Mutual Recognition of Funds (MRF) between France and Hong Kong

10 Jul 2017



  1. The Securities and Futures Commission (SFC) and the Autorité des Marchés Financiers (AMF) signed a Memorandum of Understanding (MoU) on France-Hong Kong mutual recognition of funds on 10 July 2017. The MoU provides a framework for mutual recognition of covered funds offered, marketed and distributed to retail investors in France and the public in Hong Kong. 

  2. For the purpose of this Circular, unless otherwise defined herein, the words beginning with a capital letter refer to the list of definitions set out in Article 1 of the MoU.

  3. For the purpose of this Circular, the term “French Covered Fund” means a French-domiciled UCITS fund authorized or seeking authorization for offering, marketing and distribution to the public in Hong Kong through a streamlined process in accordance with Section 104 of the SFO pursuant to this Circular, provided that such fund meets the applicable conditions as set out in this Circular.

  4. For the purpose of this Circular, the term “French Covered Management Company” means a French-domiciled management company which is licensed or authorized by the AMF to manage French Covered Funds and meets the applicable conditions as set out in this Circular.

    General principles

  5. MRF operates on the principles that, in respect of a French Covered Fund that has been authorized by the AMF and is seeking or has received authorization to be offered, marketed and distributed to the public in Hong Kong:

    a.  the French Covered Fund shall meet the eligibility requirements (Eligibility Requirements) set out in Annex B to this Circular;     

    b.  the French Covered Fund shall remain authorized by the AMF in France and is allowed to be offered, marketed and distributed to retail investors within France;

    c.  the French Covered Fund shall operate and be managed in accordance with the relevant laws and regulations in France and its constitutive documents;

    d.  the sale and distribution of the French Covered Fund in Hong Kong shall comply with the applicable laws and regulations in Hong Kong; 

    e.  the French Covered Fund and the French Covered Management Company shall comply with the additional rules released by the SFC governing the authorization, post authorization and ongoing compliance in the context of the offering, marketing and distribution of the French Covered Fund to the public in Hong Kong; and

    f.  the French Covered Management Company of the French Covered Fund shall ensure holders in both France and Hong Kong receive fair treatment, including in respect of investor protection, exercise of rights, compensation and disclosure of information. 

  6. In general, funds that are seeking SFC authorization or have received SFC authorization for offering to the public in Hong Kong pursuant to Section 104 of the SFO have to comply with the SFC Handbook for Unit Trusts and Mutual Funds, Investment-Linked Assurance Schemes and Unlisted Structured Investment Products (SFC Handbook) and the circulars, guidelines and other requirements as may be issued by the SFC from time to time (together with the SFO, the Hong Kong laws and regulations). On the basis of the principles set out above, if a French Covered Fund complies with the relevant French laws and regulations and the conditions described in this Circular, it is generally deemed to have complied in substance with the relevant SFC requirements and will enjoy a streamlined process of authorization for offering to the public in Hong Kong.

  7. In view of the differences between the Hong Kong and the French regulatory regimes, to ensure proper investor protection and consistency with existing Hong Kong SFC-authorized funds, this Circular sets out the additional requirements with which a French Covered Fund has to comply when applying for SFC authorization for offering, marketing and distribution to the public in Hong Kong under the MRF, as well as other requirements which a French Covered Fund has to observe after obtaining SFC authorization.

  8. The SFC will grant authorization to a French Covered Fund for offering, marketing and distribution to the public in Hong Kong within one month (the one-month period)1 provided that the French Covered Fund meets all the applicable requirements set out in this Circular and that the SFC has received a complete and satisfactory set of Application Documents as described in paragraph 45 in relation to the application process.

    Eligibility Requirements and types of French Covered Funds

  9. The Eligibility Requirements are set out in Annex B to this Circular.

  10. The SFC and the AMF may consider extending the MRF to include other types of funds in future in accordance with the MoU.

