Revamped SFC Code on Unit Trusts and Mutual Funds targeted for implementation on 1 January 2019 with transitional period

On 6 December 2018, the Securities and Futures Commission (SFC) published the conclusions to its consultation on proposed amendments to the Code on Unit Trusts and Mutual Funds (UT Code). The proposed amendments are aimed at updating the regulatory regime for SFC-authorised funds and addressing the risks posed by financial innovation and other developments. Continue reading

EU: EBA’s report on good practices for ETF risk management

The European Banking Authority (EBA) today published an opinion addressed to competent authorities (as defined in the Capital Requirements Directive) which outlines a high level description of good practices with respect to the management of key risks that credit institutions encounter through their ETF business units or when dealing with ETFs, to:

  • seek to ensure that potential risks associated with ETFs are managed adequately from the perspective of the credit institution – and indirectly from the perspective of its customers; and
  • provide guidance as to the evaluation of risk that might emerge at bank level through their operational relationships with ETFs.

Although the opinion is addressed to competent authorities, credit institutions that have business units managing ETFs within their group, and those who may act as counterparties in swaps, securities lending and repos, as market makers/ authorised participants, or as ETF investors, should read it carefully – not least since it contains (in part II) a three-page checklist of questions – under the general headings of  liquidity, counterparty credit risk, and operational risk/conflicts of interest – which they can, in due course, expect their supervisor to be posing to their risk management function (and on which firms need therefore to be able to provide answers/explanations).

Continue reading