Investment Fund Prospectus (Hong Kong)

An Investment Fund Prospectus in Hong Kong records the findings or particulars it documents for the purpose at hand.

The public offer of interests in a collective investment scheme (CIS) in Hong Kong is regulated under section 104 of Cap. 571. No person may issue an advertisement, invitation, or document inviting the public to acquire interests in a CIS unless the CIS is authorised by the SFC or an exemption under Cap. 571 applies. SFC authorisation is the standard pathway for funds distributed to retail investors in Hong Kong. The SFC's Investment Products Division administers the authorisation process and reviews the fund's constitutional documents and prospectus before authorisation is granted.

The UT Code, issued by the SFC under section 399 of Cap. 571, sets out detailed requirements for the structure, investment policies, disclosure, and ongoing obligations of SFC-authorised unit trusts and mutual funds. The UT Code imposes diversification and investment restriction requirements designed to protect retail investors — for example, limits on concentration in single issuers (typically 10% of NAV for equity funds), restrictions on direct investment in commodities, and borrowing limits capped at specified percentages of NAV. Funds that cannot satisfy the UT Code's investment restriction requirements due to their specialist investment strategy (for example, sector funds, country funds, or alternative funds) may be authorised subject to enhanced disclosure requirements, additional risk warnings, and product key facts statement (KFS) requirements at the point of sale.

Hong Kong's fund distribution landscape is served by a large network of SFC-licensed intermediaries, including banks (which are the primary distribution channel through their retail branches and digital platforms), licensed securities brokers, independent financial advisers, and fund supermarket platforms. Funds offered through banks are also subject to the SFC's suitability requirements under the Code of Conduct for Persons Licensed by or Registered with the SFC, which require intermediaries to assess the suitability of a product for a client before recommending it.

Hong Kong funds are commonly domiciled in Hong Kong (as unit trusts or as open-ended fund companies under the Companies Ordinance (Cap. 622)), in the Cayman Islands (for hedge funds and private equity structures), or in Luxembourg or Ireland (for UCITS funds seeking EU and Hong Kong dual-authorisation). The SFC has mutual recognition arrangements with the China Securities Regulatory Commission (CSRC) under the Mainland-Hong Kong Mutual Recognition of Funds (MRF) scheme, allowing eligible Hong Kong-domiciled funds to be publicly offered in Mainland China and eligible Mainland funds to be publicly offered in Hong Kong, subject to the requirements of both regulators. Section 194 of the Securities and Futures Ordinance (Cap. 571) empowers the SFC to issue restriction notices to licensed persons, and section 213 of Cap. 571 allows the SFC to seek court injunctions against unauthorised fund promoters.

A Hong Kong Investment Fund Prospectus is needed at the inception of a new SFC-authorised fund, when a new share class or sub-fund is launched under an existing umbrella fund structure, and whenever a material change to an existing fund's characteristics requires the prospectus to be updated and re-issued.

A fund management company seeking to launch a new retail fund for public distribution in Hong Kong must prepare a full offering prospectus complying with the UT Code's disclosure requirements as part of the SFC authorisation application. The prospectus is submitted to the SFC for review at an early stage of the authorisation process, and the SFC's comments must be addressed before the fund is authorised. The prospectus cannot be used for marketing or distribution purposes until SFC authorisation is granted.

An existing SFC-authorised fund that wishes to launch a new sub-fund within an umbrella fund structure must prepare a supplement prospectus for the new sub-fund and submit it to the SFC for authorisation. The supplement prospectus covers the investment objectives, policies, fees, and risk factors specific to the new sub-fund, cross-referencing the master prospectus for information applicable to the umbrella fund as a whole.

A fund that wishes to make a material change to its investment objectives, fee structure, dealing arrangements, or key service providers must prepare and issue a revised or supplemental prospectus. Under the UT Code, material changes typically require SFC prior approval and prior notification to unitholders, with a period during which unitholders may redeem their holdings without penalty before the change takes effect.

A fund that has been operating for a period and whose prospectus no longer accurately describes the fund's investment approach, fee levels, or regulatory status must update its prospectus proactively. The SFC can require a prospectus update where the fund's documents become out of date or misleading. Periodic prospectus updates (typically every two to three years) are standard practice for active fund ranges.

