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Key Messages:

  • Most funds are sold on a "forward" pricing basis, i.e. your subscription will be based on the fund's net asset value calculated when the market closes on that dealing day.
  • A fund may suspend trading and defer your redemption requests in certain circumstances.

An astute investor should be familiar with the procedures for buying and selling.

Are all fund distributors regulated by the SFC?

Yes, the SFC supervises all intermediaries engaged in the business of providing investment advice and dealing in funds, except for banks, which are regulated by the Hong Kong Monetary Authority.

What are the subscription and redemption procedures?

You place your orders directly to the fund house or your fund agent on any dealing day in person, by phone or through the Internet. Currently, most funds are dealt on a daily or weekly basis. Dealings are mainly on a "forward" pricing basis, i.e. your subscription will be based on the fund's NAV, calculated when the market closes on that same day. This is seen to be able to ensure that the price you pay accurately reflects the value of the fund on the day the order was placed. Funds that deal on a "historic" basis deal with the fund price based on the previous valuation day. When a market is particularly volatile, funds dealing on a historic basis would need to defer trading and re-calculate the price.

Once your order is executed, a contract note should be issued promptly. Read it and keep it safe. A fund manager must release redemption proceeds within a month of receipt of properly documented instructions.

What issues should I be aware of if I invest in funds over the Internet?

Check whether the SFC or other foreign authorities have accredited a fund and its operators and distributors. Be vigilant when an incredibly attractive special offer is shown for a particular fund. In Hong Kong, it is an offence under law to induce investors to deal in securities by any fraudulent or reckless misrepresentation. Do your own research before investing.

How do I get regular fund price updates?

The latest available offer and redemption prices or net asset value of an authorised fund must be made public on every dealing day in an appropriate manner. The channel for disseminating price information is stated in a fund's offering documents. Means of dissemination may include newspapers, telephone hotlines and websites.

Will I get scrips for my fund units?

Normally, funds are traded scripless. However, each fund is required to maintain a register of its holders. The contract note you receive after a transaction may also serve as proof of ownership.

Will my redemption request be deferred under any circumstance?

If redemption requests on any one dealing day exceed 10% of the total number of units / shares in issue, orders in excess of the 10% may be deferred to the next dealing day. In such cases, a fund may deal with the investors' redemption orders on an equitable basis up to the 10% limit, with the outstanding requests carried forward to the next dealing day.

Why is dealing in a fund sometimes suspended?

Suspension occurs only in the interest of investors and in exceptional circumstances. Examples: The closure of a market in which a fund has considerable investments, making valuation difficult or circumstances as specified in the constitutive document. A decision to suspend is usually undertaken by the fund manager, in consultation with the trustee or custodian. The SFC should be notified immediately and will monitor the situation closely to ensure that the suspension is justified.

Remember: Dealing suspension must be published immediately following such decision and at least once a month during the period of suspension in written form via appropriate means (for example newspapers or websites). The suspension notice should contain, among other things, the legal basis and reasons for the suspension, and where appropriate, the duration of suspension.