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SFC issues consultation conclusions on fund manager code and point of sale transparency

The Securities and Futures Commission (SFC) issued its consultation conclusions on the Fund Manager Code of Conduct (FMCC) 16 November 2017, agreeing to a twelve month transition period before the revised FMCC takes effect on 17 November 2018.

Changes to the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct) dealing with point-of-sale transparency in relation to disclosure of monetary benefits and non-monetary benefits and ability of an intermediary to market itself as independent will take effect from 17 August 2018.

The SFC has issued a further consultation on the disclosure requirements applicable to discretionary accounts which will expire on 15 January 2018.

Points to note in respect of the revised FMCC

  • The FMCC only applies to entities licensed with the SFC to engage in Type 9 regulated activity (“asset management”);
  • it covers the management of both retail and private funds as well as discretionary accounts;
  • certain provisions of the FMCC only apply to fund managers who are responsible for the “overall operation of fund”;
  • the SFC will issue FAQs giving examples of when a fund manager will be deemed to be responsible for the overall operation of fund;
  • the consequences of being responsible for the overall operation of a fund will result in a fund manager having to implement specific policies dealing with a number of issues ranging from leverage, securities lending to liquidity management. Furthermore, additional disclosure obligations to investors will arise – this in turn will require a review and possible amendments to existing prospectus documentation;
  • for entities that are not responsible for the “overall operation of a fund”, they will nonetheless be subject to additional responsibilities in connection with the appointment and ongoing monitoring of delegates and also be required to implement polices addressing risk management and securities lending by reference to specific requirements set out in the FMCC; and
  • additional minimum contents requirements have been set for client agreements in respect of discretionary account management.

The consultation conclusions and FAQs issued by the SFC can be accessed here:

Key Contacts

Jeremy Lam

Partner | Financial Services

Email or call +852 2825 9732

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