On January 20, 2021, the Securities and Exchange Commission of Thailand (SEC) and the Securities & Futures Commission of Hong Kong (SFC) entered into a memorandum of understanding (MOU) on mutual recognition of funds. The MOU aims to facilitate the process for eligible funds set up in one country to be marketed and offered to investors in the other country by streamlining qualifications and processes for registration with the regulators.

The key elements of the MOU are outlined below.

Covered Funds

The MOU generally only covers funds in the form of collective investment schemes (CIS), set up in Thailand or Hong Kong and managed by a covered management company that is authorized or licensed in its home country, (i.e., Thailand or Hong Kong) that is seeking approval to offer these funds to the public in the other country (the "host country").

Apart from the regulatory requirements prescribed by the regulator of the home country, the covered funds must also meet certain eligibility requirements, dependent on the type of fund offering, set by the regulator of the inbound jurisdiction (i.e. the SEC or the SFC). These funds must fall within one or more fund types specified in the MOU, including general equity funds, bond funds, mixed funds, feeder funds, unlisted index funds, and exchange-traded funds. Note that the SEC has agreed to expedite approval for Thai feeder funds that invest in Hong Kong master funds by streamlining certain processes.

Covered Management Companies

Generally, an asset management company that is authorized in its home jurisdiction (i.e., Thailand or Hong Kong) will be able to conduct cross-border marketing and fund offering activities under this MOU.

Requirements for Fund Offerings

Apart from meeting certain qualifications prescribed by the host country, fund offerings must be conducted in accordance with the host country's requirements. In Thailand, these requirements include the following:

  • Fund offerings must be conducted by intermediaries that are properly licensed by the SEC, and they must comply with the relevant regulations;
  • A local representative of the covered management company must be appointed in the host country;
  • The offering documents must be complete, accurate, fair, clear, effective, and easily understood;
  • The prospectus must also be properly prepared (a prospectus that has been authorized by the SFC may be used); and,
  • The information contained in the fund offering documents must be consistent with the information distributed in Hong Kong.

This Hong Kong-Thailand MOU is the third passporting regime that Thailand has established with alliance countries. The first framework was the ASEAN CIS in 2014, covering Malaysia, Singapore, and Thailand. In 2019, the Asia Region Funds Passport framework was established, covering Australia, Japan, New Zealand, the Republic of Korea, and Thailand.

In signing the MOU, both the SFC and the SEC have agreed to unify their entry processes by promulgating local regulations in order to accommodate the cross-border offering of funds—a step that is anticipated to be complete in the second quarter of 2021.

T&G will continue to monitor the progress of the implementation of this MOU closely. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.