UK retail investors are to have access to Hong Kong-domiciled funds following a memorandum of understanding (MoU) signed by the country's regulator and the Financial Conduct Authority (FCA).
The MoU will allow Hong Kong 'public funds' and United Kingdom retail funds to be distributed in each other's market if they are compliant with each nation's specific regulatory requirements.
A range of fund types across active and passive strategies are covered by the MoU, with equity, bond and mixed asset products all available for sale, in addition to feeder funds and funds of funds.
For a Hong Kong fund to be distributed in the UK, it must maintain its authorisation through Hong Kong's Securities and Futures Commission (SFC) and continue to comply with its laws and regulations.
Investors must be treated fairly, with no arrangements providing an advantage to Hong Kong-based investors unavailable to UK investors, and investors from either country must receive information disclosures from the fund manager at the same time.
The FCA said that based on these requirements, those funds compliant with Hong Kong laws and regulations will enjoy a "streamlined" authorisation process.
If a fund breaches Hong Kong domestic laws, the constitutive documents or the requirements set out in the MoU, the asset manager must notify the FCA and the SFC at the same time and rectify the breach promptly.
UK retail funds looking to be distributed in Hong Kong will face the same requirements from the SFC.
The MoU also establishes a framework for the exchange of information, regular dialogue and regulatory cooperation in relation to the cross-border offering between the FCA and SFC.
FCA chief executive Andrew Bailey said the MoU "paves the way to offering consumers greater choice and diversification in their investments".
He added: "It reflects the UK's commitment to open financial markets supported by effective regulation which delivers equivalent outcomes.
"We will continue to work closely with the SFC, both in connection with cross-border fund offerings and in wider areas of mutual benefit."
Meanwhile, SFC CEO Ashley Alder said the MoU "will not only bring benefit to the asset management industries in the United Kingdom and Hong Kong, but also offer investors in both markets with more investment choices".
He added: "Expanding the mutual recognition of funds framework is consistent with our strategic goal of positioning Hong Kong as an international asset management centre. We look forward to working closely with the FCA under these strengthened regulatory ties."
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