On 29 August 2013, the Hong Kong Special Administrative Region government and the central people’s government signed a new “supplement X” to the closer economic partnership arrangement (CEPA) to further enhance their co-operation.
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One of the highlights for the funds and securities services industry is that the mainland has agreed to actively study mutual recognition of fund products between the mainland and Hong Kong. The proposed mutual recognition arrangement intends to offer a streamlined authorisation process for the recognised funds to be sold directly in Hong Kong and in the mainland. According to the latest annual report released by the Securities and Futures Commission (SFC), the proposal envisages that SFC-authorised funds domiciled in and operating from Hong Kong would be “recognised Hong Kong funds”, and qualified mainland funds would be “recognised mainland funds”.
The other highlight is that qualified Hong Kong-funded financial institutions are allowed to set up joint venture fund management companies in the mainland, in accordance with the local requirements. The shareholding of these Hong Kong-funded institutions could exceed 50%. This marks new opportunities for Hong Kong financial institutions to expand their fund business in the mainland.
The fact that the mainland has agreed to actively study fund products mutual recognition is another step forward. Mutual recognition of fund products will no doubt change the dynamics of the fund and securities services industries in Hong Kong and the mainland. Watch this space for further news!
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Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mail at: Zhang Danian (Shanghai) danian.zhang@bakermckenzie.com
