Insurance & Pensions in Hong Kong

Key dates

2025-10-22

The SFC published its consultation paper on proposed amendments to the UT Code.

2026-01-21

The consultation period closed.

2026-10-16

The revised UT Code and consequential revised PRF, MPF, ILAS and REIT codes are scheduled to be gazetted.

2026-11-01

The revised UT Code and consequential revised PRF, MPF, ILAS and REIT codes become effective.

2027-11-01 Deadline

The generally applicable 12-month transitional period for existing SFC-authorised funds is scheduled to end.

Suggested considerations

• Compliance teams may wish to map each SFC-authorised fund’s current derivative exposure methodology against the revised UT Code and assess whether adopting relative or absolute VaR would be operationally and commercially appropriate.
• Fund managers considering VaR may wish to validate reference-portfolio selection, VaR models, calibration, stress testing, back-testing, independent validation, governance approvals, limit monitoring and escalation procedures against the final revised UT Code and forthcoming SFC guidance.
• Managers may wish to review liquidity-risk frameworks, redemption terms, asset-liability liquidity matching, stress-testing scenarios, anti-dilution tools and disclosures, particularly for funds with exposure to less liquid assets.
• Money market fund managers may wish to test compliance with the 7.5% daily-liquid-assets and 15% weekly-liquid-assets thresholds and document monitoring of investor concentration, redemption behaviour, asset liquidity, days to trade, cost to trade and maturity profiles.
• Product, legal and disclosure teams may wish to update offering documents, constitutive documents, investment-management agreements, risk disclosures, derivatives policies and fund supplements where the revised requirements affect a fund’s strategy or operating model.
• Managers may wish to assess whether existing UCITS or other overseas risk-management documentation can be leveraged while confirming that Hong Kong-specific requirements and SFC-authorised-fund classifications are satisfied.
• Trustees, custodians and oversight committees may wish to confirm their revised oversight responsibilities, reporting arrangements and escalation processes before the transition period expires.
• Firms may wish to monitor the SFC’s forthcoming supplementary guidance, frequently asked questions and revised templates and incorporate them into implementation plans.

What changed

The revised UT Code will permit eligible retail funds to manage derivative exposure using either the existing net derivative exposure approach or a VaR approach. The proposed VaR framework uses a relative VaR limit of 200% of the VaR of a designated unleveraged reference portfolio or an absolute VaR limit of 20% of the fund’s NAV, together with associated governance, risk-management and monitoring requirements.

Key dates

27 April 2012

- CISIAM became licensed under the Securities and Futures Ordinance to carry on Type 4 (advising on securities) and Type 9 (asset management) regulated activities

03 June 2013

- CISIAM obtained a licence to carry on Type 5 (advising on futures contracts) regulated activity

August 2019

- Start of the period during which CISIAM’s failures as fund manager occurred in relation to the Tahoe Life‑related private fund

September 2020

- End of the period during which CISIAM’s failures in managing the private fund took place

Suggested considerations

• Review and update private fund governance frameworks to ensure investment approvals require independent investment discretion, documented due diligence, and explicit challenge of investor‑driven proposals, particularly those originating from client senior management.
• Implement or enhance written procedures to identify “dubious arrangements”, including criteria such as unnecessary structural complexity, unclear commercial rationale, additional costs or risks, related‑party exposure, and potential concealment of asset movements or connected transactions.
• Establish a mandatory escalation and approval process for complex or investor‑driven transactions, requiring risk, compliance, and senior management sign‑off before execution and documented reasoning for proceeding.
• Conduct a gap analysis of all existing private funds to confirm that current and past investments comply with the funds’ investment restrictions and stated objectives, and remediate any breaches including client notification and corrective actions where appropriate.
• Strengthen risk management frameworks for private funds by defining key risk types, setting monitoring thresholds, and implementing periodic risk reporting to senior management and the board.

What changed

• - Asset managers must maintain and apply documented procedures and controls to identify whether proposed private fund arrangements or transactions are dubious, including where structures are...
• Where a proposed arrangement or transaction is assessed as dubious, asset managers may only proceed once they are satisfied that concerns and red flags have been sufficiently addressed and evidenced.
• Fund managers are expected to exercise independent investment discretion and cannot rely solely on investor‑driven proposals, especially from influential client personnel such as chief investment...
• Asset managers must ensure that all fund investments comply with the fund’s stated investment restrictions and align with its stated investment objectives, with documented controls to verify...
• Firms must implement effective measures to identify, manage, and continuously monitor the risks to which private funds are exposed, including counterparty, concentration, structural, and...