Category Archives: Updates & Publications

Enhanced Requirements on Complex Products

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From 6 July 2019, the Guidelines on Online Distribution and Advisory Platforms (“Guidelines on Online Platforms”) issued by the Securities & Futures Commission (“SFC”) would become effective, within which outlines the SFC’s further guidance on the expected conduct requirements on intermediaries offering investment products on online platforms, and where the SFC introduced specific requirements with respect to investment products that are “complex products”. Correspondingly, a new paragraph 5.5 in the SFC Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (“Code of Conduct”) shall apply to all intermediaries (online or offline) in providing services in complex products. Paragraph 5.5 of the Code of Conduct will also take effect on 6 July 2019.

In this update, we provide an overview of the enhanced requirements that would apply under which investment products may be categorised as complex products, in respect of which intermediaries would need to ensure suitability of the product to its clients and provide expected disclosures of minimum product information and warning statements. Intermediaries and fund managers should be taking actions including legal and regulatory review of their service offerings, product due dilience processes and product disclosures in preparing for compliance with the requirements.

Enhanced Requirements on Complex ProductsDownload

聚焦香港资产管理

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香港的资产管理和基金行业在开放式基础框架下发展成熟并取得成功。这不仅反映在香港接纳和认可基金经理的海外资格和不同市场的经验以在香港设立基金管理公司，也体现在香港对基金设立地采取的中立和不设限制的态度上。在这样的背景下，香港得以发展成为一个世界金融中心，吸引众多的国际机构和集团在此设立资产管理公司。中国大陆的基金公司也在近年纷纷加入其中，到香港来成立资产管理平台，以香港作为中心开拓境外及国际市场。

最近，香港在提升其作为国际金融中心的竞争力和巩固其作为中国大陆门户的地位方面所作的努力使得现状有所改变。国际监管和财务方面的合作也存在新的发展。 本文中我们概要聚焦香港作为一个国际资产管理中心在资产管理领域的主要特点和变化，为资产管理机构将香港纳入其全球策略提供一定的参考依据，并希望有助考虑在香港展开业务的资产管理人探讨香港的潜在新优势。

聚焦香港资产管理Download

Focus on Hong Kong Asset Management

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Hong Kong has a well-established asset management and funds industry that has been successful under an open architecture framework. This spans from being accepting of fund managers’ overseas qualifications and experiences of different markets to set up in Hong Kong, to being domicile-neutral on the funds that may be offered in Hong Kong on a private placement basis or which may be approved for retail public offer. It is this backdrop that has developed Hong Kong into a financial centre where many asset management firms are set up by international groups and in recent years Mainland China fund houses.

Recently the status quo has been shaken up amidst efforts to maintain and enhance Hong Kong’s competitiveness as an international centre for funds, and also as it seeks to further capitalise and stay relevant as the gateway for Mainland China of the People’s Republic. There are also developments in the context and environment of international regulatory and fiscal cooperation. In this article written as a synopsis, we focus on the key attributes and changes that are interesting for asset managers to consider Hong Kong under their global strategy.

Focus-on-Hong-Kong-Asset-ManagementDownload

This article first appeared in the Corporate Livewire “Expert Guide – Investment Funds 2019” (with necessary updates since publication). Vivien Teu & Co LLP is pleased to have been invited by Corporate Livewire to contribute the Hong Kong chapter. Access the full guide at Corporate Livewire (registration required): http://www.corporatelivewire.com/guide.html?id=investment-funds-2019

HKMA on Green Finance and UNPRI

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Earlier this week, the Hong Kong Monetary Authority (HKMA) issued a press release on key measures that the HKMA is adopting to support and promote sustainable and green finance in Hong Kong (https://www.hkma.gov.hk/eng/key-information/press-releases/2019/20190507-4.shtml)

In particular, as an asset owner and manager of the Exchange Fund, HKMA is placing emphasis on responsible investment, including incorporating ESG factors in HKMA’s credit risk analysis on bonds and to further grow the Exchange Fund’s green bond portfolio, through direct investment or investment in green bond funds. 

