Paper 5 Investment-linked Long Term Insurance Quiz 03

The question tests the understanding of the regulatory framework governing investment-linked insurance products in Hong Kong, specifically the role of the Insurance Authority (IA) and the Securities and Futures Commission (SFC) in oversight. Investment-linked insurance policies are dual-regulated products, meaning they fall under the purview of both the IA for insurance aspects and the SFC for investment aspects. The Insurance Companies Ordinance (Cap. 41) and the Securities and Futures Ordinance (Cap. 571) are the primary legislative instruments. The IA is responsible for licensing insurers and ensuring solvency and market conduct related to insurance. The SFC is responsible for licensing intermediaries and regulating investment activities, including the sale of investment products. Therefore, when an investment-linked insurance policy is sold, both the insurer and the intermediary selling it must comply with the regulations set forth by both the IA and the SFC. The question highlights the need for compliance with both regulatory bodies due to the dual nature of the product. Option (b) is incorrect because while the IA is the primary regulator for insurance, the SFC’s role is crucial for the investment component. Option (c) is incorrect as the SFC’s jurisdiction extends to the investment aspects of these products, not just the insurance company’s financial health. Option (d) is incorrect because while the IA ensures solvency, the SFC’s mandate covers the conduct of selling investment products, which is a key concern for investment-linked policies.

The ILAS Code, issued under the Securities and Futures Ordinance (Cap. 571), mandates that insurance intermediaries provide prospective clients with specific documents to ensure informed decision-making regarding investment-linked assurance schemes. Among these, the Principal Brochure is a comprehensive document designed to offer a detailed understanding of the scheme’s nature, parties involved, investment return determination, and associated risks. The Product Key Facts Statement (KFS) provides a concise summary, and the Illustration Document projects potential future values. While all are crucial, the Principal Brochure is the foundational document that enables a prospective participant to make an informed judgment about the scheme’s suitability and risks, as it contains the most extensive prescribed information necessary for such an assessment. The other options represent either a summary (KFS), a projection (Illustration Document), or a general risk category (Product Risk) rather than the primary, detailed disclosure document required before application.

The Insurance Companies Ordinance (Cap. 41) and its subsequent amendments, particularly concerning investment-linked insurance, mandate that insurers must maintain a clear segregation between policyholder assets and the insurer’s own assets. This is crucial for protecting policyholders’ interests, especially in the event of the insurer’s insolvency. Policyholder assets in investment-linked policies are typically held in unit trusts or similar investment vehicles, and the value of these units directly reflects the performance of the underlying investments. The insurer acts as a trustee or custodian for these assets, and any gains or losses from the underlying investments accrue directly to the policyholder, not the insurer’s general revenue. Option (b) is incorrect because while insurers do bear operational costs, the investment performance of the underlying assets in an ILAS policy directly impacts the policy value, not the insurer’s general profit and loss statement in the way described. Option (c) is incorrect as the insurer’s own capital is primarily for solvency and to cover liabilities not directly tied to specific policy investments; it does not absorb the investment gains or losses of ILAS policyholders. Option (d) is incorrect because while insurers must comply with solvency requirements, the direct link between policyholder investment performance and policy value is a fundamental characteristic of investment-linked products, not a discretionary choice that can be overridden by general solvency rules.

This question tests the understanding of the fundamental difference between speculation and arbitrage in the context of financial derivatives, specifically futures contracts. Speculators aim to profit from anticipated price movements of the underlying asset, accepting risk. Arbitrageurs, on the other hand, seek to exploit temporary mispricings between related assets (like a stock index and its futures contract) to achieve a risk-free profit by simultaneously buying and selling. The scenario describes an action that aims to profit from a price discrepancy between the HSI futures and the underlying stocks, which is the hallmark of arbitrage, not speculation. Speculation would involve a directional bet on the index’s movement without necessarily exploiting a mispricing between two related instruments.

The question tests the understanding of how Japanese candlestick charts represent price movements, specifically the relationship between the opening and closing prices and the resulting body color. A black body signifies that the opening price was higher than the closing price, indicating a downward movement within that period. Conversely, a white body indicates the opening price was lower than the closing price, signifying an upward movement. The ‘fat body’ refers to the range between the open and close, distinguishing it from the ‘wicks’ or ‘shadows’ that represent the high and low prices. Therefore, a black body on a Japanese candlestick chart directly implies that the closing price was lower than the opening price.

