Oversight: Proposed regulation of Hong Kong custodians

On 22 February 2022, the Securities and Futures Commission (SFC) published its Consultation Conclusions on the Proposed Regulatory Regime for Depositaries of SFC-authorised Collective Investment Schemes (CIS) (Consultation Conclusions) and a Further Consultation on Proposed Amendments to Subsidiary Legislation and SFC Codes and Guidelines to Implement the Regulatory Regime for Depositaries of SFC-authorised CIS (Further Consultation). Before the onset of the global COVID-19 pandemic, the SFC had issued back in September 2019 a Consultation Paper on the Proposed Regulatory Regime for Depositaries of SFC-authorized CIS (Consultation Paper), in which the SFC proposed a new regulatory activity under the Securities and Futures Ordinance (SFO) to be called 'Type 13 (acting as a depositary)' regulated activity (RA 13). The Oversight regarding the original Consultation Paper can be accessed here. The Consultation Conclusions and the Further Consultation are available on the SFC's website here.

The Consultation Conclusions set out the comments received and the SFC's responses in respect of the proposed regulatory regime for RA 13 as described in the Consultation Paper. The Further Consultation contains the detail being the SFC's proposed amendments to relevant subsidiary legislation and SFC codes and guidelines in order to facilitate the implementation of the RA 13 regime. The consultation period in respect of the Consultation will end on 30 April 2022.

This Oversight provides an overview of the Consultation Conclusions and the Further Consultation. It first discusses the Consultation Conclusions and compares them against the relevant proposed requirements in the Consultation Paper. It then looks at the proposed amendments to SFC codes, guidelines and subsidiary Legislation in the Further Consultation and the practical implications of the changes currently proposed for trustees and custodians of CIS authorised under the Code on Unit Trusts and Mutual Funds (UT Code) and the Code on Open-Ended Fund Companies (OFC Code).