A Mainland Chinese fund management company seeking to distribute a fund in Hong Kong under the Mainland-Hong Kong Mutual Recognition of Funds (MRF) scheme must prepare a Hong Kong offering prospectus meeting the SFC's requirements for MRF-recognised funds, translated into English and Chinese (traditional characters), and submit it for SFC recognition alongside the required supporting documents.

A Hong Kong Investment Fund Prospectus for an SFC-authorised unit trust or mutual fund must include the following key elements as required by the SFC Code on Unit Trusts and Mutual Funds (UT Code) and best market practice.

The fund overview section must state: the full legal name of the fund; its domicile and date of establishment; the SFC authorisation number; the investment category (equity, bond, money market, mixed assets, or specialist); and the reference currency. For umbrella funds, the sub-fund structure and the number and types of sub-funds must be described.

The investment objectives and policies section is the foundation of the prospectus. It must state clearly and specifically the fund's investment goals — capital appreciation, income generation, or a combination — and the principal investment strategy and asset classes used to achieve those goals. Any investment restrictions imposed by the UT Code (diversification limits, borrowing caps, prohibited investments) or as a matter of the fund's own policy must be described. The benchmark index (if any) for performance comparison purposes must be identified.

The management company section must identify the management company (including its SFC licence number and Type 9 regulated activity authorisation), its ownership structure, its other funds under management in Hong Kong, and the identity of the key investment professionals responsible for managing the fund. The Fund Manager Code of Conduct imposes obligations on the management company to act in the best interests of investors.

The trustee or custodian section must identify the trustee (for Hong Kong-domiciled unit trusts) or custodian (for overseas-domiciled funds), its relationship to the management company (confirming independence), and the scope of its custody and supervisory functions. For umbrella funds with sub-custodians appointed for specific markets, the arrangement should be disclosed.

The fees and charges section must provide a complete and transparent schedule of all fees and charges: the annual management fee (expressed as a percentage of NAV per annum); the trustee or custodian fee; the annual expense ratio and total expense ratio (TER) based on the most recent financial year; subscription fees (front-end loads); redemption fees (back-end loads or contingent deferred sales charges); switching fees; and any performance fees with a clear description of the performance fee calculation method and the high-water mark or hurdle rate mechanism.

The dealing procedures section must specify: the dealing days on which subscriptions and redemptions are accepted; the dealing cut-off time; the basis on which the NAV per unit is calculated (forward pricing — the next calculated NAV after the cut-off time — is standard for UT Code funds); the settlement period; minimum investment amounts; and the procedure for placing subscription and redemption orders (through distributors, direct with the transfer agent, or via the fund's online platform).

The risk factors section must identify all material risks to which investors in the fund are exposed, including market risk, credit risk, liquidity risk, currency risk (for funds investing in non-HKD assets), concentration risk (for sector or country funds), counterparty risk, regulatory risk, and operational risk. The risk factors must be specific to the fund's actual investment strategy and must not be generic boilerplate. Mandatory risk warnings required by the UT Code — including warnings for high-risk funds, funds with complex features, and funds investing in Mainland China — must be included in the prescribed form. Section 104 of the Securities and Futures Ordinance (Cap. 571) prohibits unauthorised public offers of collective investment scheme interests. Section 103 of Cap. 571 sets out professional investor exemptions. Section 399 of Cap. 571 empowers the Securities and Futures Commission to issue the UT Code. Section 32 of the Companies Ordinance (Cap. 622) governs the open-ended fund company (OFC) structure available to Hong Kong-domiciled funds. Section 194 of Cap. 571 empowers the Securities and Futures Commission to issue restriction notices to licensed persons. Section 213 of Cap. 571 allows the Securities and Futures Commission to seek court injunctions against unauthorised fund promoters in the Court of First Instance. Section 116 of Cap. 571 requires persons carrying on regulated activities — including Type 9 asset management — to hold a licence issued by the Securities and Futures Commission. Section 7 of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) imposes customer due diligence obligations on licensed fund managers. Section 22 of Cap. 615 requires retention of customer due diligence records for at least five years. The Investment Products Division of the Securities and Futures Commission administers the SFC authorisation process. The Hong Kong Exchanges and Clearing Limited operates the Hong Kong Stock Exchange listing regime for exchange-traded funds. Download a free Hong Kong Investment Fund Prospectus template and disclosure checklist at forms-legal.com. Related documents include the HK Non-Disclosure Agreement, HK Anti-Money Laundering Policy, and HK Service Agreement.