On 15 January 2019, the Hong Kong Securities and Futures Commission ("SFC") and the CSSF signed a Memorandum of Understanding ("MoU") concerning mutual recognition of investment funds. The conditions applicable to Hong Kong funds and their management companies wishing to access the Luxembourg retail market are provided in a CSSF document ("CSSF streamlining requirements and process for mutual recognition of Hong Kong funds") dated 15 January 2019.

On the same date, the SFC published a circular ("SFC Circular") which sets out the additional requirements to be fulfilled by eligible Luxembourg UCITS funds and eligible UCITS management companies.

The SFC Circular and the CSSF streamlining requirements and process for mutual recognition of Hong Kong funds outline the general principles which apply in the case of mutual recognition. They outline the eligibility conditions and the ongoing requirements (e.g. operational requirements, disclosure and reporting requirements) which must be complied with in order for Luxembourg UCITS and Hong Kong funds to access the Luxembourg retail market and/or the Hong Kong retail market, as applicable.

The following types of Luxembourg UCITS funds are eligible:

  • equity funds, bond funds, mixed funds; or
  • feeder funds of equity, bond or mixed funds.

As part of the Hong Kong market access requirements, eligible Luxembourg UCITS funds must appoint a Hong Kong representative to handle dealing requests as well as enquiries from Hong Kong investors. Eligible UCITS management companies must ensure that investors in both Luxembourg and Hong Kong receive fair treatment, including in respect of investor protection, exercise of rights, compensation and disclosure of information. In order to ensure investor protection and consistency with the existing Hong Kong regime applicable to authorised retail funds, the MoU establishes a framework for the exchange of information, regular dialogue as well as regulatory cooperation between the SFC and the CSSF in relation to cross-border offering of eligible funds.

Depending on the practical implementation by the SFC, Luxembourg in-scope UCITS can expect fast treatment of their file in accordance with the SFC Circular particularly if they are handled under the "Standard Application" stream.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.