China Mainland-Hong Kong Mutual Recognition of Funds Scheme Enhancement to Take Effect in 2025, Increased Allowable Limit of Funds Sold to Investors in Host Market from 50% to 80% for Recognised Fund and Allowing Funds to Delegate Investment Management Functions Outside of Home Market
23rd December 2024 | Hong Kong
The China Securities Regulatory Commission (CSRC) and Hong Kong Securities & Futures Commission (SFC) Mainland-Hong Kong Mutual Recognition of Funds (MRF Scheme) enhancements will take effect from 2025 January, including increasing the allowable limit of funds sold to investors in host market from 50% to 80% for recognised fund, and allowing funds to delegate investment management functions outside of home market. Hong Kong SFC (20/12/24): “The Securities and Futures Commission (SFC) welcomes the publication today of the revised Provisions on the Administration of Recognised Hong Kong Funds (《香港互認基金管理規定》) by the China Securities Regulatory Commission (CSRC) and also the revised operating guidelines jointly by the People’s Bank of China and the State Administration of Foreign Exchange, for the purpose of implementing the enhancements to the Mutual Recognition of Funds (MRF) scheme. The SFC also published a revised Circular on Mutual Recognition of Funds between the Mainland and Hong Kong today. (Note 1). Enhancement to the MRF scheme is one of the five measures on capital market cooperation with Hong Kong announced by the CSRC on 19 April 2024. For Hong Kong funds approved by the CSRC for public offering in Mainland (Hong Kong MRF Funds), the relaxation of the sales limit will increase their maximum potential sales value on the Mainland by three times. Also, the relaxation of overseas delegation restriction will provide more opportunities for international asset managers to leverage their expertise and extensive knowledge of global markets to offer more offshore solutions and products to Mainland investors. The MRF enhancements will be effective from 1 January 2025.” Note 1 – The enhancements include: (i) relaxing the cap on the value of units of a recognised fund sold to investors in the host market from 50% to 80% of the fund’s total assets; and (ii) allowing the delegation of investment management functions of recognised funds to overseas asset management companies within the same group. Hong Kong MRF Funds can delegate such functions to an overseas entity within the same group located in a jurisdiction that has entered into a memorandum of understanding on regulatory cooperation with the CSRC, whereas recognised Mainland funds can delegate such functions to an overseas entity within the same group located in a jurisdiction under the SFC’s acceptable inspection regime.
“ China Mainland-Hong Kong Mutual Recognition of Funds Scheme Enhancement to Take Effect in 2025, Increased Allowable Limit of Funds Sold to Investors in Host Market from 50% to 80% for Recognised Fund and Allowing Funds to Delegate Investment Management Functions Outside of Home Market “
China Securities Regulatory Commission & Hong Kong SFC to Enhance Mainland-Hong Kong Mutual Recognition of Funds Scheme, Including Increasing Allowable Limit of Funds Sold to Investors in Host Market from 50% to 80% for Recognised Fund, and Allowing Funds to Delegate Investment Management Functions Outside of Home Market
18th June 2024 – The China Securities Regulatory Commission (CSRC) and Hong Kong Securities & Futures Commission (SFC) will be implementing new measures to enhance the Mainland-Hong Kong Mutual Recognition of Funds (MRF Scheme), including increasing the allowable limit of funds sold to investors in host market from 50% to 80% for recognised fund, and allowing funds to delegate investment management functions outside of home market. Hong Kong SFC (14/6/24): “The Securities and Futures Commission (SFC) welcomes the public consultation paper published today by the China Securities Regulatory Commission (CSRC) on proposed rule amendments for implementing the enhancements of the Mainland-Hong Kong mutual recognition of funds (MRF) scheme. The draft proposals in the CSRC’s consultation paper include relaxing the sales restrictions for recognised Hong Kong funds in the Mainland and allowing the delegation of investment management functions of recognised Hong Kong funds to overseas asset management companies within the same group. Based on the principle of reciprocity, the SFC will also relax the relevant restrictions on recognised Mainland funds accordingly (Notes 1 and 2). Enhancing the MRF scheme is one of the five measures announced earlier by the CSRC on the Mainland’s capital market cooperation with Hong Kong. The SFC will continue to work closely with the CSRC to formulate and implement the measures. Details and the launch date of the enhancements will be announced in due course.
SFC CEO Julia Leung: “This would address a longstanding wish of asset managers in Hong Kong for the scheme to be more flexible and to provide more diversified product choices to Mainland investors as well as injecting new impetus into the continuous development of the MRF scheme.”
Notes:
- On sales restrictions, currently, the value of units of a recognised fund sold to investors in the host market is capped at 50% of the fund’s total assets. Such cap will be relaxed to 80% after the enhancement.
- On delegation of investment management functions, currently, such functions cannot be delegated to a firm outside the home market. After the enhancement, recognised Hong Kong funds can delegate such functions to an overseas entity within the same group located in a jurisdiction that has entered into a memorandum of understanding on regulatory cooperation with the CSRC, whereas recognised Mainland funds can delegate such functions to an overseas entity within the same group located in a jurisdiction under the SFC’s acceptable inspection regime.
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