Hong Kong Securities Regulator Proposes to Enhance Asset Management Regulation

Hong Kong's capital markets regulator has launched a three-month consultation period on proposals to enhance the regulation of the asset management industry and point-of-sale transparency. 

The Securities and Futures Commission's ("SFC") stated aim is to protect investors' interests more effectively and to ensure market integrity. The regulator formulated the proposals after a review of major international regulatory developments, factoring in observations and views from industry stakeholders.

"A robust and responsive regulatory regime is fundamental to the development and growth of an international asset management centre. As part of the SFC's broader initiative to enhance Hong Kong's position as a major international asset management centre, it is important to ensure that our regulations are properly benchmarked to evolving international standards," Ashley Alder, the SFC's chief executive, said. 

The proposed changes will be made to the SFC's 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"). Details are set out in the securities regulator's consultation paper. 

The main areas to be amended under the FMCC are securities lending and repurchase agreements, custody of fund assets, liquidity risk management and disclosure of leverage by fund managers. The proposed changes to the Code of Conduct will seek to address the potential conflicts of interest in the sale of investment products and enhance disclosure at the point-of-sale by:

  • restricting an intermediary from representing itself as "independent" or using any term(s) with a similar inference if the intermediary receives a commission or other monetary or non-monetary benefits or it has links or other legal or economic relationships with product issuers which are likely to impair its independence; and
  • requiring an intermediary to disclose the range and maximum dollar amount of any monetary benefits received or receivable that are not quantifiable prior to or at the point of sale.

Members of the public should submit their comments and observations to the SFC on or before 22 February 2017.


Ajay Shamdasani is a senior staff writer with Thomson Reuters Regulatory Intelligence in Hong Kong. He covers regulatory developments in Hong Kong, India and South Korea. He also writes about money laundering, fraud, corruption, data privacy and cybercrime.