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The SFC has issued a number of new/revised circulars and FAQs in respect of retail funds. The key ones are as follows:
a. Formal adoption of the revamped fund authorisation process: upon the expiry of the six-month pilot period, the revamped process for fund authorisation will be formally adopted with effect from 9 May 2016. The revamped process will be extended to applications of mainland funds under the mutual recognition arrangement. The SFC’s Guide on Practices and Procedures (the Guide) for fund authorisation, the information checklist and the relevant FAQs have been revised accordingly. Applicants must use the revised information checklist from 9 May 2016. One of the major amendments to the information checklist is a new confirmation that the fund will not invest 30% or more of its NAV in any particular type of asset classes or investments or markets save as otherwise disclosed in the Key Facts Statement (KFS) in compliance with the requirements of the Guide.
b. Green light for simple leveraged and inverse ETFs: the SFC has issued a new circular and new FAQs to provide guidance on the factors the SFC would consider in authorising leveraged and inverse exchange traded funds (L&I Products). There are additional requirements covering product names, structure, disclosure in offering documents and market making arrangements. Both swap-based and futures-based structures are allowed for L&I Products. There are caps on the permitted leverage factor: two times for leveraged products and one time for inverse products. Initially, the underlying indices of L&I Products must be broadly based non-Hong Kong, non-Mainland foreign equity indices.
c. A new FAQ regarding the SFC’s acceptability criteria for managers of futures and options funds authorised under Chapter 8.4 of the Code on Unit Trusts and Mutual Funds has been added to clarify the SFC’s requirements on the experience of the managers / delegates (Q8A).
d. Updates to FAQs on post authorisation compliance issues of authorised funds:
e. Updates to FAQs on Mainland-Hong Kong mutual recognition of funds (MRF):
f. Revised Guidance on Internal Product Approval Process – a footnote has been added to clarify that issues related to “expected tenor” under “Target market identification” are only relevant to funds with specific tenor such as guaranteed funds and structured funds which have pre-determined rules-based pay-outs.
g. MRF-related forms for scheme changes / revised offering documents have been issued and updated – these are applicable to recognised mainland funds which have post-authorisation changes.
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