Hong Kong Securities and Futures Commission publishes implementation guidance ahead of November 1 retail fund reforms

The Hong Kong Securities and Futures Commission (SFC) has published guidance and revised disclosure templates for implementing the amended Code on Unit Trusts and Mutual Funds, which takes effect Nov. 1, 2026. The materials follow the reforms finalized on Oct. 7 and explain how authorized retail funds should apply the alternative derivatives risk framework and stronger liquidity and money market fund safeguards. The derivatives guide details calculation, testing and governance standards for the Value-at-Risk (VaR) approach, which will operate alongside the existing net derivative exposure approach. Hong Kong domiciled funds must obtain prior SFC approval to adopt VaR. Liquidity guidance addresses the alignment of asset and portfolio liquidity with redemption terms, alongside the design, calibration and use of liquidity management tools. Under the revised regime, funds investing mainly in less liquid assets and offering daily dealing must implement and use appropriate anti-dilution liquidity management tools. All authorized money market funds must maintain at least one such tool. Guidance also clarifies minimum credit quality standards for eligible money market instruments and enhanced disclosures for funds offering a constant net asset value. Revised key facts statement templates enhance disclosures of product complexity classifications and liquidity risk management tools. Funds applying for authorization on or after Nov. 1 generally must comply with the revised requirements immediately. Existing schemes generally have a 12-month transition to meet the revised liquidity risk management, money market fund and offering document disclosure requirements, including updating their key facts statements.