  11. A French Covered Fund must comply with the requirements set out under the “Requirements applicable to all French Covered Funds” section below.

    Requirements applicable to all French Covered Funds

  12. To ensure proper investor protection and consistency with existing Hong Kong schemes authorized for offering, marketing and distribution to the public in Hong Kong, French Covered Funds are required to comply with the requirements set out in paragraphs 13 to 53 below, as well as the relevant requirements set out in Annex A to this Circular.

    Representatives in Hong Kong

  13. Each French Covered Fund must appoint a firm in Hong Kong as its representative in compliance with Chapter 9 and 11.1(b) of the UT Code.

    Operational and ongoing requirements

    AMF supervision

  14. The French Covered Fund must, on an ongoing basis, remain authorized by the AMF for offering, marketing and distribution to retail investors in France, be subject to the ongoing regulation and supervision of the AMF and comply with the Eligibility Requirements set out in Annex B to this Circular.

    Reporting obligation

  15. The French Covered Fund shall have at least 20% of the French Covered Fund’s net asset value attributable to investors in France on an ongoing basis for offering, marketing and distribution to the public in Hong Kong.     

    The French Covered Management Company shall confirm to the AMF semi-annually that at least 20% of the French Covered Fund’s net asset value is attributable to investors in France at the end of each reporting period.

  16. If the AMF becomes aware or is notified that the French Covered Fund or its French Covered Management Company fails to meet the requirement set out in paragraph 15 above, it shall notify the SFC as soon as possible.

    Jurisdiction

  17. The French Covered Management Company shall ensure and procure its distributors to ensure that Hong Kong investors are able to bring actions concerning the French Covered Fund and the French Covered Management Company in the courts of Hong Kong.

    Changes to French Covered Funds

  18. No change shall be made to a French Covered Fund resulting in non-compliance with the Eligibility Requirements set out in Annex B to this Circular.  If the AMF is aware of such change, it shall notify the SFC as soon as possible.

  19. Changes to a French Covered Fund shall be made in accordance with the applicable French laws and regulations and the provisions of its constitutive documents2.  Changes to a French Covered Fund shall not contravene the applicable French laws and regulations and the requirements set out in this Circular. 

  20. These changes shall be effective upon approval by the AMF or compliance with the appropriate procedures.

  21. However, changes that affect Hong Kong investors only and revisions made to the offering documents of a French Covered Fund relating to such changes should be made in accordance with the requirements under the relevant Hong Kong laws and regulations. Prior consultation with the SFC concerning such changes is encouraged.

  22. The AMF shall notify the SFC of any change approved by the AMF in respect of a French Covered Fund authorized by the SFC in Hong Kong as soon as possible and in any event within one week from the date of approval.          

    In addition, the AMF will confirm to the SFC that the French Covered Fund effecting such changes continues to meet the Eligibility Requirements set out in Annex B to this Circular.

  23. The French Covered Management Company shall ensure that the SFC is informed of any change filed with the AMF as soon as possible and in any event within one week from the date of filing with the AMF.

  24. Holders in Hong Kong shall be notified about the changes to the French Covered Fund according to the relevant Hong Kong laws and regulations.

    Breach

  25. In the event of a breach of French laws and regulations or of the requirements set out or referred to in this Circular comes to the attention of the AMF, the AMF will notify promptly the SFC pursuant to the MoU. The French Covered Management Company shall rectify the breach promptly. The AMF will notify the SFC when the French Covered Management Company has rectified the breach.

  26. Following SFC authorization, if a French Covered Fund ceases to meet any of the requirements as set out in this Circular, the SFC may withdraw its authorization to offer, market and distribute the fund to the public in Hong Kong, after informing the AMF. In any case, the French Covered Fund shall cease to be offered to the public in Hong Kong and shall not accept subscriptions from new investors in Hong Kong without the SFC’s prior approval.

