SFC issues guidance to support enhancements to Hong Kong’s retail fund regime
AI Analysis
The SFC has published implementation guidance for the revised Code on Unit Trusts and Mutual Funds, which takes effect on 1 November 2026. The package operationalises a VaR framework for derivatives, strengthened liquidity and anti-dilution controls, enhanced money market fund safeguards and revised disclosures; new funds must comply immediately, while most existing funds have until 31 October 2027 to transition.
Key dates
- 2025-10-22
- The SFC issued its consultation paper on proposed amendments to the UT Code.
- 2026-10-07
- The SFC published consultation conclusions announcing the enhancements to Hong Kong's retail fund regime.
- 2026-10-16
- The revised UT Code was gazetted.
- 2026-11-01 Deadline
- The revised UT Code takes effect. New funds must comply with the revised requirements immediately, and the 12-month transitional period for existing funds begins.
- 2027-10-31 Deadline
- The 12-month transitional period ends. Existing funds generally must comply with the revised UT Code requirements by this date.
- 2027-11-01 Deadline
- Existing funds continuing to be offered to the Hong Kong public must use KFSs containing the enhanced disclosure requirements after expiry of the transitional period.
Suggested considerations
- Compliance teams may wish to map each existing fund against the revised UT Code requirements and determine which requirements fall within the 12-month transitional period.
- Managers should consider documenting whether each fund will use the existing net derivative exposure approach or the new VaR approach, and assess the required models, data, governance, validation, stress testing, limits and reporting processes.
- Managers should consider reviewing fund asset liquidity, portfolio liquidity and redemption terms, including whether daily-dealing funds investing mainly in less liquid assets require anti-dilution liquidity management tools.
- Compliance teams may wish to inventory available liquidity management tools, assess their calibration and activation triggers, and verify that the fund documentation and operational procedures describe their use consistently.
- MMF managers should consider testing compliance with the revised minimum credit-quality standards and eligible-instrument and deposit requirements, including the additional safeguards applicable to constant-NAV MMFs.
- Fund boards, trustees and management companies may wish to review governance and escalation arrangements for derivatives exposure, liquidity risk and use of liquidity management tools.
- Managers should consider updating KFSs, offering documents, product classifications, liquidity disclosures and related marketing materials using the revised SFC templates.
- Applications for new funds submitted from 1 November 2026 should be prepared against the revised UT Code and updated application guides rather than the former requirements.
What changed
The revised UT Code introduces a Value-at-Risk approach alongside the existing net derivative exposure approach, with accompanying calculation methodology and standards. Funds complying with the applicable NDE or VaR limits will generally be treated as non-complex products, although the SFC retains discretion to classify products as complex based on their features and risks. Liquidity risk requirements are enhanced to align with updated IOSCO recommendations, including closer alignment between asset liquidity and redemption terms and the appropriate design, calibration and use of anti-dilution liquidity management tools. Funds investing mainly in less liquid assets and offering daily dealing are expected to use appropriate ADTs, and all SFC-authorised money market funds must maintain at le
Compliance impact
This is a significant implementation change for Hong Kong-authorised retail funds, combining binding UT Code amendments with detailed supervisory expectations on VaR, liquidity, MMFs and disclosure. Non-compliance may affect fund authorisation, continued public offering, product classification, investor disclosures and the SFC's assessment of management-company controls and regulatory fitness.
Who is affected
Related regulations
References
AI-generated analysis. May contain errors or omissions — verify with the original SFC source before acting. Full disclaimer.
What the SFC said
No description available.
Published by SFC . Read the full notice at the source for the authoritative text.