This circular outlines the additional requirements for the Securities and Futures Commission ("SFC") to consider authorizing specific types of listed structured funds, such as L&I Products and Defined Outcome Listed Structured Funds. It updates previous regulations and introduces new guidelines for the naming, structure, disclosure, and market making of these funds.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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On January 23, 2025, the Securities and Futures Commission ("SFC") published a circular that supplements the requirements for listed structured funds under the Code on Unit Trusts and Mutual Funds (UT Code).
The circular provides general guidelines for listed structured funds seeking public offerings in Hong Kong, addressing investment objectives, product naming conventions, structural elements, and key risk disclosures to safeguard the interests of investors and uphold market integrity.
The SFC is receptive to proposing additional requirements for specific types of listed structured funds, such as Single Stock Leveraged & Inverse Products (L&I Products) that reference a single stock.
For Leveraged and Inverse Products (L&I Products), the circular establishes a maximum leverage factor ranging from 2x to -2x, along with specific naming, market-making, and margin financing requirements. Market makers' performance is monitored by the Hong Kong Exchanges and Clearing Limited ("HKEX"), and investors are cautioned against holding these products longer than the rebalancing interval.
Investors are encouraged to utilize performance simulators to assess the fund's performance under varied market conditions and receive comprehensive education before launching the funds in Hong Kong.
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