On 17 Feb 2025, the HKMA circulated two SFC circulars detailing regulatory requirements for listed alternative asset funds and structured funds. The circulars mandate intermediaries to conduct one-off knowledge assessments and risk disclosures for non-professional investors in alternative funds, while requiring adherence to derivative-specific Code of Conduct provisions for structured funds distribution, with exemptions for unsolicited transactions.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction
On 17 Feb 2025, the Hong Kong Monetary Authority (HKMA) circulated two Securities and Futures Commission (SFC) documents to all Registered Institutions, outlining regulatory requirements for listed closed-ended alternative asset funds and listed structured funds, effective as of the SFC's issuance dates.
SFC Circular on Listed Closed-ended Alternative Asset Funds
As set out in the SFC's Circular dated 17 February 2025, intermediaries must assess client knowledge of relevant alternative assets via a one-off test prior to transactions in SFC-authorised Listed Alternative Funds, excluding institutional professional and qualified corporate professional investors. Intermediaries must also provide one-off risk disclosure statements specific to the fund and asset class, and verify clients' sufficient net worth to bear potential losses. Where no solicitation or recommendation occurs, intermediaries are exempt from suitability requirements and minimum information/warning statements under SFC Code of Conduct paragraph 5.5(a).
SFC Circular on Listed Structured Funds
As set out in the SFC's Circular dated 23 January 2025, intermediaries distributing listed structured funds—including leveraged/inverse products and Defined Outcome Listed Structured Funds—must comply with SFC Code of Conduct paragraphs 5.1A to 5.3 for derivative products. Registered Institutions distributing these funds must implement adequate policies, procedures, controls, and staff training to ensure compliance with the SFC's requirements.
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