On 28 February 2020, the Hong Kong Securities and Futures Commission (SFC) issued updated circulars, guidance notices, application forms and checklists and FAQs regarding the Mutual Recognition of Funds (MRF) between Luxembourg and Hong Kong — including the application and maintenance of investment funds under the revamped authorization process.

Here are the main changes that were made:

1. Luxembourg UCITS that invest more than 50% of the NAV in derivative instruments, and/or funds that use guaranteed features, can no longer follow the standard application process under the “revamped authorization process”. Instead, they must use the non-standard application process in Hong Kong, which is slower and more burdensome than the standard one.  
2. If a previously-authorized UCITS changes after its authorization and, as a result, no longer meets the eligibility criteria, the Hong Kong SFC must be informed appropriately. 
3. Key facts statements (KFS) templates have been updated: it is now necessary to include risks regarding renminbi shares and specific disclosures regarding the use of derivatives.
4. The option to prepare a long-form audit report in lieu of the Hong Kong SFC-specific report has been removed.

Links to the updated documents can be found here:

• (Updated) Circular on Mutual Recognition of Funds (MRF) between Luxembourg and Hong Kong
• (Updated) Guide on Practices and Procedures for Application for Authorization of Unit Trusts and Mutual Fund
• (Updated) Guide on the Use of Financial Derivative Instruments for Unit Trusts and Mutual Funds
• Illustrative templates for product key facts statements (KFS)

Please feel free to contact us if you require any further information.

Said Fihri
Partner
+352 22 51 51 7892
said.fihri@kpmg.lu

Stephanie Zedda
Senior Manager
+352 22 51 51 7271
stephanie.zedda@kpmg.lu