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The Securities and Futures Commission (SFC) launched a three-month consultation on 23 November 2016 on proposed enhancements to the Fund Manager Code of Conduct (FMCC) and the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct) as part of the SFC’s objective to ensure that the regulatory regime for the asset management industry is in line with international regulatory developments.
Who is affected?
All SFC Type 9 licensed / registered fund managers (managing either public or private funds or discretionary accounts) and their representatives (Managers) and SFC licensed intermediaries are affected. Managers of public funds are generally already subject to more stringent requirements.
What does it affect?
Enhancements proposed to the FMCC address four areas, listed below. They will impact all Managers. Managers with responsibility for overall fund operation (or de facto control of the fund’s oversight and operation) (Controlling Managers) must assume additional responsibilities.
There are other miscellaneous updates, the main ones are (i) requiring Controlling Managers to schedule independent audits; (ii) clarification of the requirements on the use of side pockets; (iii) enhanced SFC reporting; and (iv) trades when aggregating house and client orders.
Proposed changes to the Code of Conduct enhance point-of-sale transparency for potential conflicts of interest arising out of inducements and commissions received by intermediaries from sale of investment products. The Consultation’s two pronged approach is:
The updated Code of Conduct will also clarify that it and its general principles apply to all Managers. The SFC did consider, but decided to keep under review (i) manager remuneration and alignment of manager and investor interests; and (ii) unbundling of research from broker commissions.
The SFC invites interested parties to submit comments on or before 22 February 2017.
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