For the first time ever, home-grown Hong Kong funds are able to gain direct access to the investing public in a European market thanks to a ground-breaking deal between the territory's Securities and Futures Commission and the Swiss Financial Market Supervisory Authority.

Both regulators signed a memorandum of understanding on the matter on Friday the 2nd. This will now allow eligible Swiss and Hong Kong public funds to be distributed in each other’s market through a streamlined vetting process.

The MoU also established a set of rules for the exchange of information and regular fund-related dialogue between the regulatory bodies. They have also pledged to co-operate in relation to the cross-border offering of public funds.

Hong Kong’s regulator is keen to turn the city into an international asset management centre. Swiss fund managers, for their part, have been keen to gain more or less unfettered access to this important financial centre. The phrase 'mutual recognition' refers to each regulator accepting the worth of the other's regulatory policy as equivalent to its own.

FINMA's main approval requirements, in accordance with article 120 Collective Investment Schemes Act 2006, are as follows.

• The collective investment scheme, the company / fund management company, the asset manager of the collective investment scheme and the custodian are subject to public supervision with an emphasis on 'investor protection.'
• In terms of organisation, the rights of investors and investment policy, the company/ fund management company and custodian are subject to regulation that is equivalent to the provisions of the Act.
• The collective investment scheme must not be described in such a way so as to deceive or confuse.
• A representative and paying agent are designated for units distributed in Switzerland.
• There is a co-operation and information exchange agreement between FINMA and the foreign supervisory authorities responsible for distribution.
• Foreign collective investment schemes may not be distributed in Switzerland unless and until the fund management company company has appointed a representative to fulfil its obligations in article 124.

Meanwhile, Swiss funds that apply to the SFC for authorisation must meet the following requirements.

• The fund has to be established, domiciled and managed in accordance with Swiss laws and regulations and its constitutive documents.
• FINMA ought to have defined and approved the fund as a securities fund in accordance with articles 53-7 CISA for public offering in Switzerland.
• The fund ought to fall into at least one of the following categories: general equity funds, bond funds and mixed funds; feeder funds; funds of funds or unit portfolio management funds; money market and/or cash management funds; index funds; structured funds; funds that invest in financial derivative instruments; and index-tracking exchange-traded funds.