The aim is to maintain orderly and fair trading, protect investors’ interests, and to enhance the arrangements to prevent supervisory discord, regulatory arbitrage and other related cross-boundary illicit or non-compliance activities, according to a joint-statement by the regulators on Friday.
The signatories agreed to strengthen enforcement cooperation to jointly “combat cross-boundary illicit” activities and “to put in place a mechanism for the collection and exchange of information”.
As first revealed in June 2020, the cross-border wealth management scheme will initially cover simple investment products. Also, funds can only be used for the designated purpose and proceeds from the redemption of wealth management products will be remitted back via the same route in renminbi to ensure a “closed loop”.
Last October, the Hong Kong Monetary Authority (HKMA) said that cross-border investments will be capped at RMB 150bn ($23.2bn / HK$180bn) in each direction, and that individual quotas will be limited to RMB 1m.
“We welcome the signing of the memorandum of understanding (MoU) among the authorities in the mainland, Hong Kong and Macau, which marks another encouraging step towards realising the full potential of the Greater Bay Area (GBA),” said Peter Wong, deputy chairman and chief executive of HSBC, in a press release.
The MoU was signed by the People’s Bank of China, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, State Administration of Foreign Exchange, and the HKMA, Securities and Futures Commission of Hong Kong, and Monetary Authority of Macao.
COOPERATIVE ARRANGEMENTS
The signatories will conduct regular liaison meetings to discuss the operation and supervision of the scheme, establish an investor protection supervisory cooperation mechanism, strengthen financial education for investors, and protect the rights and interests of investors based on the principle of “regulation by the jurisdiction where the business is conducted”.
In addition, they agreed to provide guidance to the banks they supervise on the due diligence that needs to be conducted to understand the nature, risks and complexity of wealth management products offered across borders.
Guidance will also be given on investor protection measures, anti-money laundering requirements, personal data protection, and the management of investment accounts under the scheme, including to prevent the use of cross-border wealth management products for purposes such as pledges and guarantees.
The GBA economy was worth U$1.7trn in 2019 and should reach $4.6trn by 2030, according to HSBC, which expects the region to become the world’s largest banking revenue pool, amounting to $185bn by 2025.
“The launch of Wealth Management Connect will open new opportunities for members of the fast-growing mass affluent and high-net-worth investor pool, allowing them to diversify their investments,” said Wong.
“Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect and Bond Connect have all been important milestones for China’s capital market liberalisation and renminbi internationalisation,” he added.