    Withdrawal of authorization

  27. Following the authorization of a French Covered Fund, if its French Covered Management Company does not wish to maintain such authorization, it shall apply for withdrawal of authorization from the SFC in accordance with the applicable Hong Kong laws and regulations.

    Termination

  28. Termination of a French Covered Fund shall require the approval of the AMF with immediate notice from the AMF to the SFC. Termination notice to Hong Kong investors should be submitted to the SFC for prior approval.

    Sale/distribution, offering documents, ongoing disclosure and advertisements

    Sale/distribution

  29. The sale and distribution of a French Covered Fund in Hong Kong must be conducted by intermediaries properly licensed by or registered with the SFC. The sale and distribution of a French Covered Fund in Hong Kong shall comply with the applicable Hong Kong laws and regulations relating to distribution, sale and marketing of funds.

    Offering documents

  30. The disclosure of information relating to a French Covered Fund shall be complete, accurate, fair, clear, effective, and shall be capable of being easily understood by investors.

  31. The offering documents of a French Covered Fund must be up-to-date and contain information necessary for investors to be able to make an informed judgement of the investment proposed to them.

  32. The offering documents used to market a French Covered Fund in Hong Kong shall include the following statement: 

    “This fund, authorized by the SFC for offering, marketing and distribution to the public in Hong Kong, remains governed by laws, ordinances and other regulations or requirements applicable in France and is supervised by the Autorité des Marchés Financiers in France. It complies with rules (including investment restrictions) that are different from the requirements applicable to other SFC-authorized funds established under the Hong Kong laws.”

  33. A French Covered Fund may utilize the prospectus authorized by the AMF. Unless otherwise provided in this Circular, matters such as the content of the prospectus, its format, frequency of its update and the update procedures shall comply with the applicable French laws and regulations and the provisions of its constitutive documents. In addition, the AMF-authorized prospectus may be supplemented by a Hong Kong covering document to comply with the disclosure requirements set out in Annex A to this Circular and to disclose any other information which may have a material impact on investors in Hong Kong.  The prospectus and the Hong Kong covering document shall not contain any information that would be inaccurate/misleading regarding the French Covered Fund.

  34. The French Covered Management Company shall ensure fair treatment for investors in France and in Hong Kong in making available to them the offering documents of a French Covered Fund and their possible changes. In any case, the French Covered Management Company shall comply with the requirements regarding information to be provided to investors provided under relevant Hong Kong laws and regulations. Subject to paragraph 21, the revised offering documents of a French Covered Fund shall be filed with the SFC as soon as possible and in any event within one week after the revised offering documents have received AMF’s authorization or are filed with the AMF.

    Ongoing disclosure

  35. The French Covered Management Company shall provide ongoing disclosure of information (including periodic financial reports and notices) to investors in Hong Kong regarding the French Covered Fund as provided under relevant Hong Kong laws and regulations3.

  36. The French Covered Management Company shall ensure fair treatment of investors in France and Hong Kong regarding the ongoing disclosure of information of a French Covered Fund (including periodic financial reports and notices).

  37. The ongoing disclosure should be filed with the SFC as soon as possible and in any event within one week after it has received AMF’s authorization or is filed with the AMF.

  38. French Covered Funds shall comply with the requirements set out in Annex A to this Circular and on an ongoing basis, disclose any other information which may have a material impact on investors in Hong Kong. 

  39. Subject to paragraph 41, a French Covered Fund may use its French financial reports as the basis for distribution in Hong Kong, provided that it is supplemented by the additional information and meet the other requirements set out in Annex A to this Circular.

    Language

  40. The offering documents and notices to Hong Kong investors of a French Covered Fund shall be provided in English and Chinese.

  41. The constitutive documents and financial reports of a French Covered Fund shall be made available to Hong Kong investors in either English or Chinese. The language in which these documents are made available to Hong Kong investors should be clearly disclosed in the offering documents.