The provided text specifies that a trustee/custodian must be independently audited and possess a minimum issued and paid-up capital, along with non-distributable capital reserves, equivalent to HKD10 million or its foreign currency equivalent. This requirement is a fundamental aspect of ensuring the financial stability and operational integrity of entities entrusted with managing investment fund assets, thereby safeguarding investor interests. The other options present incorrect capital requirements or focus on aspects not directly related to the minimum capital and reserve stipulations for trustee/custodian independence and financial soundness as mandated by regulatory frameworks for investment-linked long-term insurance products.

The ILAS Code, issued under the Securities and Futures Ordinance (Cap. 571), mandates that insurance intermediaries provide prospective clients with specific documents to ensure informed decision-making regarding investment-linked assurance schemes. The Principal Brochure is a comprehensive document designed to give participants a thorough understanding of the scheme’s nature, parties involved, investment return determination, and associated risks. The Illustration Document provides projections of potential outcomes, and the Product Key Facts Statement (KFS) offers a concise summary of key features and risks. While all are crucial, the Principal Brochure is the foundational document that details the scheme’s mechanics and risks, enabling an informed judgment. The other options are either incomplete (only mentioning one document) or misrepresent the primary purpose of these disclosures. The SFC’s concern stems from the policyholder bearing the investment performance risk, necessitating robust information disclosure.

The question tests the understanding of the risk management process for financial intermediaries, specifically focusing on the ‘Measurement of Risk’ step. The provided scenario describes a situation where a financial advisor is evaluating two investment funds, Fund A and Fund B, for a client. The advisor has calculated the expected returns and volatilities for both funds using historical data and assigned probabilities to different market scenarios. The Sharpe Ratio is a key metric used to assess risk-adjusted returns, comparing the excess return of an investment over the risk-free rate to its volatility. A higher Sharpe Ratio indicates a better risk-adjusted performance. In this scenario, Fund A has a lower expected return and lower volatility than Fund B. However, when considering the risk-adjusted return using the Sharpe Ratio (assuming a risk-free rate of 5%), Fund A yields a Sharpe Ratio of 2.83, while Fund B yields 1.65. This demonstrates that Fund A provides a superior return for each unit of risk undertaken, making it the more suitable choice for a client prioritizing risk-adjusted performance, even if Fund B has a higher absolute expected return. The other options are incorrect because they either focus solely on absolute returns without considering risk, misinterpret the Sharpe Ratio’s meaning, or incorrectly calculate the risk-adjusted performance.

This question tests the understanding of the regulatory framework governing investment-linked insurance products in Hong Kong, specifically the role of the Securities and Futures Commission (SFC) and the Insurance Authority (IA) in oversight. Investment-linked insurance policies involve both insurance and investment components, necessitating dual regulation. The SFC regulates the investment aspect, ensuring compliance with securities laws and investor protection related to the investment fund. The IA, on the other hand, oversees the insurance aspect, ensuring the policy meets solvency, conduct, and consumer protection standards for insurance products. The Insurance Companies Ordinance (Cap. 41) and the Securities and Futures Ordinance (Cap. 571) are the primary legislative pillars. While the Financial Services and the Treasury Bureau (FSTB) sets policy, and the Hong Kong Monetary Authority (HKMA) regulates banks, their direct day-to-day oversight of the specific investment and insurance conduct of these products is less direct than the SFC and IA. Therefore, the joint oversight by the SFC and IA is crucial for comprehensive regulation.

The scenario describes a Hong Kong-incorporated Financial Institution (FI) with overseas branches that are unable to implement customer due diligence (CDD) measures identical to those mandated in Hong Kong due to local legal restrictions. According to the provided guidelines, when an overseas branch or subsidiary cannot comply with requirements similar to Parts 2 and 3 of Schedule 2 of the AMLO, the FI has two primary obligations. First, it must inform its relevant regulator (RA) of this non-compliance. Second, it must implement additional measures to effectively mitigate the money laundering and terrorist financing (ML/TF) risks arising from this inability to comply. Simply continuing operations without informing the regulator or without implementing compensatory risk mitigation measures would be a breach of the guidelines. While reporting to the Joint Financial Intelligence Unit (JFIU) is a crucial AML/CFT function, it is typically triggered by suspicion of criminal proceeds, not by a structural inability to implement CDD due to foreign law. Therefore, the most appropriate and comprehensive action is to inform the regulator and implement enhanced risk mitigation strategies.

