Taylor Hui was recently quoted in an article on the mutual fund recognition scheme in International Financial Law Review (IFLR).
Taylor said: “The mutual recognition of funds between Hong Kong and China is a breakthrough, and allows both sides to have a fast-track approach.”
On the topic of redemption charges, Taylor explained that in Hong Kong there are no back-end load funds being offered. That, he said, creates a technical issue in that the systems used by banks here do not cater for this redemption charge mechanism.
From the PRC legal point of view, he said, Chinese funds would need to update their fund constitutional documents if they wish to make SFC application as early as July. “This will not require all investors to hold a meeting,” he added. “Instead they can update the documents and make a subsequent filing with the CSRC.”
Taylor warned that the bulk of the work is actually translation, particularly when going southbound. Prospectuses must also be converted from simplified Chinese to traditional Chinese, with the additional requirement that they must be understandable for Hong Kong investors. “That means that they also need to look at how the language is used, and whether that is in line with the habits of Hong Kong investors,” he said.
“They should make sure that the technical wiring of funds is ready to take orders and that banks are prepared to distribute their products. Regulatory approval of the funds is important on one level, but they must also do the groundwork to support their sales and distribution,” he concluded.
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