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Hong Kong – Domiciled Funds,Trustee Liability.

1 May 2014

 

Legal News & Analysis – Asia Pacific – Hong Kong –  Investment Funds

 

Following the implementation in December 2013 of legislation updating the Trustee Ordinance, the Securities and Futures Commission (SFC) issued a circular on 17 April 2014 to clarify the application of the revised Trustee Ordinance to trustees of SFC-authorised funds constituted as Hong Kong unit trusts.

 

Section 41O of the Trustee Ordinance provides that a trustee is not liable for any act or omission of an agent, nominee or custodian acting for the trust if the trustee has discharged the statutory duty of care applicable to the trustee imposed under the Trustee Ordinance.

 

In the circular, the SFC has confirmed that authorised fund trustees are subject to the requirements concerning trustee/custodian liability as set out in the SFC’s Code on Unit Trusts and Mutual Funds, notwithstanding any provisions in the revised Trustee Ordinance.

 

In order to “put it beyond doubt” that section 41O of the Trustee Ordinance shall not operate to affect the application of the code requirements, the SFC requires that:

 

  1. new Hong Kong domiciled funds seeking SFC authorisation will include provisions confirming and clarifying the position in the trust deed;
  2. trustees of existing SFC-authorised Hong Kong unit trust funds shall, by 16 May 2014, either (a) confirm in writing to the SFC that, for so long as the fund is SFC-authorised, they will not seek to rely on section 41O of the Trustee Ordinance or (b) furnish a legal opinion acceptable to the SFC confirming the position as in 1 above;
  3. the trust deeds of existing SFC-authorised Hong Kong funds shall be amended to include clarifying provisions as soon as reasonably practicable, and shall then be filed with the SFC.

 

Deacons

 

For further information, please contact:

 

Susan Gordon, Partner, Deacons

susan.gordon@deacons.com.hk

 

Deacons Investment Funds Practice Profile in Hong Kong

 

 

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