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Welcome to Herbert Smith Freehills’ monthly private wealth industry updates in Asia.

Every month we survey ten Asian jurisdictions for legal developments concerning trust and estate planning which are of interest to the private wealth industry, and provide a succinct summary in a table format.  The jurisdictions covered in the update are Hong Kong, Singapore, China, Taiwan, Japan, India, Malaysia, Indonesia, Thailand and the Philippines. We hope that these updates will prove to be a useful resource to keep private clients, business people, and lawyers abreast of legal updates in the region.

Hong Kong

SFC CEO discusses strategy to bring Hong Kong to the next level as international asset management hub and private wealth centre

The SFC has made available a keynote speech delivered by its CEO, Ms Julia Leung, at the 16th Annual Conference of Hong Kong Investment Funds Association, titled "Reflect, Reset and Refocus: Game Plan for Hong Kong as an Asset Management Hub".

Ms Leung reflected on the market challenges in 2022 but noted that Hong Kong has shown resilience and seemed to have turned the corner late last year, although the investing terrain remains rough.

The SFC's strategy to bring Hong Kong to the next level as an international asset management hub and private wealth centre consists of the following four prongs:

  • Onshoring strategy – fund domicile structures – Hong Kong's two new fund structures (open-ended fund companies (OFCs) and limited partnership funds) introduced in 2018 and 2020 respectively as alternatives to the trust form are bearing fruit.  The SFC is working with the Government to optimise the OFC regime in several areas, including winding-up procedures and anti-money laundering.  Progress is also underway to introduce the new Type 13 regulated activity covering fund depositary services, which will take effect in October 2024 after completing the legislative process.
  • Platforms: Connect schemes with Mainland China – Mutual market access between the Mainland and Hong Kong is the SFC's vision and commitment for the long term.  The SFC's strategy is to expand the sales footprint for Hong Kong-domiciled funds by building numerous conduits to reach Mainland investors.  These include the Mutual Recognition of Funds scheme, the Wealth Management Connect and the ETF Connect, launched in 2015, 2021 and 2022 respectively.  The SFC sees a need to scale them up, widen the scope of products and relax restrictions to create more headroom for fund flows.
  • Products – The SFC aims to enable growth in respect of climate-resilient ESG investment products, virtual asset products, and RMB-denominated products. An immediate priority is to provide guidance to the asset management industry on how they engage ESG service providers.  In the long term, the SFC would like to see the development of carbon credit trading, more sustainability-related innovation, and more affordable decarbonisation driven by technology.  The SFC recently authorised the first batch of virtual asset futures ETFs, and released guidelines for licensed virtual asset platform operators.  The Stock Exchange of Hong Kong will launch the HKD-RMB Dual Counter Model for stock trading on 19 June 2023. In addition, the SFC is working with the China Securities Regulatory Commission to include the RMB counter in southbound Stock Connect.
  • Technology and services – The SFC believes that generative AI can be used responsibly to augment (rather than replace) asset managers in decision making.  However, licensed corporations are expected to thoroughly test AI to address any potential issues before deployment and keep a close watch on the quality of data used by the AI.  They should also have qualified staff to manage their AI tools, proper senior management oversight and a robust governance framework for AI applications.  

Regulatory requirements for VATP licensing regime finalised for implementation on 1 June 2023, together with enhanced AML/CFT requirements for various sectors regulated under AMLO

The SFC has published its conclusions to the consultation on proposed licensing regime and regulatory requirements for operators of virtual asset trading platforms (VATPs) (see our previous update in relation to the consultation paper).  The new regime will be implemented on 1 June 2023, under the legal framework set out in the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).

The respondents generally supported the proposed regulatory requirements.  Many of the comments sought clarification of the technical and implementation details (which the SFC has taken into account and revised the proposed requirements where appropriate), such as:

  • retail access to licensed VA trading platforms;
  • the criteria for token admission;
  • compensation arrangements for the risks associated with custody of client assets,
  • trading in virtual asset derivatives;
  • implementation details and the transitional arrangements.

