UCITS passporting in Hong Kong

The regulation of the marketing and distribution of investment funds in Hong Kong is primarily governed by the Securities and Futures Ordinance (Cap. 571) (“SFO”), which is administered by the Securities and Futures Commission (“SFC”). The SFO, together with the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (“CWUMPO”), sets out the principal requirements for the offering of investment products.

Marketing fund interests in or into Hong Kong generally constitutes dealing in securities (Type 1 regulated activity). Key pathways include:

1. Type 1 licensed intermediary route. A Hong Kong Type 1 licensed corporation may market fund interests to investors relying, as applicable, on the private placement and/or professional investor frameworks. Where a manager already holds a Type 9 (asset management) licence, it may rely on the narrow “incidental exemption” to conduct marketing of funds under its own management without a separate Type 1 licence. This exemption does not extend to third-party funds.
2. Marketing by the fund “as principal” to Institutional Professional Investors. A limited licensing exemption permits the issuer (acting through its directors) to deal as principal with certain institutional professional investors only (e.g., licensed intermediaries, authorised financial institutions, regulated insurers, authorised/regulated schemes, government/multilateral agencies). This does not cover high net worth individuals or most corporates for licensing purposes and does not permit an investment manager to rely on the exemption when acting on the fund’s behalf.
3. Temporary licences. Temporary Type 1 licences for up to three months (maximum six months in any 24 month period) may be available to offshore intermediaries that are authorised in their home jurisdiction by an equivalent regulator. In practice, obtaining temporary licences can be difficult; marketing must not commence before grant, representatives also require temporary approval, and temporary licensees cannot hold client assets. Temporary Type 9 licences are not available.

Section 115 of the SFO prohibits any person from “actively marketing” to the Hong Kong public, from outside Hong Kong, any services which would constitute a regulated activity if provided in Hong Kong, unless that person is licensed or registered by the SFC. “Active marketing” is interpreted broadly and may include frequent calls on Hong Kong investors, mass media campaigns, or internet activities targeting Hong Kong residents. The SFC will consider the nature and extent of the marketing activities, the existence of a marketing plan, and whether the services are sought out by customers on their own initiative.

There is no bright-line test for what constitutes the “public” under the SFO. As a matter of best practice, marketing efforts from outside Hong Kong should be restricted to as few professional investors as possible, and careful records should be kept to demonstrate compliance.

The SFO and CWUMPO impose strict restrictions on the issue of advertisements, invitations, or documents containing offers to the public to acquire interests in funds. Any such materials must be authorised by the SFC unless an exemption applies. Exemptions are available for advertisements directed solely at professional investors, for private placements, and for offers meeting the minimum subscription or small offer thresholds.

Internet marketing is subject to the same restrictions as traditional marketing. The SFC will consider whether information is targeted at Hong Kong residents, including the use of local agents, references to Hong Kong dollars, Chinese language materials, or publication in Hong Kong media. Where information memoranda are sent electronically, they should be sent by individual emails (not posted on a website), be individually addressed, and include appropriate selling restrictions and legends.

Reverse solicitation arises where a Hong Kong investor approaches the fund or its manager entirely on their own initiative, without any prior solicitation. While responding to an unsolicited request by a prospective investor does not constitute “active marketing” to the Hong Kong public, it is a fact-sensitive area and the SFC will scrutinise any reliance on this situation. Firms should carefully document the circumstances of each approach and ensure that responses are strictly limited to the information requested.