Wealth Management Connect Agreement (Hong Kong)

A Wealth Management Connect Agreement in Hong Kong records the terms the parties accept and the commitments each makes to the other.

The Greater Bay Area Wealth Management Connect scheme was jointly established by the Hong Kong Monetary Authority (HKMA), the People's Bank of China (PBOC), and the Monetary Authority of Macao (AMCM) and launched in September 2021. The scheme is a significant milestone in the financial integration of the Greater Bay Area — the economic zone comprising Hong Kong, Macao, and nine Guangdong Province cities (Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen, and Zhaoqing) — with a combined GDP exceeding US$1.9 trillion and a population of over 86 million. The scheme allows GBA residents to invest in eligible wealth management products offered in each other's markets, subject to individual investment quotas (currently RMB 3,000,000 per investor per direction as enhanced in February 2024) and an overall aggregate scheme quota.

The WMC scheme operates through a closed-loop fund flow arrangement. A Hong Kong investor participating in the Northbound WMC (investing in eligible Mainland wealth management products) opens a dedicated investment account at a participating Hong Kong bank (the Hong Kong bank) and a paired dedicated account at the Hong Kong bank's Mainland partner bank. Subscription funds are transferred from the investor's HKD account at the Hong Kong bank, converted to RMB at the prevailing exchange rate, and credited to the investor's Mainland partner bank account for investment in eligible Northbound WMC products. Redemption proceeds and investment income flow back through the same closed-loop channel. This closed-loop design maintains the integrity of China's capital account management while supporting legitimate cross-border retail investment by GBA residents.

The HKMA supervises the participating Hong Kong banks under Section 7 of the Banking Ordinance (Cap. 155), which confers on the HKMA broad supervisory powers over authorised institutions. Participating Hong Kong banks must comply with the HKMA's guidelines on WMC scheme implementation, including investor eligibility verification, product suitability assessment requirements, risk disclosure obligations, and AML/CFT due diligence under Section 5 of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615). Schedule 2 of Cap. 615 sets out the customer due diligence measures that banks must apply to WMC investors. Hong Kong investors must meet eligibility criteria including Hong Kong permanent resident status confirmed under the Immigration Ordinance (Cap. 115), a Hong Kong bank account held for at least one year, and the investment suitability requirements specified by the participating bank under the Securities and Futures Ordinance (Cap. 571).

The Securities and Futures Commission (SFC) regulates the sale of WMC products by bank-based intermediaries registered with the SFC under Section 119 of Cap. 571. The SFC's Code of Conduct for Persons Licensed by or Registered with the SFC imposes suitability obligations — requiring that each product recommended to a Northbound WMC investor is suitable for that investor having regard to their risk profile, investment experience, and financial situation. Section 307 of Cap. 571 creates the framework for SFC oversight of persons registered with the SFC through authorised institutions.

Hong Kong's participation in the WMC scheme reflects its unique role as the gateway between Mainland China and international capital markets. The scheme complements the existing cross-border capital market connectivity initiatives — Stock Connect (launched 2014), Bond Connect (launched 2017), and the Mainland-Hong Kong Mutual Recognition of Funds (MRF) arrangement (launched 2015) — and forms part of the broader GBA financial integration agenda set out in the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area approved by the State Council of the People's Republic of China.

A Wealth Management Connect Agreement is needed whenever a Hong Kong resident wishes to invest in eligible Mainland GBA wealth management products through a participating Hong Kong bank under the Northbound WMC arrangement, or whenever a participating Hong Kong bank onboards a new Northbound WMC investor.

A Hong Kong permanent resident who has identified one or more eligible Northbound WMC wealth management products offered through their bank and wishes to invest in those products must enter into the WMC client agreement with the participating Hong Kong bank before the bank can open the dedicated WMC investment account and WMC remittance account required for the investor's participation. The agreement is a pre-requisite for WMC account opening.

A participating Hong Kong bank that has been approved by the HKMA to offer Northbound WMC services to eligible Hong Kong investors must implement a standard WMC client agreement that satisfies the HKMA's requirements for investor eligibility verification, risk disclosure, and product suitability assessment. The bank's WMC client agreement must be reviewed and approved internally for compliance with the HKMA guidelines before the bank commences offering the scheme to customers.

A Hong Kong investor who has previously participated in the WMC scheme and wishes to invest in a new eligible Northbound product category added to the scheme following the February 2024 enhancements (or any subsequent enhancements) may need to sign an updated WMC agreement or product addendum if the new products involve product categories or risk levels not covered by the investor's existing WMC account agreement.

