ENG-2015 — Page 96

4

Financial and Monetary Affairs

Developing an Uncertificated Securities Regime

The Securities and Futures and Companies Legislation (Uncertificated Securities Market Amendment) Ordinance 2015 was enacted in March to enable the introduction of an uncertificated securities market regime in Hong Kong, subject to the formulation of detailed operational rules. This will enhance the securities market's overall efficiency and competitiveness, strengthen corporate governance, improve investor protection and facilitate market development.

Asset Management and Private Wealth Management

The combined fund management business was valued at $17,682 billion at the end of 2014. About 71 per cent came from non-local investors, indicating that overseas investors see Hong Kong as a preferred investment platform3. At the end of 2015, there were 2,110 unit trusts and mutual funds authorised by the Securities and Futures Commission (SFC)4. Among those funds, 636 were domiciled in Hong Kong, up 11 per cent from a year earlier.

To enhance the operational, regulatory and tax environment for fund managers, the government has been taking forward a number of measures to further develop the business. On 17 July, profits tax exemption for offshore funds was extended to private equity funds to attract more private equity funds to expand their business in Hong Kong. Offshore private equity funds are exempt from profits tax in respect of profits derived from specified transactions. This applies to transactions carried out from 1 April.

The government is proposing to introduce an open-ended fund company structure as an alternative fund vehicle. This aims to allow funds to be set up in an open-ended structure like a company, but with the flexibility, not enjoyed by conventional companies, to create and cancel shares for investors to trade the funds. This additional choice would help attract more funds to use Hong Kong as their base. The relevant legislative proposals had been finalised for introduction into the Legislative Council in January 2016.

Exchange Traded Funds (ETFs)

The government has waived the stamp duty for the transfer of all ETFs from 13 February, when the Stamp Duty (Amendment) Ordinance 2015 took effect. This will promote the development, management and trading of ETFs in Hong Kong. Thirteen new ETFs were authorised in 2015, bringing the number of SEHK-listed ETFs to 133 at the end of the year.

Enhanced Fund Authorisation Process

In October, the SFC announced starting an enhanced fund authorisation process on 9 November to shorten the overall processing time for new fund applications. Introduced under a six-month pilot arrangement, the enhanced process adopts a 'two-stream' approach: standard applications are fast-tracked with the aim that authorisation, if granted, will be given on average

3

4

Figures are quoted from the Fund Management Activities Survey for 2014, a survey conducted by the SFC annually to collect information on the general state of affairs in the local fund management industry.

This includes 119 MPF pooled investment funds offered both as retail unit trusts and for mandatory provident fund purposes.

64