Europe-HK relations warming over Ucits
A senior EU policymaker has lauded warming ties between the European Commission and Hong Kong’s securities regulator.
Tilman Lueder, head of asset management in the EC’s internal market and services department, discussed the issue with Hong Kong's Securities and Futures Commission (SFC) during a recent visit to the city.
A good working relationship between the European Commission and SFC is important, he added, because nearly 70% of the 1,800 funds distributed in Hong Kong are Ucits products.
He applauded Hong Kong’s securities regulator for cutting the time it takes to approve Europe-domiciled Ucits funds from one year to six months, as from January 1.
However, Taylor Hui, a partner at commercial law firm Deacons, said he had not seen any significant change of approval speed since January.
"We have noticed that the SFC is spending more time in the pre-vetting stage to iron out important issues upfront before accepting the formal applications, so that the applications may be approved more smoothly and quickly, relatively,” he added.
But the SFC is making an effort to speed up the fund approval process in general, he noted.
Asked whether the European Commission had encouraged the SFC to pick up the pace, Lueder said: “I am happy to say that they did this on their own volition. They said ‘yes, we do realise that these are the issues’.”
Frustration over the then year-long process surfaced publicly in 2012 when a money management executive described the procedure in the press as “a 12-month black hole”. The executive also said that renminbi qualified foreign institutional investor (RQFII) funds enjoyed an easier ride because the approval process for them was more “efficient”.
Asked whether the SFC favoured RQFII funds, Lueder said: “This is certainly not presented to us as the official policy.”
Lueder said it previously took a year because the SFC had asked providers to provide better marketing materials. For example, the SFC pointed to insufficient reasoning in key fact statements (KFSs), and a lack of disclosure on counterparty, market, operational risks.
“There is now an understanding [between the SFC and the EU Commission] that information should be concise and avoid unhelpful jargon,” Lueder said. “Sometimes a KFS amounts to 10 pages or more. The risk is that nobody would read more than three to four pages.”
Meanwhile, Lueder suggested Europe-based Ucits fund providers could specialise in providing more specific strategies, such as sectoral or country funds, which would complement funds ran by bigger fund houses such as BlackRock or Fidelity.
Large fund houses can afford to set up vehicles for Asia run out of Hong Kong and are able to create economies of scale, he added.