The core advantage of investing in equities, particularly in the corporate structure prevalent in Hong Kong, is limited liability. This means shareholders are only liable for the amount of their initial investment. If a company faces financial distress and cannot meet its obligations, shareholders cannot be compelled to contribute further funds beyond their initial stake. While this protects shareholders from unlimited losses, it’s crucial to understand that a total loss of the initial investment is still a possibility if the company fails. The other options are incorrect because they either overstate the protection (implying no risk of total loss) or misrepresent the nature of limited liability by suggesting it extends beyond the initial investment or that it guarantees against any loss.

This question tests the understanding of how mortality charges are calculated and deducted in an investment-linked insurance policy with a Level Death Benefit (LDB). In an LDB policy, the death benefit is the higher of the account value or the chosen sum assured. The ‘amount at risk’ for mortality charge calculation is therefore the chosen sum assured minus the current account value. The provided example shows that for LDB, the mortality charge is calculated based on HKD500,000 (chosen death cover) minus HKD4,800 (account value), resulting in HKD495,200 as the amount at risk. The annual cost of life cover is HKD6 per thousand, so the monthly mortality charge is (HKD6/1000) * (1/12) * HKD495,200 = HKD247.60. Adding the monthly policy fee of HKD30, the total monthly charges are HKD277.60. To cancel units, this total charge is divided by the bid price of units (HKD12), resulting in 23.13 units to be cancelled. The other options are incorrect because they either use the full sum assured as the amount at risk (which is for Increasing Death Benefit), miscalculate the monthly charge, or incorrectly determine the number of units to be cancelled.

The Code of Conduct for Insurance Brokers Conducting Investment-Linked Business, as issued by PIBA, mandates that brokers must act in the best interests of their clients. This includes providing advice that is suitable for the client’s financial situation, investment objectives, and risk tolerance. When a broker recommends an investment-linked product, they must ensure that the product aligns with these client-specific factors. Failing to do so constitutes a breach of their fiduciary duty and the Code of Conduct. Option B is incorrect because while disclosure of commissions is important, it is secondary to the primary duty of acting in the client’s best interest. Option C is incorrect because while maintaining professional competence is required, it doesn’t directly address the suitability of a specific recommendation. Option D is incorrect because while record-keeping is essential for compliance, the core ethical obligation is client-centric advice.

This question tests the understanding of the regulatory framework governing investment-linked insurance products in Hong Kong, specifically the role of the Securities and Futures Commission (SFC) and the Insurance Authority (IA). Investment-linked insurance policies are dual-regulated products. The SFC regulates the investment component, ensuring compliance with securities laws regarding advice, marketing, and product suitability. The IA regulates the insurance component, focusing on solvency, policyholder protection, and fair treatment. Therefore, both authorities have oversight, but their specific areas of responsibility differ. Option (b) is incorrect because while the IA is the primary regulator for insurance, the SFC’s role in the investment aspect is crucial and mandated by law. Option (c) is incorrect as the IA’s mandate extends beyond just solvency to include policyholder protection and fair dealing, and it does not solely rely on the SFC for investment-related compliance. Option (d) is incorrect because the SFC’s jurisdiction is specifically tied to the investment nature of the product, not the entire insurance contract, and it does not have sole authority over all aspects of these products.

