Member Article

As an initiative to develop Islamic finance and Islamic fund management in Hong Kong, the SFC signed a Declaration on Mutual Cooperation on Development of Islamic Capital Market and Islamic Collective Investment Schemes (Declaration) with the Securities Commission of Malaysia (MSC) on 9 November 2009, which provides a framework for the mutual recognition of Islamic funds (excluding hedge funds, wholesale funds and real estate investment trusts as defined in the relevant guidelines) between the two jurisdictions.

Recognition of Islamic Funds Approved by the MSC in Hong Kong

Under the Declaration, the SFC will apply a streamlined process in respect of applications for authorisation of MSC-approved Islamic funds if they fulfil the following requirements:

1. Approved and primarily regulated by the MSC;
   
   
2. Managed by MSC licensed fund managers; and
   
   
3. The fund complies with certain minimum requirements of the SFC's Code as set out in Annex A to the SFC's Circular dated 9 November 2009 on the subject (accessible at: http://www.sfc.hk/sfcRegulatoryHandbook/EN/
   displayFileServlet?docno=H563).

The applicable provisions of the Code cover, inter alia, the following areas:

1. Requirements on management companies
   
2. Investment restrictions
   
3. Required contents of offering documents
   
4. Appointment of a Hong Kong representative and an approved person
   
5. Post-notification requirements
   
6. Other requirements

• Bilingual (English / Chinese) offering documents, performance fee restrictions, and required contents of the constitutive documents and financial reports of the fund.

Recognition of Islamic Funds approved by the SFC in Malaysia

Reciprocally, a streamlined authorisation process by the MSC will also be applicable to SFC-authorised Islamic funds if these funds are (1) primarily regulated by the SFC, (2) managed by SFC licensed fund managers and are (3) domiciled in either Hong Kong or signatory jurisdictions of the International Organisation of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding which have broadly implemented IOSCO Principles 17 to 20.