SFC proposes amendments to the Code on Unit Trusts and Mutual Funds

18 Dec 2017

The Securities and Futures Commission (SFC) today launched a three-month consultation on proposed amendments to the Code on Unit Trusts and Mutual Funds (UT Code) (Note 1) to update the regulatory regime for SFC-authorized funds and address risks posed by financial innovation and fast-moving market developments (Note 2).

Key proposals include strengthening requirements for key operators (management companies, trustees and custodians), providing greater flexibility and enhanced safeguards for funds' investment activities (particularly in relation to derivatives, securities lending, and repo and reverse repo transactions), and introducing new fund types (including active ETFs) (Note 3). The proposals are made in view of international regulatory and local market developments (Note 4).

"An important part of the SFC's strategy to strengthen Hong Kong as an international, full-service asset management centre is to ensure that the regulations governing public funds remain robust and aligned with international standards," said Mr Ashley Alder, the SFC's Chief Executive Officer. "These updates to the UT Code will provide a foundation for further growth in our retail fund industry."

Consequential amendments are also proposed to relevant provisions of the SFC Code on MPF Products, the Code on Pooled Retirement Funds and the Code on Investment-Linked Assurance Schemes.

The public is invited to submit their comments to the SFC on or before 19 March 2018 via the SFC website (www.sfc.hk), by email to utc-consultation@sfc.hk, by post or by fax to 2877 0318.



  1. The Securities and Futures Commission is empowered under section 104(1) of the Securities and Futures Ordinance to authorize collective investment schemes (CIS). The UT Code establishes guidelines for the authorization of CIS in the nature of mutual funds or unit trusts for offering to the public in Hong Kong (SFC-authorized funds).
  2. Unit trusts and mutual funds constitute a large portion of the financial products authorized by the SFC for offering to the Hong Kong public. As of 30 September 2017, there were 2,188 public funds authorized by the SFC, representing 79% of all SFC-authorized CIS. There were 753 Hong Kong-domiciled funds and their assets under management (AUM) amounted to US$151 billion. Since 2012, the number of Hong Kong-domiciled SFC-authorized funds has almost doubled and their AUM has increased by 158%.
  3. Some industry participants have expressed interest in launching active ETFs in Hong Kong. In view of this, the SFC proposes to introduce active ETFs to provide investors with more investment choices.
  4. Since the global financial crisis, the asset management industry has posted robust growth and there have been significant international regulatory developments in relation to public funds. The International Organization of Securities Commissions (IOSCO) issued enhanced standards for custody of assets, liquidity risk management, money market funds and valuations, while the Financial Stability Board (FSB) issued policy recommendations covering securities lending, repo transactions and other areas.

Page last updated : 18 Dec 2017