The question tests the understanding of the regulatory framework for investment funds in Hong Kong, specifically the role of the Securities and Futures Commission (SFC) and the requirements for fund authorization. The SFC’s ‘Code on Unit Trusts and Mutual Funds’ mandates that authorized investment funds must have a management company that is primarily engaged in fund management, possesses sufficient financial resources (minimum HKD 1 million in issued and paid-up capital and capital reserves), does not lend to a material extent, maintains a positive net asset position, and bases its investment management operations in an SFC-acceptable jurisdiction. The trustee/custodian must also be acceptable to the SFC, typically being a licensed bank, a subsidiary trust company of such a bank, a registered trust company, or an acceptable overseas institution. The core responsibility of the management company is to manage the fund in the exclusive interest of the unit holders, adhering to the constitutive documents and general law. The trustee/custodian’s primary role is to safeguard the fund’s assets and ensure the management company operates within the fund’s prospectus. The scenario describes a situation where a fund is seeking authorization, and the question probes the specific financial and operational prerequisites for the management company as stipulated by the SFC’s Code. Option A correctly identifies the minimum capital requirement and the primary business focus, which are key SFC authorization criteria. Option B is incorrect because while a positive net asset position is required, the specific threshold for lending is not a fixed monetary amount but rather a qualitative ‘material extent’. Option C is incorrect as the SFC does not mandate that the management company must be incorporated in Hong Kong; it only requires that if it operates from Hong Kong, it must be licensed or registered. Option D is incorrect because while the management company must manage the fund in the exclusive interest of unit holders, the specific requirement for appointing an independent auditor for the management company’s internal controls is a duty of the trustee/custodian, not the management company itself.

Guideline on the Use of Internet for Insurance Activities (GL8) aims to establish a framework for insurers utilizing the internet for business. It covers various aspects including the identity of service providers, authorization status, security measures, privacy of client information, forms of communication, sale of insurance products, and the use of third-party websites. The primary objective is to enhance client protection and foster the healthy growth of the insurance industry in the digital age. Option (a) accurately reflects the overarching purpose and scope of GL8. Option (b) is too narrow, focusing only on marketing. Option (c) is incorrect as GL8 is a guideline, not an ordinance, and its scope extends beyond just underwriting. Option (d) is also incorrect as GL8 is specifically about internet usage, not a general guideline for all insurance activities.

This question tests the understanding of the regulatory framework governing investment-linked insurance products in Hong Kong, specifically the role of the Securities and Futures Commission (SFC) and the Insurance Authority (IA). Investment-linked insurance policies involve both insurance and investment components, thus falling under the dual regulatory oversight of both the SFC (for the investment aspect) and the IA (for the insurance aspect). The Insurance Companies Ordinance (Cap. 41) and the Securities and Futures Ordinance (Cap. 571) are the primary pieces of legislation. The question probes the candidate’s ability to identify the correct regulatory bodies responsible for overseeing such products, which is crucial for ensuring compliance and consumer protection. Option (b) is incorrect because while the IA regulates insurance, it does not have primary jurisdiction over the investment component. Option (c) is incorrect because the SFC regulates securities and futures, but the insurance component is outside its direct purview. Option (d) is incorrect as the Hong Kong Monetary Authority (HKMA) primarily regulates banks and monetary policy, not investment-linked insurance products.

The Insurance Companies Ordinance (Cap. 41) mandates that insurers must maintain a minimum paid-up share capital and a solvency margin to ensure their financial stability and ability to meet policyholder obligations. The solvency margin is calculated based on the insurer’s liabilities and assets, with specific formulas defined by the Insurance Authority. This requirement is crucial for protecting policyholders and maintaining public confidence in the insurance industry. Option B is incorrect because while insurers must appoint an actuary, this appointment is a regulatory requirement for specific functions, not the primary determinant of solvency. Option C is incorrect because while insurers must have a principal place of business in Hong Kong, this is an operational and regulatory requirement, not a direct measure of financial solvency. Option D is incorrect because while insurers must submit financial returns, these returns are a reporting mechanism to demonstrate compliance with solvency requirements, not the requirement itself.

This question tests the understanding of the regulatory framework governing investment-linked insurance products in Hong Kong, specifically the role of the Securities and Futures Commission (SFC) and the Insurance Authority (IA) in oversight. Investment-linked insurance policies are dual-regulated products. The SFC regulates the investment component, ensuring compliance with securities laws regarding advice, marketing, and product suitability. The IA regulates the insurance component, focusing on solvency, policyholder protection, and the insurance contract itself. Therefore, both authorities have a vested interest and jurisdiction over different aspects of these products. Option (b) is incorrect because while the IA is the primary regulator for insurance, the investment aspect necessitates SFC involvement. Option (c) is incorrect as the IA’s role is not limited to just the insurance contract’s financial aspects but also its overall sale and conduct. Option (d) is incorrect because the IA does not solely oversee the investment aspects; that falls under the SFC’s purview.