    Advertising guidelines

  42. All advertisements and marketing materials in relation to the French Covered Fund issued in Hong Kong shall comply with the applicable Hong Kong laws and regulations, in particular, the Advertising Guidelines Applicable to CIS Authorized under the Product Codes.

    Application process

  43. Unless otherwise specified in paragraphs 44 to 51, the applications of French Covered Funds seeking SFC’s authorization under the MRF are subject to the revamped fund authorization process as set out in SFC’s circular entitled “Circular to management companies of SFC-authorized unit trusts and mutual funds – Formal adoption of revamped fund authorization process” dated 22 April 2016 (as amended on 2 December 2016).

  44. Applications of French Covered Funds will be processed and classified as Standard Applications under the revamped fund authorization process.

  45. To start an application, the following documents (Application Documents) have to be submitted to the SFC through the AMF:

    a.  a duly signed and completed Application Form;

    b.  a duly signed and completed Information Checklist (http://www.sfc.hk/web/EN/forms/products/forms.html);

    c.  a certificate from the AMF confirming that the Eligibility Requirements listed in Annex B to this Circular are met;

    d.  advanced draft of the French Covered Fund’s offering documents in English (including the product key facts statement) and, where applicable, marked up against the latest version filed with the SFC;

    e.  constitutive documents of the French Covered Fund in either English or Chinese;

    f.  documents (including any confirmations and/or undertakings) required to be submitted under or pursuant to the Information Checklist; and 

    g.  a cheque made payable to “Securities and Futures Commission” in the amount of the applicable application fee (see Q.3 of the FAQs on Application Procedures for Authorization of Unit Trusts and Mutual Funds under the Revamped Process).

  46. Upon receipt of the Application Documents, the SFC will have five working days to assess that all Application Documents have been duly and properly submitted. 

  47. Provided that the French Covered Fund meets all the applicable requirements set out in this Circular and if no requisition letter, as described in paragraph 48 below, is issued by the SFC, the SFC will grant authorization with conditions4 to a French Covered Fund within the one-month period. The one-month period will start from the date the SFC confirms that it has received, to its satisfaction, the Application Documents listed in paragraph 45 above. Should a requisition letter be issued by the SFC, the SFC will grant authorization to a French Covered Fund within two months (the two-month period) provided that all outstanding issues have been addressed to the satisfaction of the SFC.

  48. A requisition letter might be sent by the SFC for any clarifications relating only to matters relating to paragraphs 29 to 42 and in Annex A to this Circular that it considers necessary.

  49. The SFC may refuse the application if outstanding issues are not addressed to the satisfaction of the SFC within the two-month period.

  50. Once the SFC authorizes the application, it will notify the AMF.

  51. The application process shall be made through the following address: mrffrance@sfc.hk.

  52. The SFC encourages applicants to consult the Investment Products Division early for any clarification or guidance as to how the relevant requirements may apply and be complied with in light of their specific circumstances.

  53. The SFC may issue other circulars, frequently asked questions and other documents from time to time to provide practical guidance to the industry. Please refer to the SFC’s website or contact the Investment Products Division.

     

    Investment Products Division
    Securities and Futures Commission

 

1 Such period may be extended to two months should additional information be required by the SFC.

2 For the avoidance of doubt, change in Delegate(s) is subject to AMF’s prior approval.

3 It is expected that to the extent there are requirements on minimum notice period and content of or template for the notice to Hong Kong investors under the relevant Hong Kong laws and regulations, the French Covered Fund should comply with these requirements.

4 For the authorization of a French Covered Fund to become effective, the conditions that are required to be fulfilled include: (i) the submission of offering documents properly addressing all the comments of the SFC, (ii) the submission of Chinese version of offering documents together with the Chinese translation confirmation(s); (iii) the due appointment of a Hong Kong representative; and (iv) the payment to the SFC of authorization fee and annual fee (for the first year of authorization).

 

 

 

 

 

 

 

 

 


Click here to download the document

Supplementary document:
Annex A - C


Page last updated : 10 Jul 2017