HKMA is also requiring external managers of the Hong Kong equity portfolios to comply with the Principles of Responsible Ownership promulgated by the Securities and Futures Commission in 2016, and intends to participate in ESG-themed public equities investments through external managers in passive or active mandates targeting ESG benchmark index.

According to recent news, HKMA may soon be the second central bank to sign up to the Principles for Responsible Investment (UNPRI) (the first being Dutch central bank).

Offshore Economic Substance Requirements

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From 1 January 2019, various offshore jurisdictions have enacted economic substance (ES) requirements, although there are differences and local nuances in each of the respective jurisdictions involved. Generally speaking, the introduction of ES requirements in such traditional ‘no or nominal tax jurisdictions’ has raised concerns amongst individuals or corporations who have been using offshore companies, whether in the conduct of a trade or business, funds or investment management, family-owned businesses or trust structures using offshore companies for the holding of investments or real properties, multinational groups with an offshore listing vehicle and/or holding companies, and so forth. As such, the impact of the ES requirements on the use of entities in such no or nominal tax jurisdictions needs to be assessed, immediately and on an ongoing basis.

In this legal update we provide an outline of the broad global context and the general ES requirements for information and discussion, while specific details of the ES requirements that may apply to specific entities in specific offshore jurisdictions should be considered in consultation together with lawyers of the particular jurisdictions in question.

Specifically, we consider the types of entities and activities that may be impacted, the potential implications and options that may be available to comply or address the ES requirements, including whether companies may “relocate” or obtain tax residency in another jurisdiction such as Hong Kong, which we suggest careful analysis should be undertaken in review.

Offshore Economic Substance RequirementsDownload

To view a Chinese version of this update:

Offshore-Economic-Substance-Requirements-ChiDownload

“Green” or “ESG” Funds? Hong Kong Regulator Issues Guidelines

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An evolutionary force has built momentum in recent years within the global investment management industry and investors community – a greater focus on the power of capital for good and purpose. Beyond “green investing” to fight climate change, it goes from sustainable investing to ethical or impact investing, encompassing objectives to embrace broader responsibilities that take into account environmental, social and corporate governance (ESG) factors.

In the broader context, the investment industry and capital markets are responding to governmental policies and investors demand for capital allocation with these objectives. Yet, there are varying degrees and approaches to addressing ESG factors, with limited regulatory requirements that provide specific framework. What counts as green, or what specific environmental, social or governance issues are being addressed, and how?

With an increase in the offering of investment products or services with proposed green or ESG investment objectives or policies, there is an issue of clarity or sufficiency of disclosures. This makes it difficult for investors to compare and contrast the available choices of products – what exactly are the products purported to be or to what extent are the investment strategies or investment portfolios actually “green” or “ESG” compliant.

On 11 April 2019, the Hong Kong Securities and Futures Commission (“SFC”) issued its Circular to management companies of SFC-authorised unit trusts and mutual funds to address “Green” or “ESG” funds (Circular). The aim is to enhance disclosure comparability between similar types of SFC-authorised Green or ESG funds and their transparency and visibility in order to facilitate investors making informed investment decisions in this evolving investment areas.

The Circular would serve to require and obligate investment managers offering investment products with an expressed green or ESG focus or who intend to do so to carefully consider whether their fund would and is able to comply within the SFC’s expected framework for Green or ESG funds and become designated as such.  An investment manager of Green or ESG funds would also be expected to have a proper and robust investment selection process and assessment criteria in line with its stated investment focus and green or ESG principles, and may seek to obtain a third party certification or fund labeling or would rely on its self-confirmation.

