Hong Kong’s Securities and Futures Commission has revealed plans to shore up its status as an asset management hub and funds domicile.
In its latest annual report, the SFC has outlined its initiatives to improve market access through new mutual recognition of funds programmes with Europe and increased oversight of commissions and the custody of assets.
Regulators in the Special Administrative Region have faced criticism over lax enforcement of corporate governance and IPO rules.
‘We strive to combine sound regulation with the development of new products and platforms and the pursuit of overseas market access,’ SFC CEO Ashley Alder said in a statement.
Hong Kong has been pushing market access programmes, including Mutual Recognition of Funds schemes with Switzerland and mainland China, and the Stock Connect initiative linking the Hong Kong bourse with its counterparts in Shenzhen and Shanghai.
Since last year, the regulator has been speaking to European counterparts to establish another MRF arrangement. It is also speaking to the China Securities Regulatory Commission on including exchange-traded funds as eligible securities under Stock Connect. A new ‘Bond Connect’, linking the bond markets on the mainland with Hong Kong’s markets, is also in the works.
According to the proposals in its annual report, the SFC is developing legislation for open-ended fund companies in Hong Kong which, when enacted, would provide the industry with the choice of an alternative investment fund vehicle.
The regulator is also looking to tighten rules on commissions and independent advice, custody of fund assets and liquidity management. As data collection in financial centres grows due to the Common Reporting Standards, Hong Kong is examining the existing reporting requirements for public funds.
The SFC is also conducting a holistic review of the Code on Unit Trusts and Mutual Funds to align the regulatory framework of SFC-authorised funds with international standards.
The combined assets under management of fund management business in Hong Kong stood at $2.2 trillion in November 2016. The number of asset management licenses granted by the SFC has been increasing over the past few years, exceeding 1,200 by the end of September 2016.