Further details on the SFC consultation conclusions can be found in our briefing.

Apart from providing for a new VATP licensing regime, the AMLO has been amended concurrently to update other anti-money laundering and counter-terrorist financing (AML/CFT) requirements and align them with international standards.  See:

SFC issues circulars on transitional arrangements and guidance for new VATP licensing regime which came into effect on 1 June 2023

The new licensing regime for virtual asset trading platforms (VATPs) under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) came into effect on 1 June 2023 (see our previous update). Under the regime, all VATPs carrying on the business of operating a virtual asset exchange in Hong Kong, or actively marketing their services to Hong Kong investors, will need to be licensed by the SFC.

The SFC has published (1) a circular detailing the transitional arrangements for the new licensing regime under the AMLO (attaching a timeline), and (2) a second circular highlighting various guidance documents and information which are intended to assist licence applicants.

(1) Transitional arrangements

The transitional arrangements apply only to pre-existing VATPs providing trading services in non-security tokens. There is no transitional arrangement for compliance with the Securities and Futures Ordinance (SFO).  VATPs which intend to provide trading services in security tokens will be subject to the securities laws of Hong Kong and should commence their businesses in providing trading in security tokens only upon obtaining the relevant licence under the SFO. The circular (attaching a timeline) sets out in detail the eligibility for the transitional arrangements, the deeming arrangement for pre-existing VATPs and their proposed licensed individuals, points to note in relation to licence applications, and the dual licensing regime.

(2) Guidance documents and information

The second circular highlights various documents and information which assist licence applicants and provide guidance on the new regulatory requirements.  It also sets out the notification requirements for licensed VATPs. The guidance and information include (among others):

HKMA launches list of AI-related trustees on its website 

The HKMA has announced the launch of a list of authorised institution (AI)-related trustees on its website, to enable the public to identify such trustees and ascertain their details.

The list consists of AIs and AI subsidiaries that conduct trust business in Hong Kong as trustees, and will be maintained by the HKMA. Any other entities within an AI’s group that carry on trust business in Hong Kong as trustees, wishing to be included in the list, can provide to the HKMA an annual declaration on their compliance with the Code of Practice for Trust Business, annexed to the HKMA's Supervisory Policy Manual module TB-1, "Regulation and Supervision of Trust Business".

Module TB-1 and the code of practice were issued in May 2022 (see our previous update) and are required to be complied with by AIs and subsidiaries of locally incorporated AIs on 1 June 2023.  They incorporate international standards and practices and are aimed at enhancing protection of client assets held on trust and promoting treating of customers fairly and a customer-centric culture in trust business.

SFC concludes further consultation on proposed changes to position limit regime

The SFC has published the conclusions to its further consultation (see our previous update) on proposed changes to the position limit regime for the derivatives market. The proposed changes include imposing obligations on asset managers who manage funds or sub-funds of umbrella funds, and amending the Securities and Futures (Contracts Limits and Reportable Positions) Rules (CLRP Rules) in response to the HKEX’s proposed enhancements to its position limit regime. The obligations relate to the application of position limits and reporting requirements to funds.  Other changes include revising the statutory position limits for stock options and stock futures contracts, and removing the additional position limits for mini stock index futures and options contracts.

After considering market feedback, the SFC will implement the proposed changes to give more clarity on regulatory requirements for funds to facilitate compliance and provide more flexibility to the market by increasing position limits for certain products.  Subject to the legislative process, the amended CLRP Rules are expected to come into effect in December 2023.

HKMA releases proposed prototype of local green classification framework for feedback by 30 June 2023 

The HKMA has published a discussion paper entitled 'Prototype of a Green Classification Framework for Hong Kong', annexing a prototype spreadsheet, setting out its current thinking on a local green classification framework (taxonomy).  Stakeholders are invited to provide their feedback by 30 June 2023.

