Regulatory Margin Requirements for Derivatives and Legal Documentation Issues - FAQ

Investors in private equity funds who are negotiating fund terms with fund managers can improve the transparency of the private equity industry and the commercial terms on which they invest by actively advocating for stringent terms and changes in market standards to protect their own interests. Pro-active efforts by investors during negotiations are essential to maintain high standards of investor protection.

The Securities and Futures Commission of Hong Kong (“SFC”) issued a circular on 17 February 2025, clarifying the requirements for closed-ended funds seeking a listing on the Stock Exchange of Hong Kong Limited (“SEHK”). This marks the latest initiative by the Hong Kong government to broaden distribution channels for private equity funds, following the launch of the New Capital Investment Entrant Scheme (as discussed in our previous article) and the expansion of the tax concession regime for funds and single-family offices.

Hong Kong has a rigorous licensing and compliance framework for virtual asset exchanges, as we summarised in our KWM 2023 Guide to VATP Licensing. The Securities and Futures Commission (SFC) has recently published fresh guidance on Hong Kong’s virtual asset trading platform (VATP) regime, in three key documents. These are as follows: Announcement: SFC’s extension of the swift licensing process to new VATP applicants (Swift Licensing Process). Circular: Circular to new VATP operators seeking to be licensed: enhanced licensing process and revamped external assessments (Updated Licensing and Assessments Circular). Circular: Circular on findings from inspections on deemed-to-be-licensed VATP applicants and expected standards of conduct for VATP operators (Expectations and Observations Circular). This article sets out a summary of these important materials. Please contact us if you have any questions about the VATP regime. We have supported several applicants and would be delighted to assist you.