Investment Funds: Proposed New Flexibility for SFC Authorized Funds to Publish Dealing Prices and NAVs

The SFC proposes greater flexibility for the dissemination of dealing prices and net asset values by authorized funds.

On June 24, 2014, the Securities and Futures Commission (“SFC”) began a one-month consultation on proposals to amend the Code on Units Trusts and Mutual Fund (“Mutual Fund Code”). The proposals are designed to give unit trusts and mutual funds (together “SFC Authorized Funds”) authorized by the SFC under the Mutual Fund Code greater flexibility in determining the means by which they make public their offer and redemption prices (“Dealing Prices”), net asset values (“NAVs”), and notices of suspensions in dealing. The proposals seek to take into account developments in information technology, existing market practices and similar regulatory requirements in major overseas jurisdictions. In particular:

• Means of Public Dissemination - The SFC is proposing to remove the requirement under the Mutual Fund Code which mandates the use of newspapers to publish Dealing Prices or NAVs and to allow SFC Authorized Funds to use any appropriate means to make their Dealing Prices and NAVs public. The SFC has considered, but decided against, specifying any concrete disclosure methods in the Mutual Fund Code in the hope that this will facilitate a wider choice of dissemination channels. Instead, the SFC proposes that management companies of SFC Authorized Funds determine appropriate methods of dissemination by ensuring that (i) holders or prospective investors can have free access to such information, (ii) disclosure is consistent with the manner and frequency of dealing in the shares or units, and (iii) the dedicated channel of dissemination is specified in the offering document.
• Frequency of Public Dissemination – The SFC is proposing that SFC Authorized Funds be required to make their Dealing Prices or NAVs public on every dealing day on the basis that many SFC Authorized Funds already do so and a number of major overseas jurisdictions impose the same requirement on publicly offered schemes. The SFC has considered, but decided against, requiring the daily disclosure of Dealing Prices and NAVs on the basis that some SFC Authorized Funds may not offer dealing on a daily basis and in such cases daily Dealing Prices and NAVs may not be available.
• Dealing Suspension Notices – The SFC is proposing to remove the requirement under the Mutual Fund Code that mandates the use of newspapers to publish a dealing suspension notice in respect of the interests in an SFC Authorized Fund and to allow SFC Authorized Funds to use any appropriate means to publish such notices. The frequency of the publication of such notices as required under the Mutual Fund Code will remain unchanged.
• General Discretion – Separately, the SFC is proposing to add an additional general principle to its Handbook on Unit Trusts and Mutual Fund to provide that the SFC may modify or relax the application of a requirement in the Mutual Fund Code if it considers that, in particular circumstances, strict application of the requirement would operate in an unduly burdensome or unnecessarily restrictive manner.

Market participants are invited to submit their comments on the proposals to the SFC on or before July 23, 2014.

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