no doubt be interested in exporting their fund products to Switzerland, tapping a market of high net-worth investors. By the same token, with Hong Kong being the gateway to China, the new MRF programme will surely open a new door for Swiss based fund management companies. At the same time, Switzerland has been admitted to the SFC’s list of Acceptable Inspection Regimes. The new addition will facilitate the appointment of Swiss based fund management companies as delegate managers of SFC authorised funds (such as UCITS).