The Green and Sustainable Finance Cross-Agency Steering Group (established in May 2020) has been working on developing a green classification framework for adoption in Hong Kong.  The HKMA has commissioned an external consultant, Climate Bonds Initiative, to develop a prototype framework to demonstrate its approach and facilitate discussions with stakeholders. The prototype has been developed with a view to enabling easy navigation across the Common Ground Taxonomy and the taxonomies of Mainland China and the European Union.

The discussion paper sets out the background to taxonomy development in Hong Kong, followed by a detailed discussion on the prototype, including its core principles, activities and thresholds, and key reference taxonomies.  As for next steps, the HKMA plans to fine-tune the prototype as appropriate and summarise the consultation with recommendations on future work in around the third quarter of 2023.  This future work may include an expansion of the coverage of activities and structural elements to make the taxonomy more complete and usable.

Stakeholders are invited to share their views in relation to the (1) taxonomy design and structure, (2) metrics, technical screening criteria and thresholds, and (3) future development by 30 June 2023.


MAS updates FAQs on the licensing and registration of FMCs

The Monetary Authority of Singapore (MAS) has updated its frequently asked questions (FAQs) on the licensing and registration of fund management companies (FMCs).  The update relates to processing times for applications.

MAS issues revised Code on CIS

MAS has issued a revised version of its Code on Collective Investment Schemes (CIS). The Code is issued pursuant to section 321 of the Securities and Futures Act (Cap. 289) (SFA). It sets out the best practices on management, operation and marketing of schemes, that managers, approved trustees, directors of a Variable Capital Company (VCC) and custodians of a VCC or a sub-fund thereof, are expected to observe. The Code is non-statutory in nature. In this revised version, a guidance note has been added to paragraph 4.2 of Appendix 6 to clarify that a property fund may hold electronic meetings provided it observes the relevant provisions in the Companies Act (Cap. 50), the listing requirements of its approved exchange and its trust deed relating to the convening and conduct of general meetings.

SGX and SSE sign MoU to develop ETF link

SGX Group has announced that it has signed an MoU with the Shanghai Stock Exchange (SSE) to launch an SSE-SGX exchange-traded fund (ETF) link. Under this agreement, SGX Group and SSE will jointly develop and promote the ETF markets in both countries through a master-feeder fund model.


CSRC and SFC hold high-level meeting on regulatory cooperation

The China Securities Regulatory Commission (CSRC) and the SFC held their 13th high-level meeting on regulatory cooperation in Hong Kong on 12 June 2023. The two regulators exchanged views on the latest capital market situation, reviewed recent achievements of cross-boundary regulatory and enforcement cooperation, and discussed various market development cooperation initiatives.

The CSRC and the SFC agreed to:

  • further enhance and expand various mutual market access schemes, including Stock Connect, Cross-boundary Wealth Management Connect and Mutual Recognition of Funds;
  • further strengthen the cooperation on the derivatives market and asset management industry; and
  • explore other initiatives to promote the healthy development of the Mainland and Hong Kong capital markets.


BNM publishes Financial Inclusion Framework

Following on from the implementation of the first Financial Inclusion Framework (2011–2020), the Bank Negara Malaysia (BNM) has published its strategy paper Financial Inclusion Framework (2023-2026). The paper was developed by the BNM to align with the Financial Sector Blueprint 2022 which serves as a four-year strategic roadmap and principle-based guidance to advance financial inclusion in Malaysia.

The strategy paper also takes into consideration alignment of strategies towards new emerging growth angles in financial services, and achievement of the United Nation’s Sustainable Development Goals (SDGs) and Environmental, Sustainability and Governance (ESG) propositions for higher value creation.

CM sets up inter-agency committee to support implementation of ISSB standards

In advance of the expected release of the IFRS Sustainability Disclosure Standards (ISSB Standards) by the International Sustainability Standards Board (ISSB) at the end of June this year, the Securities Commission of Malaysia (SCM) has set up a new national level Advisory Committee on Sustainability Reporting (ACSR) to support the implementation of the new standards in Malaysia. The ACSR will look into the enablers that would support implementation, including the approach and timeline for implementation, taking into consideration market readiness to meet the reporting requirements. In order to address reliability of the information and mitigate concerns of greenwashing, the ACSR will also discuss matters related to assurance of sustainability statements.