Our legal update outlines the background and context of the growth of Green or ESG funds, Hong Kong’s efforts and SFC’s issued framework for such funds as set out in the new Circular:

Hong Kong Guidelines on Green or ESG FundsDownload

 

家族财富管理

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张慧雯律师事务所很高兴成为“中国商法”杂志授予的《2019年中国商法卓越律所大奖》的获奖者。

本所获奖领域为： 家族财富管理 －国际所。

“中国商法”卓越律所大奖是根据中国境内外企业法务、管理决策者、法律专业人士的投票及推荐，以及对获奖事务所的显著成就进行评估而授予的。

由于中国和亚洲地区的财富和超高净值以及高净值家庭的数量大幅增加，近年来对家族财富管理的专业人士和专业服务的需求很大。 不断增长的需求，也带来很多家族办公室的设立。

取决于每个家族的独特情况，家族办公室的功能以及家族办公室的设计、形式和架构可就个别家庭而异。 包括家族企业和投资之需求，为下一代策划资产转移的遗产和传承计划等，可能有很大不同的考虑因素和方式。

在本所获奖之际，我们再次分享本所刊物，含本所深入分析家族财富管理的要素和相关问题。 结合本所就证券及私募股权投资、企业、基金、信托安排和税务等方面的专长，我们期待与更多合作伙伴合作，为行业做出贡献和塑造，以达满足客户需求。

私人财富管理及家族办公室（2019）Download

Family Wealth Management

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Vivien Teu & Co LLP is delighted to be a recipient of the China Business Law Awards 2019 conferred by the China Business Law Journal.

The firm is recognised as an award winner in the category of Family Wealth Management – International Law Firm.

The China Business Law Awards of China Business Law Journal are conferred based on votes and recommendations from corporate counsel, senior managers and legal professionals around the world, and an evaluation of the notable achievements of winning firms.

Due to tremendous increase in wealth and numbers of ultra-high-net-worths and high-net-worths families in China and broader Asia, there has in recent years been great demand for professionals and specific expertise in the family wealth management sector to service the growing needs, along with more family offices being established.

The functions of a family office and the design, form and structure for family wealth management can vary significantly from one family to another depending on the unique circumstances of each family. Relevant considerations including succession planning for the family business and investments, leaving a legacy and succession planning for generational transfer of assets can be quite different.

With our award win, we are happy to share again our publication that takes a deep dive into analysing the elements and relevant issues for family wealth management. With our practice focus across securities and private equity investments, corporate, funds, trusts and tax, we look forward to working with more partners in contributing and shaping the sector to meet client needs.

Private Wealth Management & Family OfficesDownload

Revised Code on Unit Trusts and Mutual Funds

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On 6 December 2018 the Hong Kong Securities and Futures Commission (“SFC”) issued the consultation conclusions (“the Consultation Conclusions”) on proposed amendments to the Code on Unit Trusts and Mutual Funds, governing investments funds authorised by the SFC for offer to the public in Hong Kong. The revised Code on Unit Trusts and Mutual Funds is now in force with effect from 1 January 2019 with a transition period of 12 months for existing SFC authorised funds and operators.

In this publication, we look into the background of the amendments and the extent of such changes:

Revised Code on Unit Trusts and Mutual Funds (Feb 2019)Download

International tax cooperation spurs key development for the Hong Kong asset management industry

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In December 2017, the Council of the European Union (EU) identified certain ring-fencing features in Hong Kong’s profits tax exemption regime, which are considered discriminatory and isolated from the domestic economy. In order not to be labelled as a non-cooperative jurisdiction by the EU Council, Hong Kong committed to addressing this concern by considering appropriate modifications and proposing legislative amendments by the end of 2018.

On 7 December 2018, the Hong Kong Government Gazette published new and self-contained provisions in the Inland Revenue Ordinance (Cap. 112) (IRO) that will allow all funds operating in Hong Kong, regardless of their location of central management and control, their size or the purpose that they serve, to enjoy profits tax exemption for transactions in specified assets subject to meeting certain conditions. The bill will be introduced into the Legislative Council on 12 December 2018, and when adopted, will come into operation on 1 April 2019.

Once the proposed amendments are adopted, more funds are expected to become eligible for enjoying tax exemption benefits in Hong Kong. This is a significant development that will create a level playing field for tax for all funds operating in Hong Kong, whether domiciled in or outside Hong Kong, and whether operating or managed in or from Hong Kong.

The change is expected to enhance Hong Kong’s position as an international asset and wealth management centre, and could attract more professional asset management and related services to be brought into and be carried out from Hong Kong.

Read our Legal Update for more details:

Key development of the asset management industry in HK – level playing field (11 Dec 2018)Download