Aggregated News From Investment Management Regulators

SFC concludes consultation on changes to the open-ended fund companies regime and further consults on customer due diligence requirements


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The Securities and Futures Commission (SFC) today released consultation conclusions on enhancements to the open-ended fund companies (OFC) regime (Note 1), including the removal of all investment restrictions for private OFCs (Note 2). The SFC will also allow licensed or registered securities brokers to act as custodians for private OFCs (Note 3) and introduce a statutory mechanism for the re-domiciliation of overseas corporate funds to Hong Kong.

“The changes we announced today will put the OFC structure on a level playing field with other private fund structures,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “This is part of our ongoing effort to support the development of Hong Kong as a preferred fund domicile and full-service international asset management centre.”

The removal of the investment restrictions and expansion of the custodian eligibility requirements will take immediate effect upon gazettal of the revised Code on Open-ended Fund Companies (OFC Code). A six-month transition period will be provided for existing private OFC custodians to make adjustments to comply with the new safekeeping requirements. The re-domiciliation mechanism will come into effect upon completion of the legislative process.

The SFC is further consulting on the customer due diligence requirements for OFCs to better align them with the practices adopted by other funds in Hong Kong (Note 4). The public is invited to submit their comments to the SFC by 5 October 2020.



  1. On 20 December 2019, the SFC launched a two-month Consultation on Proposed Enhancements to the Open-ended Fund Companies Regime. A total of 13 written submissions were received from industry associations, law and accounting firms, asset management firms and individuals. The proposals received general support.
  2. Under the current OFC regime, at least 90% of the gross asset value of a private OFC must consist of (1) those types of assets the management of which would constitute a Type 9 regulated activity, and/ or (2) cash, bank deposits, certificates of deposit, foreign currencies and foreign exchange contracts. A private OFC may not invest more than 10% of its gross asset value in other asset classes. After the investment restrictions are removed, private OFCs can invest in all asset classes without limit.
  3. Intermediaries licensed or registered for Type 1 regulated activity (dealing in securities) will be allowed to act as custodians of private OFCs provided that they meet certain requirements as set out in the revised OFC Code.
  4. Under the proposed customer due diligence requirements, OFCs would have to appoint a responsible person to carry out anti-money laundering and counter-financing of terrorism (AML/CFT) functions as stipulated under Schedule 2 to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. These requirements are similar to those imposed on limited partnership funds under the Limited Partnership Fund Ordinance. The aim is to align the AML/CFT requirements for the different investment vehicles for funds in Hong Kong.

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Regulator Information

Abbreviation: SFC
Jurisdiction: Hong Kong

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