The ACSR, chaired by the SCM, comprises representatives from Bank Negara Malaysia (BNM), Bursa Malaysia, the Companies Commission of Malaysia, the Audit Oversight Board and the Financial Reporting Foundation.


IFSCA circular: AML, CFT and KYC guidance

IFSCA has issued a circular regarding the Guidance to the International Financial Services Centres Authority (Anti Money Laundering (AML), Counter-Terrorist Financing (CFT) and Know Your Customer (KYC)) Guidelines, 2022.  The circular sets out some clarifications for regulated entities.

SEBI Master Circular for mutual funds

The Securities and Exchange Board of India (SEBI)  has published a Master Circular for mutual funds which consolidates the content of circulars issued up to 31 March 2023. The Master Circular comes into force from the date of issuance.

SEBI consultations

The Securities and Exchange Board of India (SEBI) has published the following consultations:

SEBI extends deadline for consultation responses

The Securities and Exchange Board of India (SEBI) has announced that it is extending the deadline for responses to the following consultation papers:

IFSCA: Norms for FME reporting

The International Financial Services Centres Authority (IFSCA) has published a circular setting out reporting norms for fund management entities (FMEs) operating in IFSCs. FMEs are required to submit reports on a half-yearly basis, with the first reports under this circular for the period 1 October 2022 to 31 March 2023 due by 21 June 2023. Subsequent reports for each half year period are then to be submitted within 21 calendar days from the end of the half year.

India extends AML law to cover many more professionals

India's finance ministry has issued notifications SO2036(E) and SO2135(E), widening the scope of the Prevention of Money Laundering Act 2002 to cover a much wider range of professional service providers.

  • Notification SO2036(E),published on 3 May 2023, brings practicing chartered accountants, company secretaries, and cost and works accountants carrying out financial transactions under the Act. This includes those who manage clients' financial accounts, business entities and trusts. They are now considered reporting entities with duties to maintain records, conduct due-diligence on their clients and report to the central registry. However, the position of auditors and legal professionals was not affected.
  • Notification SO2135(E),issued on 9 May 2023, further extends the Act’s coverage to persons carrying out trust and company services on behalf of another person. These include acting as a formation agent or director of a company or partnership; providing registered offices or correspondence addresses for companies or other entities; acting as a trustee or equivalent role of any trust or acting as nominee shareholder. However, it excludes advocates, accountants or company secretaries who merely file the relevant declarations for the formation of a company. It also excludes any person defined under the Act as an intermediary.


SECP: FSF concludes review of corporate governance requirements on sustainable finance

In a press release, the Securities and Exchange Commission, Philippines (SECP) has announced that the Financial Sector Forum (FSF) has completed the review of corporate governance requirements issued by its member agencies (the SECP, the Insurance Commission, and the Philippine Deposit Insurance Corporation) in relation to advancing the sustainability agenda across the financial sector. Based on the results of the review, the corporate governance requirements set out by the FSF member agencies adequately cover the expectations in promoting sustainable   finance.  The existing regulations highlight the importance of the 'tone at the top' in recognizing    the adverse effects of environmental, social and governance (ESG) risks and in taking action to  manage and help mitigate these risks.


The contents of this document are for reference purposes only. Some of the information comes from public sources and this may not be comprehensive, accurate or up to date; where we have relied on third party information and sources, this has not been verified by us. The document does not constitute legal advice, and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication, and any facts in this document should be checked for your specific circumstances at the time you wish to use or refer to them.

Key contacts

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Richard Norridge

Partner, Head of Private Wealth and Charities, London

Richard Norridge
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Anna Sutherland

Managing Partner, Disputes, Sydney

Anna Sutherland