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Financial and Monetary Affairs
Open-ended Fund Company Structure
The new open-ended fund company regime introduces a new corporate fund structure in addition to the unit trust structure. This allows funds to be set up in the form of companies but with the flexibility to create and cancel shares for investors' subscription and redemption in the funds. It broadens the choice of investment fund vehicles and makes Hong Kong a more attractive fund domiciliation location. The first open-ended fund company was incorporated and registered in Hong Kong during the year.
Limited Partnership Fund Bill
The government is working on a limited partnership fund regime to attract private equity funds to set up and operate in Hong Kong. In July, a proposal was put up for industry consultation, followed by legislative work to enable the establishment of the new fund structure.
Mutual Recognition of Funds
In January, the SFC and the Commission de Surveillance du Secteur Financier of Luxembourg signed a Memorandum of Understanding (MoU) on Mutual Recognition of Funds (MRF) to allow the streamlined distribution of eligible public funds in each other's market. In May, the SFC entered into an MoU on MRF with the Dutch Authority for the Financial Markets. Hong Kong also has MRF arrangements with the Mainland of China, France, Switzerland and the United Kingdom. As at the year end, 73 funds had been authorised under the Hong Kong- Mainland MRF arrangement, enabling aggregate net sales of more than RMB16 billion.
Regulation of Asset and Wealth Management
An updated Code on Unit Trusts and Mutual Funds took effect in January to strengthen requirements for key operators of SFC-authorised funds and introduce new fund types, such as active ETFs. More protective measures for the sale of complex products became effective in July, including a requirement to ensure the suitability of complex products sold on an unsolicited basis. New guidelines for the design and operation of online distribution and advisory platforms also took effect.
Green Finance
The government seeks to develop and consolidate Hong Kong's position as a leading hub for green finance in the region. The inaugural green bond under the Government Green Bond Programme, with a nominal size of US$1 billion, was issued in May and was well received by the global investment community. Green bonds arranged and issued in Hong Kong in the year totalled US$10 billion. Cumulative green bond issuances amounted to US$26 billion as at end- 2019.
The government will continue its role as a facilitator and provide the necessary infrastructure and catalysts to jump-start market developments, so as to encourage more entities to arrange financing for their green projects through Hong Kong's capital markets and expand the local green investor base.
Further to the announcement of its Strategic Framework of Green Finance in 2018, the SFC issued a circular in April 2019 to provide guidance to management companies of SFC-
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