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3 Section II - Code on Unit Trusts and Mutual Funds ...

Code on Unit Trusts and Section II: Code on Unit Trusts and Mutual Funds Mutual Funds Section II: Implementation schedule The effective date of this UT Code is 1 January 2019. For the purpose of the implementation of this UT Code: (a) New schemes refer to schemes which apply for the SFC's authorization on or after the effective date;. (b) New operators refer to (i) management companies which do not manage any SFC- authorized schemes as at the effective date (new management companies); and (ii). trustees/custodians which do not act as the trustee/custodian of any SFC-authorized schemes as at the effective date (new trustees/custodians);. (c) Existing schemes refer to (i) schemes which are authorized by the SFC as at the effective date; and (ii) schemes which applied for the SFC's authorization prior to the effective date and are subsequently authorized by the SFC; and (d) Existing operators refer to (i) management companies which are managing SFC- authorized schemes as at the effective date (existing management companies); and (ii).

Topics January 2019 Provisions of the UT Code New schemes with new operators (i.e. with new management companies and new trustees/ custodians) New schemes with new management companies but existing trustees/ custodians

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Transcription of 3 Section II - Code on Unit Trusts and Mutual Funds ...

1 Code on Unit Trusts and Section II: Code on Unit Trusts and Mutual Funds Mutual Funds Section II: Implementation schedule The effective date of this UT Code is 1 January 2019. For the purpose of the implementation of this UT Code: (a) New schemes refer to schemes which apply for the SFC's authorization on or after the effective date;. (b) New operators refer to (i) management companies which do not manage any SFC- authorized schemes as at the effective date (new management companies); and (ii). trustees/custodians which do not act as the trustee/custodian of any SFC-authorized schemes as at the effective date (new trustees/custodians);. (c) Existing schemes refer to (i) schemes which are authorized by the SFC as at the effective date; and (ii) schemes which applied for the SFC's authorization prior to the effective date and are subsequently authorized by the SFC; and (d) Existing operators refer to (i) management companies which are managing SFC- authorized schemes as at the effective date (existing management companies); and (ii).

2 Trustees/custodians which are acting as the trustee/custodian of SFC-authorized schemes as at the effective date (existing trustees/custodians). As from the effective date, this UT Code will apply to new schemes with new operators with immediate effect. As for existing schemes and existing operators, a transition period of 12 months from the effective date will be provided to comply with this UT Code unless otherwise set out in the attached table. January 2019. Topics Provisions of New schemes New schemes New schemes New schemes Existing the UT Code with new with new with new with existing schemes with operators ( management trustees/ operators existing with new companies but custodians operators management existing but existing companies and trustees/ management new trustees/ custodians companies custodians). I. Key operators Trustees/custodians Chapter 4 Immediately 12-month Immediately 12-month 12-month effective transitional effective transitional transitional period period period Review on internal Appendix G.

3 Controls and systems of trustees/custodians1. Management companies Chapter 5 Immediately Immediately 12-month 12-month 12-month effective effective transitional transitional transitional period period period II. Investments Core investment Chapter 7 Immediately 12-month transitional period (existing guarantors of existing schemes will requirements effective be grandfathered with respect to (a)). 1. The 12-month transition period for the review on the internal controls and systems of trustees/custodians in accordance with Appendix G of the UT. Code means that the review reports of trustees/custodians with a financial year starting on a date after 12 months from the effective date should comply in full with the new requirements. January 2019. Topics Provisions of New schemes New schemes New schemes New schemes Existing the UT Code with new with new with new with existing schemes with operators ( management trustees/ operators existing with new companies but custodians operators management existing but existing companies and trustees/ management new trustees/ custodians companies custodians).

4 Money market Funds Immediately effective 12-month transitional period Unlisted index Funds and Immediately 12-month transitional period index tracking exchange effective traded Funds Hedge Funds Structured Funds Funds that invest extensively in financial derivative instruments Listed open-ended Funds Immediately effective Not applicable (also known as active ETFs). Closed-ended Funds Immediately effective January 2019. Topics Provisions of New schemes New schemes New schemes New schemes Existing the UT Code with new with new with new with existing schemes with operators ( management trustees/ operators existing with new companies but custodians operators management existing but existing companies and trustees/ management new trustees/ custodians companies custodians). Unit portfolio Not applicable Not applicable 12-month management Funds transitional period2. Futures and options Funds III. Disclosure and reporting Offering documents Appendix C Immediately 12-month transitional period effective Constitutive documents Appendix D.

5 Financial reports3 Appendix E. IV. Operational and post-authorization requirements Operational matters Chapters 6 Immediately 12-month transitional period and 10 effective 2. Existing unit portfolio management Funds are expected to comply with the requirements under Chapter 7. Existing futures and options Funds are expected to comply with the requirements either under Chapter (hedge Funds ), Chapter (structured Funds ) or Chapter ( Funds that invest extensively in financial derivative instruments). 3. The 12-month transition period for the enhanced disclosure in a fund's interim and annual reports as set out in Appendix E of the UT Code means that the interim and annual reports with a financial period or financial year starting on a date after 12 months from the effective date should comply in full with the new requirements. January 2019. Topics Provisions of New schemes New schemes New schemes New schemes Existing the UT Code with new with new with new with existing schemes with operators ( management trustees/ operators existing with new companies but custodians operators management existing but existing companies and trustees/ management new trustees/ custodians companies custodians).

