On 5 February 2021, the Securities and Futures Commission (“SFC”), the Hong Kong Monetary Authority (“HKMA”) and the Monetary Authority of Macao (“AMCM”) entered into a Memorandum of Understanding (“MOU”) in relation to the launch of the Cross-boundary Wealth Management Connect Pilot Scheme (“Scheme”) in the Guangdong-Hong Kong-Macao Greater Bay Area with Mainland authorities such as People’s Bank of China, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission and the State Administration of Foreign Exchange.
The MOU provides a framework for collaboration by the signing parties to establish supervisory and liaison mechanism for better investor protection amongst regulators in the three jurisdictions. The MOU complements existing regulatory cooperation among the parties.
The Scheme will operate in a way where the regulation of the wealth management products and sale of such products shall be by the jurisdiction where the business is conducted. The HKMA, SFC and AMCM have agreed to take effective measures to ensure that the investment scope under the Southbound Scheme meets the relevant requirements of the Scheme, such as providing guidance to Hong Kong and Macao banks to conduct due diligence on eligible wealth management products for assessing risk level and complexity of products, providing guidance on investor protection measures, and guidance for complying with anti-money laundering and counter-financing of terrorism regulations.
The MOU aims to provide a framework for exchange of supervisory information and enforcement cooperation as well as a liaison mechanism for investor protection issues among regulatory authorities in the three jurisdictions, complimenting existing regulatory cooperation amongst them.
The HKMA and AMCM also agreed to provide guidance to Hong Kong and Macao banks to strengthen management of investment accounts to ensure funds remitted are only used for designated purposes and proceeds from wealth management products will be remitted bank via the same route, so as to ensure closed loop management of funds.
There will be arrangements put in place for sharing the statistics of the Scheme regularly, including lists of banks participating in the Scheme, information related to eligible wealth management products, and the usage of aggregate quota under the Scheme.
In terms of their supervisory and enforcement function, the parties further agree to inform the relevant authorities of the other jurisdiction(s) in a timely manner of illicit or non-compliance activities of participating institutions and complaints about the institutions and products under the Scheme, if deemed necessary following reasonable assessments based on the principle of prudent supervision
The MOU would lay a solid foundation for the launch of the Scheme, which would deepen financial integration of the Greater Bay Area.