As a reminder the SFC has reviewed the current regulations governing the asset management industry and released a consultation paper in November 2016 which proposes amendments to the Fund Manager Code of Conduct (“FMCC”) and the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (“Code of Conduct”).
We separately released a commentary on who is in scope previously but broadly it covers all fund managers in Hong Kong regardless of whether they manage a public (ie SFC authorised) or a private fund and regardless of where the funds are domiciled. We also clarified the applicability of the FMCC and distinctions between parts of the FMCC that are applicable to fund managers and discretionary account managers.
This paper deals with the introduction of new requirements for securities lending and repurchase agreements, appointments of custodians and safe custody of fund assets, risk management and liquidity risk management and disclosure of leverage all of which are causing discussion as these are fund level requirements. Our comments are in italics.
Just as a reminder the SFC has added several new definitions to the FMCC.
1. Fund or client means the collective investment scheme (“CIS”) (authorised or unauthorised) managed by the fund manager.
2. Fund investors refers to investors as whole in the CIS (authorised or unauthorised) managed by the Fund Manager.
3. In the case of discretionary accounts:
- Fund or client means Discretionary Accounts;
- Fund investors means Discretionary Account Clients;
- Fund Manager means Discretionary Account Manager (“DAM”); and
- Constitutive documents or offering documents means the investment management agreement or discretionary client agreement.
4. If a Hong Kong based Fund Manager has been delegated the management of a portfolio, a fund or part of the portfolio of a fund, its client is the delegating fund manager and “fund” will mean the portfolio managed by the Hong Kong based manager.