Regulation and complaint handling
The SFC and CSRC have set out eligibility requirements, application procedures, operational and regulatory arrangements of the MRF. They have also established a cooperation mechanism for cross-border regulation and enforcement as well as a framework for exchange of information and regulatory cooperation to ensure that Mainland and Hong Kong investors will have equal protection.
General principles of the MRF scheme
MRF operates on the principles that, in respect of a fund that has been authorised by or registered with the relevant authority in one jurisdiction (home jurisdiction) and is seeking or has received authorisation or approval to be offered to the public in the other jurisdiction (host jurisdiction):
- the fund should meet the eligibility requirements released by the relevant authority in the host jurisdiction from time to time;
- the fund should remain authorised by or registered with the relevant regulator in the home jurisdiction and is allowed to be marketed to the public within the home jurisdiction;
- the fund should generally operate and be managed in accordance with the relevant laws and regulations in the home jurisdiction and its constitutive documents;
- the sale and distribution of the fund in the host jurisdiction shall comply with the applicable laws and regulations in the host jurisdiction;
- the fund will comply with the additional rules released by the relevant authority in the host jurisdiction governing the authorisation or registration, post-authorisation and ongoing compliance, and the sale and distribution of the fund in the host jurisdiction; and
- the management firm of the fund shall ensure investors of both the home jurisdiction and host jurisdiction receive the same treatment and that treatment should be fair, including in respect of investor protection, exercise of rights, compensation and disclosure of information.
In general, funds that are seeking SFC authorisation or have received SFC authorisation for offering to the Hong Kong public have to comply with the SFC Handbook for Unit Trusts and Mutual Funds, Investment-Linked Assurance Schemes and Unlisted Structured Investment Products (SFC Handbook) and the circulars, guidelines and other requirements as may be issued by the SFC from time to time. On the basis of the principles set out above, if a Mainland fund complies with the relevant Mainland laws and regulations, it is generally deemed to have complied in substance with the relevant SFC requirements and will enjoy a streamlined process for the purpose of authorisation for offering to Hong Kong public.
There are, however, areas where regulations and market practices in the Mainland and Hong Kong differ and may not be catered for a fund’s offering in the host jurisdiction. To ensure proper investor protection and consistency with existing Hong Kong SFC-authorised funds, the SFC sets out additional requirements with which a Mainland Fund has to comply when applying for SFC authorisation for offering to the Hong Kong public under the MRF. There are also other requirements with which a Recognised Mainland Fund has to observe after obtaining SFC authorisation, for example, operational and ongoing issues, disclosures, sales and distribution etc.
The CSRC also issued the separate rules regarding the approval of eligible Hong Kong funds for offering to the public in the Mainland.
Investors may refer to the offering documents of the Recognised Mainland Funds to find out how investors’ enquiries and complaints will be handled. In general, if Hong Kong investors have any complaints concerning the Recognised Mainland Funds, they can lodge their cases with the Hong Kong representative of the Recognised Mainland Fund and/or the SFC.
The constitutive document of the Recognised Mainland Funds would also provide dispute resolution mechanisms available for investors, such as arbitration and litigation.