SFC Formally Adopts Revamped Fund Authorization Process and Extends to MRF

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Last Friday, 22 April 2016, the Hong Kong Securities & Futures Commission (SFC) announced that the revamped fund application and authorization process (“Revamped Process”) shall be formally adopted and become SFC policy effective from 9 May 2016.  The Revamped Process will now also be extended to the applications from Mainland funds seeking authorization under the Mainland-Hong Kong mutual recognition of funds arrangement (“MRF Applications”).

The Revamped Process was implemented under a 6-month review from 9 November 2015 to 8 May 2016 (“Pilot Period”).  The Pilot Period has been considered a success, as the SFC notes that the quality of new fund applications has improved, responses from applicants are generally observed to be timelier, and the overall processing time for new fund applications shortened in line with the SFC’s targeted processing timelines under the Revamped Process.

With the formal roll-out of the Revamped Process, the SFC has also revised and certain documents which is intended to further guide applicants when submitting new fund applications:

  • updated Information Checklist for Application for Authorization of Unit Trusts and Mutual Funds under the Revamped Process (“Updated New Information Checklist”);
  • updated Guide on Practices and Procedures for Application for Authorization of Units Trusts and Mutual Funds (“Updated Guide”); and
  • updated Frequently Asked Questions on Application Procedures for Authorization of Unit Trusts and Mutual Funds under the Revamped Process (“Updated FAQs on UT Code”).

The Updated New Information Checklist is available for new fund applications received by SFC on or after 22 April 2016 (i.e. with immediate effect).  However, applicants have a choice to submit the immediate preceding version of the Updated New Information Checklist, if their applications are received by SFC on or before 6 May 2016.  From 9 May 2016 onwards, all applications submitted to the SFC must use the Updated New Information Checklist.

MRF Applications

MRF Applications received by the SFC on or after 9 May 2016 shall come under enhanced processing arrangements under the Revamped Process as “Non-standard Applications” until further notice from the SFC.  In terms of target processing times for “Non-standard Applications”, the SFC aims to shorten the authorization time to about 2-3 months from submission of an application.  Currently, MRF Applications generally take up to 6 months processing time.

The SFC has also introduced a new Information Checklist for Application for Authorization of Mainland Funds under the Mutual Recognition of Funds Arrangement and the Revamped Process (“New MRF Information Checklist”), including new standardized templates for confirmations on compliance which are included in the New MRF Information Checklist.  For new MRF Applications received by the SFC on or before 6 May 2016, the existing Information Checklist for Application for Authorization of Mainland Funds seeking SFC’s Authorization under the Mutual Recognition of Funds Arrangement (“Existing MRF Information Checklist”) may still be used.

A new Section H of the Frequently Asked Questions on Mainland-Hong Kong Mutual Recognition of Funds (“Updated FAQs on MRF”) provides that, under the Revamped Process, the SFC will issue the “Take-up Letter” within 5 business days upon the receipt of the application documents, compared to the current 2 business days for “take-up” of an MRF application.   According to the Revamped Process for non-standard applications, which shall from 9 May 2016 be relevant to MRF Applications, the expected timeframe for replies to SFC requisitions would be shortened, to 14 business days or 10 business days as applicable.