The CIS Internet Guidance Note, issued by the SFC in April 2013, aims to clarify regulatory requirements for advertising and offering Collective Investment Schemes (CIS) online. It is designed to be read alongside the SFC’s 1999 Guidance Note on Internet Regulation and the Insurance Authority’s GL8 on Internet Use for Insurance Activities. The guidance covers various aspects, including general regulatory approach, advertisements, offering of CIS, analytical tools, and electronic communications with investors. The question tests the understanding of the primary purpose and scope of this specific guidance note, distinguishing it from broader anti-money laundering regulations or general internet usage guidelines.

The question probes the understanding of the regulatory framework governing investment-linked insurance products in Hong Kong, specifically focusing on the role of the Securities and Futures Commission (SFC) and the Insurance Authority (IA). Investment-linked insurance policies are dual-regulated products. The SFC regulates the investment component, ensuring compliance with securities laws regarding marketing, advice, and product suitability. The IA regulates the insurance component, overseeing solvency, policyholder protection, and the insurance aspects of the product. Therefore, both bodies have oversight, but their specific jurisdictions differ. Option (b) is incorrect because while the IA is the primary regulator for insurance, the investment aspect falls under the SFC’s purview. Option (c) is incorrect as the IA’s role is not limited to solvency but extends to policyholder protection and the insurance contract itself. Option (d) is incorrect because the SFC’s mandate includes regulating investment products, which are integral to investment-linked policies, and it has specific rules for intermediaries dealing with such products.

The question tests the understanding of the regulatory framework governing investment-linked insurance products in Hong Kong, specifically the role of the Insurance Authority (IA) and the Securities and Futures Commission (SFC) in oversight. Investment-linked insurance policies (ILIPs) are dual-regulated products. The IA regulates the insurance aspects, ensuring solvency, policyholder protection, and fair treatment. The SFC regulates the investment aspects, ensuring compliance with securities and investment laws, including conduct of business, disclosure, and suitability. Therefore, both regulators have a vested interest and a defined role in overseeing these products. Option (b) is incorrect because while the IA is the primary regulator for insurance, it does not solely oversee the investment components. Option (c) is incorrect as the SFC’s mandate extends to investment products, including the investment component of ILIPs, and it does not solely focus on unit trusts. Option (d) is incorrect because while the Hong Kong Monetary Authority (HKMA) regulates banks, its direct oversight of ILIPs is limited to instances where banks act as distributors or in specific banking-related activities, not the core product regulation itself.

This question tests the understanding of the regulatory framework governing investment-linked insurance products in Hong Kong, specifically the role of the Securities and Futures Commission (SFC) and the Insurance Authority (IA). Investment-linked insurance policies are dual-regulated products. The SFC regulates the investment component, ensuring compliance with securities laws regarding advice, sales practices, and product disclosure related to investments. The IA regulates the insurance component, focusing on policy terms, solvency, and consumer protection as an insurer. Therefore, both authorities have oversight, but their specific areas of jurisdiction differ. Option (b) is incorrect because while the IA is the primary regulator for insurance, the SFC’s role in the investment aspect is crucial. Option (c) is incorrect as the IA’s mandate extends beyond just solvency to include consumer protection and fair dealing in insurance. Option (d) is incorrect because the SFC’s jurisdiction is specifically tied to the investment nature of the product, not the entirety of insurance operations.

The question tests the understanding of the inherent disadvantages of investing in bonds, specifically focusing on the risks and limitations that differentiate them from other investment vehicles like equities. Option (a) correctly identifies the potential for a lack of ready buyers in the secondary market, which is a key liquidity risk for certain types of bonds. Option (b) is incorrect because while bonds have price risk due to interest rate fluctuations, this is a distinct risk from liquidity. Option (c) is incorrect as the fixed interest rate is a characteristic that leads to inflation risk, not a disadvantage in itself, but rather a cause of a disadvantage. Option (d) is incorrect because while some bonds may have high denominations, this is a barrier to entry for some investors, not a fundamental disadvantage of the bond itself once purchased, and it’s not as universally applicable as liquidity concerns for certain bond types.

