SFC updates rules on exempting unlaunched umbrella OFCs from preparing and publishing annual reports
December 2023
Background
On 18 December 2023, the Securities and Futures Commission of Hong Kong (‘SFC’) updated its Frequently Asked Questions relating to Open-ended Fund Companies (‘OFCs’) (‘FAQs’) to revise rules on exempting unlaunched umbrella OFCs from preparing and publishing annual reports (‘AR’).
Updated FAQs
Q21A - Lifting of Code Waiver
By amending Q21A of the FAQs, the SFC removed the requirement for unlaunched umbrella OFCs to apply for an additional waiver from disclosing their and their sub-funds’ financial positions and results in financial reports under paragraph 9.6 of the Code on OFCs (‘OFC Code’) (‘Code Waiver’). Prior to this update, an unlaunched umbrella OFC that had no investors, and which sought to be exempted from the requirement under rule 151 of the Securities and Futures (OFCs) Rules to prepare, publish and provide shareholders with a copy of their ARs (‘AR Requirement’), had to apply to the SFC for (i) a grant of an AR exemption and (ii) a Code Waiver.
Now, an unlaunched umbrella OFC seeking exemption from the AR Requirement only needs to apply to the SFC for a grant of an AR exemption (without having to apply for a Code Waiver).
Q21AB – Clarification of the start date of a sub-fund’s 1st financial period
In addition, the SFC added Q21AB to clarify that an umbrella OFC may determine, in its discretion, whether the start date of a sub-fund’s first financial period (‘Start Date’) should fall on its (a) date of establishment or (b) date of launch. Accordingly, if an unlaunched sub-fund uses its launch date as its Start Date, it can disclose its financial position and results in its AR after such date, and a Code Waiver would not therefore be required.
The SFC further indicated that a sub-fund is generally not considered to have been launched if it has not received any subscription proceeds for investments.
What this means for market participants
The removal of the Code Waiver requirement has streamlined and simplified the application process for unlaunched umbrella OFCs seeking exemption from the AR Requirement. The new Q21AB has also confirmed the market’s common view that an umbrella OFC is free to choose to use either its sub-fund’s establishment or launch date as its Start Date. Although only slight updates were made to the FAQs, it serves as an important revision to and clarification of the rules and procedures on exempting unlaunched umbrella OFCs from the AR Requirement.
This news alert was jointly published by PwC Hong Kong and Tiang & Partners.
Tiang & Partners is an independent Hong Kong law firm and a member of the PwC network.
