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Hong Kong to extend MRF to Luxembourg

Hong Kong’s Securities and Futures Commission and Luxembourg’s Commission de Surveillance du Secteur Financier (CSSF) have signed an a memorandum of understanding on the mutual recognition of funds scheme.
Luxembourg Old Town

The MoU tightens the bonds of cooperation between the two fund centres by allowing eligible Hong Kong public funds and Luxembourg Ucits funds to be distributed to the public in each other’s territories through a streamlined process, according to a statement from the SFC.

The MoU establishes a framework for the exchange of information and regulatory cooperation in relation to eligible cross-border products. The intention is to reduce the timeline for approvals in both jurisdictions.

Luxembourg is the one of the world’s largest fund domiciles. It also offers Hong Kong asset managers access to its private banking and insurance sectors, according to a separate statement by the Association of the Luxembourg Fund Industry.

Hong Kong has previously signed similar agreements on the Mutual Recognition of Funds with France, mainland China, Switzerland and the UK.

The Hong Kong-China MRF scheme has been running since 2015. However, most investors in Hong Kong have not participated in the cross-border programme.

The Ucits market is already well-established in Hong Kong, where, subject to SFC approval, asset managers have managed and distributed products in the EU and Asia for several years. There are 1,037 Luxembourg-domiciled retail mutual funds sold in Hong Kong, representing 47% of 2,185 SFC-authorised mutual funds as of September, according to SFC data.

Under the MRF, a so-called “Luxembourg covered fund” — authorised by the CSSF and seeking or has received SFC authorisation — needs to meet specific eligibility criteria.

These include a stipulation that it must remain authorised by the CSSF and be allowed to be offered, marketed and distributed to retail investors in Luxembourg. Investors in both jurisdictions will receive fair treatment in relation to  investor protection, exercise of rights, compensation and disclosure of information, according to the circular.

“Hong Kong and Luxembourg have a long history of cooperation in the area of mutual fund distribution,” said CSSF director general Claude Marx in the SFC statement.

“The new memorandum of understanding is an important step for the mutual recognition of investments funds in our respective jurisdictions and demonstrates the excellent cooperation between our two supervisory authorities.”

Part of the Bonhill Group.