The SFC has recently updated publication requirements for funds authorised in Hong Kong. Here we summarise selected developments.
Publication of fund prices and dealing suspension notices
The SFC revised the Code on Unit Trusts and Mutual Funds (UT Code) on 30 January 2015, implementing new publication requirements relating to fund prices or net asset value (NAV). SFC-authorised funds are now required to publish NAVs on every dealing day to enhance transparency, subject to a six-month transitional period for existing authorised funds. Under the revised UT Code, authorised funds are allowed to use any appropriate means (e.g. newspapers, telephone hotlines and websites) to publish NAVs. The previous requirement to publish NAVs in newspapers only has been removed. Fund managers also have the discretion to publish dealing suspension notices by any appropriate means (e.g. websites). The SFC has posted a revised circular on dealing suspensions on their website to provide further guidance.
Managers planning to utilise the flexibility to publish NAVs and dealing suspension notices in media other than newspapers should check their funds’ constitutive and offering documents to ensure they provide appropriate powers.
Further to the SFC’s reminder to fund managers in 2014, the SFC updated its FAQ on advertising materials for authorised funds and published illustrative examples of advertisements which are considered not acceptable. In particular, the SFC stressed that the upfront risk disclosures of an advertisement should be concise, reader-friendly and “eye-catching” – font size and spacing should be comparable with the main text of the advertisement. Any benefits or returns should not be presented in text disproportionately larger than the risks of the fund, and must be accompanied with prominent disclaimers and explanatory notes as required by the SFC.
Disclosure of ongoing charges figures / past performance in KFS
With the expiry of the transitional period in January 2015, all existing and new funds authorised by the SFC are required to publish their ongoing charges figures and past performance in the key facts statement (KFS). The SFC has updated its FAQs to clarify and provide guidance relating to (i) ongoing charges incurred by the underlying funds held by the master funds, (ii) funds with a fixed rate of ongoing charges, and (iii) total expense ratio of an exchange traded fund.
The SFC has commenced its post-vetting of the enhanced KFS and has been providing comments to fund houses. In general, the SFC requires that the ongoing charges figures should be based on the most recent available annual or semi-annual financial reports of the funds. Funds are required to disclose clearly the computation basis of the charges. Estimates must be provided for new funds with the basis of estimation clearly disclosed.
Fund managers are reminded that KFS that have not yet incorporated the 2014 calendar year performance should be updated prior to the end of April 2015.