01 view
Written by: Commentary Editing Room
2021-02-27 09:00
Last update date: 2021-02-27 09:00
Tracker Fund Manager US State Street Global announced on January 11 that it would no longer invest in stocks subject to US sanctions. Although the fund has announced the resumption of investment in sanctioned stocks two days later, the incident has also exposed the possibility of Hong Kong under foreign sanctions The financial risks that arise.
How the government protects the rights and interests of investors is a big question in the market. However, the slow pace of follow-up by the government authorities still makes investors worry about the risks Hong Kong will encounter under sanctions.
The "Approved Index-Tracking Collective Investment Plan" is an index fund, such as Tracker Fund, whose investment orientation is fixed to track a certain index, so it can be regarded as a passive investment.
(Profile picture)
Follow-up measures lagging behind the government's slow response
As a passive fund, Tracker Funds should be linked to the Hang Seng Index. However, under US sanctions, Tracker Funds may violate its passive investment fund goals.
On the 3rd of this month, the Financial Services and the Treasury Bureau was asked in the Legislative Council whether State Street Global violated its investment objectives, and what follow-up actions were taken by the HKMA and the Tracker Fund Supervisory Committee. “I’m deeply concerned about the situation”, “close follow-up” and so on. On Wednesday (24th) more than a month after the incident occurred, it still only repeated “The SFC has been maintaining regulatory communication with State Street Global”, and “On the relevant incident” The inquiry is still in progress," Yun said, and the actual measures are still lacking.
The government has neither acted in response to State Street Global, nor has it prevented similar incidents from the legal system, which means that exchange-traded funds in the market may still be subject to foreign sanctions and change their investment strategies.
On the one hand, investors should pay attention to whether the ETF they purchase has announced the relevant investment strategy changes in response to the US sanctions, but on the other hand, the government still needs to effectively supervise the local ETF, if there is a situation similar to the Tracker Fund incident If it happens again, the government should follow up the incident with a mechanism and regulations instead of procrastinating when faced with questions from the Legislative Council.
Violation of the code has no consequences, and the integration regulations are followed up
In its two replies to Tracker Fund, the government mentioned that the company must abide by the "Code of Conduct for Fund Managers" (hereinafter referred to as the "Code") on fund managers, such as the need to fully disclose all funds to investors. Required fund information, and major changes in relevant information, etc.
The Code was formulated by the Securities and Futures Commission in accordance with the Securities and Futures Ordinance. Article 169 of the Ordinance stipulates that the Code is not subsidiary legislation and therefore has no legal effect strictly. For fund managers who violate the Code, the Code is only Clarify that the renewal or registration of the corporation concerned may be negatively affected and may not be directly liable for any criminal liability.
In addition, this time when international relations are becoming increasingly tense, it is obviously out of date that local laws and regulatory documents presuppose that China and Hong Kong will not be subject to foreign sanctions.
In fact, among the relevant current documents, only paragraph 6.11 of the "Guidelines on Financial Sanctions and Terrorist Funds Raising" regarding overseas sanctions stated: "Although under Hong Kong law, financial institutions generally have no responsibility to pay attention to other jurisdictions. Organizations or competent authorities imposed unilateral sanctions, but financial institutions operating international business must still pay attention to the scope and focus of the relevant sanctions regimes in these jurisdictions. If these sanctions regimes may affect the business of financial institutions, financial institutions Institutions should consider what impact this will cause and take appropriate measures.” As for whether companies should comply with other countries' sanctions against China or Hong Kong, the authorities obviously lack a clear position and guidance.
The SFC is not strict in overseeing foreign funds, and it is not well thought out. After the Tracker Incident, people worry about whether Hong Kong's oversight of funds is adequate.
In order to avoid the risk of sanctions, State Street Global gave up buying sanctioned index stocks in passive investment funds. This decision itself may constitute a conflict of interest between fund managers and investment clients.
Therefore, while "following up the work is still in progress," the government should also study legal methods to incorporate the Fund Manager Code of Conduct and the Code of Unit Trusts and Mutual Funds into subsidiary legislation. This will allow regulators to follow up on funds suspected of violating regulations and plan ahead before the local financial sector is challenged by foreign sanctions in the future.
Tracker Fund Securities Regulatory Commission 01 View
