The UK and Hong Kong through their respective financial regulatory bodies, Financial Conduct Authority (FCA) and the Securities and Futures Commission (SFC), have signed a memorandum of understanding on mutual recognition of funds (MoU).
The MoU will pave way for eligible Hong Kong public funds and British retail funds to be distributed in each other’s market via a streamlined process.
It also sets up a framework for exchange of information, regular dialogue. In addition to that, regulatory cooperation related to the cross-border offering of eligible Hong Kong public funds and UK retail funds will be established through it.
FCA chief executive Andrew Bailey said: “We are very pleased to have agreed this framework, which paves the way to offering consumers greater choice and diversification in their investments. 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.”
According to SFC CEO Ashley Alder, asset management sectors in the two regions are expected to benefit from the new cooperation framework with the UK FCA. Apart from that investors across both markets will have increased investment choices.
Alder said: “Equally important, 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.”
In another development, the FCA said that it is consulting on new rules and guidance to cut down on the possible chances for harm to investors in funds that hold illiquid assets, especially under stressed market conditions.
The UK financial regulatory body said that the measures drafted by it will also support its market integrity objective and help resolve concerns over financial stability.
Its new rules and guidance are expected to be particularly helpful for open-ended funds that invest in illiquid assets and face difficulties when large numbers of investors simultaneously attempt to withdraw their money at short notice.