Key Messages

Managers of authorised funds must always act in the best interests of the fund's investors
A fund's assets must be held by a trustee or custodian who is independent of the fund manager and acceptable to the SFC or suitable authority in your own country.
Additionally, the assets of the fund must be segregated from the assets of the trustee or custodian, and neither the fund manager nor the trustee/custodian can use the fund's assets for their own benefit or to repay their own debts.
These rules are in place to protect the interests of investors in the fund and ensure that their assets are managed in a responsible and transparent manner.

In order for a fund to be authorized, it must have a fund manager, trustee, and/or custodian who are acceptable to the SFC or suitable authority in your own country. This means that the SFC or suitable authority in your own country must review and approve the individuals or organizations that will be responsible for managing the fund and overseeing its assets. This is done to ensure that the fund will be managed by experienced and qualified individuals who are capable of acting in the best interests of the fund's investors. The presence of an independent trustee or custodian also helps to ensure that the fund's assets are properly safeguarded and managed in accordance with the rules and regulations set forth by the SFC or suitable authority in your own country.

Who are these fund managers?

A fund manager must meet several requirements in order to be acceptable to the SFC or suitable authority in your country. These requirements include being engaged primarily in the fund management business, having sufficient financial resources, proper internal controls, and written compliance procedures, and ensuring that the company's directors and key personnel have sufficient experience in managing the same kind of fund. These requirements are in place to ensure that the fund manager has the necessary expertise, resources, and controls to effectively manage the fund and act in the best interests of its investors.

How are fund managers supervised?

If a fund manager is based in Hong Kong, they may be required to be licensed by the SFC depending on the nature of their business. A licensed fund manager must comply with the relevant provisions of the Securities and Futures Ordinance and the Fund Manager Code of Conduct. These regulations provide guidance on the organization structure, staff ethics, fund management, operations, and client dealings of the fund manager. Agreements between foreign authorities and the SFC also ensure that there is timely exchange of information related to overseas-domiciled fund managers who manage authorised funds. Overseas fund managers without branch offices in Hong Kong must appoint Hong Kong representatives to act as a liaison with Hong Kong investors and the SFC. Additionally, individuals who manage the subscription and redemption activities of funds in Hong Kong must also be licensed by the SFC.

Remember that the authority supervising it will be different in each country of origin where the businesses are being held.

How do I know if fund managers put my interests before their own?

The Fund Manager Code of Conduct is a set of guidelines that outlines the ethical and professional standards that fund managers are expected to follow. One of the key principles of the code is that fund managers should always put the interests of their investors first, and they should execute orders on behalf of the funds they manage on the best available terms in the market. Additionally, fund managers are required to give priority to orders for the funds they manage over orders for their own accounts. Failure to follow the code of conduct can result in the loss of a fund manager's Hong Kong registration. This is why it is important for fund managers to carefully follow the code of conduct in order to maintain their registration and continue to operate in Hong Kong.

Remember that the Code of Conduct will also be different in each country of origin.

What happens to a fund if its fund manager has financial problems?

The trustee or custodian of an authorized fund is responsible for holding custody of the fund's assets. This means that the trustee or custodian is responsible for safeguarding the assets of the fund and making sure that they are managed in accordance with the rules and regulations set forth by the SFC. A fund manager is not allowed to use the assets in a fund to solve its own financial problems, and if a fund manager is in financial trouble or is deemed unfit to continue managing the fund, the trustee of a unit trust or the directors of a mutual fund must dismiss the fund manager and appoint a new one. The SFC is immediately notified of the change, and they will monitor the appointment of the new fund manager to ensure that the fund continues to be managed in a responsible and transparent manner.

Remember that SFC will be represented by different body in other country of origin.

Who can be a trustee / custodian?

In order to be acceptable to the SFC, the trustee or custodian of an authorized fund must be independent of the fund management company. This means that the trustee or custodian must not have any financial or personal ties to the fund manager that could compromise their ability to act in the best interests of the fund's investors. The trustee or custodian can be a bank, a registered trust company, or a bank or trustee company incorporated outside of Hong Kong. These organizations must meet certain minimum capital and reserve requirements, and they are subject to ongoing regulatory supervision or independent audits to ensure that they are properly managing the assets of the fund. This helps to protect the interests of investors and ensure that their assets are managed in a responsible and transparent manner.

Remember that SFC will be represented by similar body in other country of origin. Also usually there will be different set of requirements that must be met with each country.

It is important to remember that a fund's assets must be kept separate from the assets of its trustee or custodian. This means that the assets of the fund must be clearly distinguished and accounted for, and they must not be commingled with the assets of the trustee or custodian. Additionally, the trustee or custodian is prohibited from using the assets of the fund for their own benefit or to repay their own debts. This is to ensure that the assets of the fund are properly safeguarded and used only for the benefit of the fund's investors. Ensuring the segregation of assets and prohibiting the misuse of the fund's assets are critical safeguards that help to protect the interests of investors and promote transparency in the management of the fund.