Joint Announcement of China Securities Regulatory Commission and Securities and Futures Commission 

To deepen Mainland-Hong Kong financial cooperation and promote the joint development of the Mainland and Hong Kong capital markets, the China Securities Regulatory Commission (CSRC) and the Securities and Futures Commission (SFC) have decided to embark on the Mainland-Hong Kong Mutual Recognition of Funds (MRF) initiative. This joint announcement sets out the details of the MRF initiative.

I.    The CSRC and SFC have agreed on the implementation principles, and the mode and operation of the MRF. On 22 May 2015, the CSRC and SFC signed a memorandum of regulatory cooperation in respect of the MRF.

II.   Through the MRF, the CSRC and SFC will allow Mainland and Hong Kong funds that meet the eligibility requirements to follow streamlined procedures to obtain authorization or approval for offering to retail investors in each other’s market.

III.  The MRF is an important element in the opening up of the Mainland’s capital market. It is an important milestone in the mutual opening of the Mainland and Hong Kong markets. The MRF will enhance the mutual capital market access between the Mainland and Hong Kong. It is significant in various ways, including:

a.  The MRF will deepen the exchange and cooperation of the Mainland and Hong Kong asset management industries, broaden cross-border investment channels, and enhance the competitiveness of the Mainland and Hong Kong fund markets.

b.  The MRF will lay the foundation for the CSRC and SFC to jointly develop a fund regulatory standard, promote the integration and development of the Asian asset management industry, and encourage the transformation of Asian savings into cross-border investments.

c.  The MRF will provide more diverse fund investment products to Mainland and Hong Kong investors, and expand the business opportunities and enhance the international competitiveness of Mainland and Hong Kong fund management firms.

IV.  The CSRC and SFC have respectively prepared the “Provisional Rules for Recognised Hong Kong Funds” and “Circular on Mutual Recognition of Funds between the Mainland and Hong Kong”. The documents set out the eligibility requirements, applications procedures, operational requirements and regulatory arrangements of the MRF. The documents will form the basis of regulation and enforcement, and market participants’ business operations.

The CSRC and SFC have established cooperation mechanism for cross-border regulation and enforcement, to ensure that Mainland and Hong Kong investors will receive equal protection.

V.   The CSRC and SFC will establish equivalent eligibility requirements for recognising Hong Kong and Mainland funds, to promote the mutually beneficial development of recognised funds and broadly balanced cross-border in and out fund flows. The initial investment quota for the MRF will be RMB300 billion for in and out fund flows each way.

VI.  The CSRC and SFC will hold briefings to explain to the market the application procedures and requirements for the MRF. Meanwhile, to ensure that Mainland and Hong Kong market participants have sufficient time to prepare; to understand the differences in laws and regulations, business requirements and operations of the two markets; and to prudently assess and manage the risks, the MRF will be implemented on 1 July 2015.

Source: SFC –  Joint Announcement of China Securities Regulatory Commission and Securities and Futures Commission

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