On 15 January 2019, the CSSF announced that the Securities and Futures Commission (SFC) and the CSSF entered into a Memorandum of Understanding (MoU) on Mutual Recognition of Funds (MRF), which will allow eligible Hong Kong (HK) public funds and Luxembourg UCITS funds to be distributed in each other's market through a streamlined process. The SFC and the CSSF may consider extending the MRF to include other types of funds in future in accordance with the MoU.
HK Covered Funds (i.e. Hong Kong-domiciled funds that are eligible for CSSF authorisation or have received CSSF authorisation under the MRF) must be established, domiciled and managed by a HK Covered Management Company in accordance with HK laws and regulations and its constitutive documents and authorised by the SFC under section 104 of the SFO for public offering in HK to be eligible. It covers the following types of funds (i) a general equity fund, bond fund or mixed fund or (ii) a feeder fund where the underlying fund falls within one of the types mentioned in (i). The HK Covered Fund must not invest in (i) physical commodities including precious metals or commodity based investments or real estate, (ii) crypto-assets or crypto-currencies, or (iii) certificates representing the assets referred to under (i) or (ii). The HK Covered Fund must not use leverage (arising from derivatives) exceeding 100% of the fund's net asset value as calculated under the commitment approach provided under the Code on Unit Trusts and Mutual Funds (UT Code).
Prior to marketing its units or shares to retail investors in Luxembourg, a HK Covered Fund must have obtained an authorisation for such marketing by the CSSF. Upon receipt of the application documents, the CSSF will have five working days to assess that all application documents have been duly and properly submitted. If not, the CSSF shall inform the HK Covered Fund accordingly within such five working day period.
The HK Covered Fund must appoint a credit institution in Luxembourg in compliance with the Law of 2010 in order to ensure that facilities are available in Luxembourg for making payments to unit-holders or redeeming units. The Applicant must provide to the CSSF a proof that a paying agent has been appointed for its HK covered Fund.
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