A Hong Kong investor who wishes to increase their investment in the Northbound WMC above their current committed amount — up to the individual investor quota ceiling of RMB 3,000,000 — does not need a new WMC agreement, but must confirm that the total outstanding investment remains within the individual quota. The participating Hong Kong bank monitors the investor's quota usage and alerts the investor when the quota is approaching its limit.

A bank compliance team reviewing the WMC scheme's onboarding and risk management documentation as part of a periodic regulatory review, or in preparation for an HKMA examination, should review the WMC client agreement template to confirm it remains current with the HKMA's most recent guidelines and guidance on the WMC scheme.

A Hong Kong Wealth Management Connect Agreement between a participating Hong Kong bank and a Northbound WMC investor should include the following key elements to satisfy the HKMA's requirements and protect both parties.

The investor identification and eligibility confirmation section must record: the investor's full legal name and Hong Kong Identity Card (HKID) number; confirmation of Hong Kong permanent resident status under the Immigration Ordinance (Cap. 115); confirmation that the investor's principal residence is in Hong Kong; confirmation that the investor has held a Hong Kong bank account for at least the minimum period required (currently one year as reduced from two years by the February 2024 enhancements); and, if applicable, confirmation that the investor does not hold a Mainland household registration (hukou) that would affect their eligibility under the Northbound WMC rules as set by the HKMA and PBOC.

The investment account and remittance account details must specify: the dedicated WMC investment account number opened at the participating Hong Kong bank; the dedicated WMC remittance account number at the paired Mainland partner bank; the HKD/RMB conversion arrangement (including the exchange rate mechanism and any conversion spread charged by the bank); and the closed-loop fund flow arrangement (with a clear explanation that WMC funds may only flow through the designated linked accounts and cannot be diverted to non-WMC purposes). The closed-loop mechanism is mandated by the HKMA and PBOC joint circular on WMC scheme implementation.

The individual investment quota acknowledgement must confirm that the investor understands and accepts the individual investment quota limit (currently RMB 3,000,000 per investor per direction), that the quota covers the total outstanding investment at any given time, and that the investor is responsible for monitoring their own quota usage. The participating Hong Kong bank must monitor quota usage and reject subscription orders that would cause the investor to exceed the limit under the HKMA's WMC supervisory guidelines.

The risk disclosure section must address all material risks associated with Northbound WMC participation under the SFC's Code of Conduct and the HKMA's guidelines, including: foreign exchange risk (RMB/HKD fluctuation affecting the HKD value of returns); market and product risk (risk of loss on the underlying Mainland investment products issued by banks or funds authorised by the China Securities Regulatory Commission (CSRC)); regulatory risk (the risk of scheme modification or suspension by the HKMA, PBOC, or AMCM); jurisdictional risk (Mainland products are governed by the laws of the People's Republic of China, not Hong Kong law or the Securities and Futures Ordinance (Cap. 571)); and liquidity risk (dealing and redemption procedures for Mainland products may differ significantly from Hong Kong norms, including potential early redemption restrictions or lock-up periods of up to 180 days).

The product suitability confirmation must record: the investor's risk profile determined through the bank's suitability assessment process under Section 4 of the SFC's Code of Conduct; the risk level of the Northbound WMC products the investor has been assessed as eligible to purchase; and the investor's acknowledgement that they understand the risk characteristics of each product category. The bank must not process subscriptions for products above the investor's assessed risk level — a requirement enforced by the SFC through its oversight of bank-based intermediaries registered under Section 119 of Cap. 571.

The fee schedule must disclose all fees charged by the participating Hong Kong bank in connection with the WMC account: HKD/RMB currency conversion fees or spreads; account maintenance fees (if any); transaction fees for subscription and redemption orders; and any platform or service fees. All fees must be disclosed in compliance with the disclosure requirements under the Code of Conduct for Persons Licensed by or Registered with the SFC.

The AML/CFT due diligence confirmation must record that the bank has completed the customer due diligence required by Schedule 2 of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), including verification of the investor's identity and source of funds. Section 5 of Cap. 615 requires authorised institutions to conduct ongoing due diligence on WMC investors throughout the account relationship.

The amendment and termination clause must address: how the agreement is amended if the WMC scheme's terms change following an HKMA/PBOC joint announcement; the process for closing the WMC account and repatriating outstanding investments through the closed-loop channel; and the investor's right to terminate participation at any time, subject to redemption procedures. The forms-legal.com Wealth Management Connect Agreement (Hong Kong) template covers the mandatory elements under Securities and Futures Ordinance (Cap. 571).