6 Scheme changes, Chapter 11 Immediately effective notifications and reporting V. Others Additional requirements Chapter 9 Immediately 12-month transitional period for non-Hong Kong based effective schemes General matters Chapters 1, 2. and 3. January 2019. Explanatory Notes: (a) The Securities and Futures Commission is empowered under Section 104(1) of the Securities and Futures Ordinance ( SFO ) to authorize collective investment schemes. By virtue of Section 104(1), the authorization may be granted subject to such conditions as the Commission considers appropriate. This Code on Unit Trusts and Mutual Funds ( UT Code ), which forms part of the Handbook, establishes guidelines for the authorization of collective investment schemes in the nature of Mutual fund corporations or unit Trusts , and codifies practices established in relation to the former Code on Unit Trusts and Mutual Funds published pursuant to the SFO.

7 Any change or amendment to this UT Code will be made known to the industry and transitional periods for compliance will be allowed where necessary. (b) The Commission may review its authorization at any time and may modify, add to or withdraw such authorization as it deems fit. (c) The issue of an advertisement or invitation to the public in Hong Kong to invest in an unauthorized collective investment scheme may amount to an offence under Section 103. of the SFO. (d) This UT Code is made under Section 399 of the SFO. (e) This UT Code does not have the force of law. (f) The Commission may modify or relax the application of a requirement in this UT Code if it considers that, in particular circumstances, strict application of the requirement would operate in an unduly burdensome or unnecessarily restrictive manner. January 2019. Table of Contents Part I : General matters 1. Chapter 1: Authorization procedures 1. Chapter 2: Administrative arrangements 3.

8 Chapter 3: Interpretation 4. Part II: Authorization requirements 7. Chapter 4: Trustee/Custodian 7. Chapter 5: Management company and auditor 12. Chapter 6: Operational requirements 18. Scheme documentation 18. Member register 19. Pricing, issue and redemption of units/shares 19. Meetings 21. Fees 22. Chapter 7: Investment: core requirements 24. Chapter 8: Specialized schemes 40. (deleted) 40. Money market Funds 40. (deleted) 43. (deleted) 43. (deleted) 43. (deleted) 43. Unlisted index Funds and index tracking exchange traded Funds 44. Hedge Funds 51. January 2019. Structured Funds 61. Funds that invest extensively in financial derivative instruments 62. Listed open-ended Funds (also known as active ETFs) 63. Closed-ended Funds 64. Chapter 9: Additional requirements for Non-Hong Kong based schemes 66. Part III: Post-authorization requirements 68. Chapter 10: Operational matters 68. Valuation and pricing 68. Pricing errors 68.

9 Suspension and deferral of dealings 69. Transactions with connected persons 69. Chapter 11: Scheme changes, notifications and reporting 71. Scheme changes, notifications and ongoing disclosures 71. Notices to holders 72. Withdrawal of authorization 73. Merger or termination 73. Reporting requirements 74. Advertising materials 75. Mention of SFC authorization .. 76. Appendix A1: (deleted) 77. Appendix A2: (deleted) 78. Appendix B: (deleted) 79. January 2019. Appendix C: Information to be disclosed in the offering document 80. Appendix D: Contents of the constitutive documents 85. Appendix E: Contents of financial reports 88. Appendix F: (deleted) 97. Appendix G: Guidelines for review of internal controls and systems of trustees/custodians 98. Appendix H: Guidelines on hedge Funds reporting requirements 111. Appendix I: (deleted) 119. January 2019. Part I: General matters Chapter 1: Authorization procedures Schemes established in Hong Kong or elsewhere Schemes to be established in Hong Kong or elsewhere are normally expected to comply with the applicable provisions of the Handbook, including without limitation, all of the applicable provisions of this UT Code in order to be authorized in Hong Kong by the SFC.

10 Pursuant to Section 104 of the SFO. Applications for authorization which seek waivers of any of these provisions must give detailed reasons why waivers are sought. Scheme established in recognized jurisdictions This UT Code accepts that some schemes already comply with certain provisions of this UT Code by virtue of prior authorization in a regulated jurisdiction. It therefore recognizes the types of scheme in jurisdictions set out in the list of recognized jurisdictions published on the Commission's website. Applications for authorization of recognized jurisdiction schemes will generally be reviewed on the basis that the scheme's structural and operational requirements, and core investment restrictions, already comply in substance with this UT Code. Applicants should note however that the SFC expects a scheme to comply in all material respects with this UT Code and reserves the right to require such compliance as a condition of authorization.


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