Financial Services & the Treasury
The Financial Services & the Treasury Bureau works closely with market regulators and participants to strengthen Hong Kong's role as an international financial centre. The Treasury formulates and implements policies and procedures to ensure effective control and management of public revenues and expenditure.
Greater transparency and closer surveillance in the hedge fund industry can help ensure a level playing field, better investor protection and reduce financial stability risk, Secretary for Financial Services & the Treasury Prof KC Chan says.
Delivering a keynote speech at the HFR Industry Summit: Asia 2010 today, Prof Chan said regulation and oversight of the hedge fund industry has tightened globally since the financial crisis.
The US has required investment advisers to private funds above US$150 million in assets under management to register with the Securities & Exchange Commission. It also requires private funds to report systemically relevant data in the interests of a broader financial stability assessment.
The Volcker Rule restricts banks' proprietary trading and investments in hedge funds and private equity funds.
"In Europe the Alternative Investment Fund Managers Directive will eventually restrict non-European Union managers to provide their services in the EU, unless these funds can fulfil the same requirements as their EU counterparts and the countries of the funds' domicile have in place EU-equivalent regulatory and supervisory standards.
Regulatory regime
Prof Chan said hedge fund managers carrying on business in Hong Kong are subject to the Securities & Futures Commission regulatory regime and are required to be licensed.
"Regulations, particularly in the financial sector cannot be expected to have a local effect only. Developments in the EU and the US relating to regulation of hedge funds will inevitably have a huge impact on the international asset management industry.
"We believe any regulations coming out of the EU should not discriminate against non-EU managers. We are supportive of co-operative arrangements between the authorities but they should be in line with international standards. Regulations should also be predictable and consistent."
Right balance
In Hong Kong the hedge fund industry manages a total of US$55.3 billion in assets, of which about 40% are funded by European investors.
"It is therefore of critical importance our hedge funds can continue to service their European clients.
"We are committed to designing regulations that are suitable for our needs and our markets. We need to strike a balance between the goal of having a quality market and maintaining a forward-looking market friendly approach."
