www.pwc.com Highlights of the Authorisation Requirements for Fund Distribution in Hong Kong Updated as of January 2012 Table of Content Regulatory Framework Authorisation Process Hong Kong Offering Document Considerations for Overseas Schemes PwC Fees for Authorisation February 2012 Regulatory Framework Under the Hong Kong regulatory regime, collective investment schemes which are marketed or distributed to the Hong Kong public, are subject to the authorisation of the Securities and Futures PwC February 2012 Regulatory Framework The major laws and regulations governing the authorisation of collective investment schemes in Hong Kong are: a) 1; and b) SFC Handbook for Unit Trusts and Mutual Funds, InvestmentLinked Assurance Schemes and Unlisted Structured Investment Products ("Handbook") [1] For specific types of investment schemes, additional regulations may apply [2] Section of the Handbook sets out the overarching principles and requirements that apply across different types of products governed by the Handbook, whilst Section of the Handbook (i.e Code on Unit Trusts and Mutual Funds (the "Code")) stipulates the specific requirements on unit trusts and mutual funds PwC February 2012 Authorisation Process A collective investment scheme applying for an SFC authorisation for public distribution in Hong Kong is required to submit a duly completed application form and checklist (prescribed by the SFC) together with various constitutive documents PwC February 2012 Authorisation Process Set out below are some of the submission requirements (not exhaustive): The scheme's offering and constitutive documents, including its Hong Kong offering document and Product Key Facts Statement ("Product KFS") The scheme's latest audited report (if any) and if more recent, the latest unaudited report; Information of the scheme's management company demonstrating its fit and propriety; The trustee/custodian's latest audited report (if any); A consent letter of appointment from the trustee/custodian (not required for schemes in recognized jurisdictions or already in existence); A letter nominating an individual to be an Approved Person of the scheme, containing the individual's details; The Hong Kong Representative related undertakings (where applicable); and Documentary evidence of the scheme's authorization status in its local jurisdiction PwC February 2012 Hong Kong Offering Document The Hong Kong Offering Document of a scheme should contain, inter alia, the following information: Constitution of the scheme (e.g the name, registered address, place and date of creation of the scheme, an indication of the scheme's duration if limited.); Investment objectives and restrictions; Collateral policy and criteria (e.g selection criteria, nature and policy of the collateral held by the scheme, description of the holdings of collateral), where appropriate; Operators and principals (e.g the name and registered address of the directors, trustee, custodian, auditors and registrar etc.) Characteristics of units or shares; Application and redemption procedures; PwC February 2012 Hong Kong Offering Document The Hong Kong Offering Document of a scheme should contain, inter alia, the following information: (Continued) Distribution policy; Fees and charges; Taxation; Reports and accounts; Warning statements; Circumstances leading to the termination of the scheme; Other information which is necessary for investors to make an informed judgement PwC February 2012 Considerations for Overseas Schemes Place of Establishment of the Scheme It is recognised by the SFC that some overseas schemes already comply with certain provisions of the Handbook by virtue of prior authorization in a regulated jurisdiction Applications for reviewed on the basis that the scheme's structural and operational requirements, and core investment restrictions, already comply in substance with the local requirements However, the SFC expects a scheme to comply in all material respects with the local requirements and reserves the right to require such compliance as a condition of authorization PwC February 2012 Considerations for Overseas Schemes Management Company The investment management operations of a fund management company or those of the investment adviser (where the latter has been delegated the investment management function) are required to be based in a jurisdiction with an inspection regime acceptable to the website It should be noted that the SFC will consider other jurisdictions on their merits and may accept an undertaking from the management company that the books and records in relation to its management of a scheme will be made available for inspection by the SFC on request PwC February 2012 10 Considerations for Overseas Schemes Hong Kong Representative If the management company of a scheme is not incorporated and does not have a place of business in Hong Kong, the scheme will be required to appoint a Representative in Hong Kong to perform certain functions such as handling subscription and redemption requests, accepting notices or correspondence served by the investors on the scheme etc The Representative must: a) be licensed or registered under the SFO; or b) be a trust company registered under Part VIII of the Trustee Ordinance (Chapter 29 of the laws of Hong Kong) and such company is an affiliate of an authorized financial institution defined under the SFO and is acceptable to the SFC PwC February 2012 11 Fees for Authorisation A scheme is required to pay an application fee according to the table below Upon the granting of authorisation, it will also be required to pay an one-off authorisation fee and an annual fee on an ongoing basis Single Fund Umbrella Fund Subfund Application Fee (HK$) 20,000 40,000 5,000 Authorization Fee (HK$) 10,000 20,000 2,500 Annual Fee (HK$) 6,000 7,500 4,500 PwC February 2012 12 Contact For more information about our services, please feel free to contact the following person or your usual PwC contacts: Adams Chan Partner, Regulatory Advisory Services : +852 2289 2784 : adams.wf.chan@hk.pwc.com This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice You should not act upon the information contained in this publication without obtaining specific professional advice No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers Limited , its members, employees and agents not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PricewaterhouseCoopers Limited which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity  ... procedures; PwC February 2012 Hong Kong Offering Document The Hong Kong Offering Document of a scheme should contain, inter alia, the following information: (Continued) Distribution policy; Fees... Document of a scheme should contain, inter alia, the following information: Constitution of the scheme (e.g the name, registered address, place and date of creation of the scheme, an indication of the. .. undertakings (where applicable); and Documentary evidence of the scheme''s authorization status in its local jurisdiction PwC February 2012 Hong Kong Offering Document The Hong Kong Offering Document