The provided text highlights several key advantages of investment funds for mass investors. Diversification is explicitly mentioned as a primary benefit, allowing investors to spread their capital across multiple assets, thereby reducing unsystematic risk. Professional management is another significant advantage, offering access to expert decision-making based on extensive research. Convenience is also a strong point, with licensed representatives facilitating purchases and redemptions. Affordability is emphasized through small unit sizes and lower investment thresholds compared to direct bulk investments. Cost efficiency arises from economies of scale in trading and administration. Flexibility allows investors to choose funds aligning with their risk tolerance and objectives. Liquidity is provided through the ability to redeem investments at Net Asset Value. Access to global markets is facilitated by international fund structures. Protection is offered through trustees and custodians safeguarding investor interests. The question asks to identify the most fundamental benefit that investment funds provide to the average investor, which is the ability to achieve diversification, a feature previously exclusive to large institutions. While other benefits like professional management and convenience are crucial, diversification is the foundational principle that enables smaller investors to participate in a broader range of investment opportunities with reduced individual asset risk.

This question tests the understanding of the regulatory framework governing investment-linked insurance products in Hong Kong, specifically the role of the Securities and Futures Commission (SFC) and the Insurance Authority (IA) under the relevant legislation. Investment-linked insurance policies are dual-regulated products. The SFC regulates the investment component, ensuring compliance with securities and futures laws, while the IA regulates the insurance component, ensuring compliance with insurance laws. Therefore, both regulatory bodies have oversight. Option (b) is incorrect because while the IA is the primary regulator for insurance, the SFC’s role is crucial for the investment aspect. Option (c) is incorrect as the Hong Kong Monetary Authority (HKMA) primarily regulates banks and monetary policy, not investment-linked insurance products directly. Option (d) is incorrect because the Independent Commission Against Corruption (ICAC) focuses on corruption and bribery, not the regulation of financial products.

A ‘Fund of Funds’ is a collective investment scheme that invests in other collective investment schemes, rather than directly in underlying securities. This structure aims to achieve diversified professional management by pooling assets and investing them across various funds. The term ‘Unit Portfolio Management Funds’ is synonymous with this structure. A ‘Growth Fund’ focuses on capital appreciation, an ‘Index Fund’ aims to mirror a specific market index, and a ‘Global Fund’ invests internationally, but none of these describe a fund that exclusively invests in other funds.

The Insurance Companies Ordinance (Cap. 41) and its subsequent amendments, particularly those related to investment-linked insurance, mandate that insurers must maintain a clear segregation of assets. This segregation is crucial for protecting policyholder interests by ensuring that the assets backing investment-linked policies are distinct from the insurer’s general business assets. This prevents the insurer’s general creditors from having a claim on these specific assets in the event of the insurer’s insolvency. The Ordinance also requires that the value of these segregated assets must at least match the liabilities attributable to the investment-linked policies. Option B is incorrect because while insurers must act prudently, the primary regulatory mechanism for protecting policyholders in this context is asset segregation, not a direct guarantee of returns by the insurer. Option C is incorrect as the valuation of units is indeed a key aspect of investment-linked policies, but it’s a consequence of asset performance, not the primary regulatory protection mechanism itself. Option D is incorrect because while disclosure is vital, the fundamental protection lies in the legal requirement to segregate assets and ensure they match liabilities.

The ‘Code on Investment-Linked Assurance Schemes’ is a regulatory document issued by the Securities and Futures Commission (SFC) in Hong Kong. Its primary purpose is to establish the guidelines and requirements that the SFC will use when authorizing investment-linked assurance schemes. These guidelines ensure that such products are fair, transparent, and adequately disclosed to investors, protecting their interests. The other options are incorrect because the ‘Code of Conduct for Insurers’ focuses on general recommended practices for insurers concerning personal policyholders, the ‘Code of Practice for the Administration of Insurance Agents’ deals with the conduct of insurance agents, and the ‘CIS Internet Guidance Note’ specifically addresses regulatory requirements for Collective Investment Schemes operating via the internet.

The Shanghai-Hong Kong Stock Connect, launched in November 2014, established a direct channel for mutual stock market access between Mainland China and Hong Kong. Initially, Southbound trading (investors in Hong Kong trading Mainland stocks) was restricted to Mainland institutional investors and eligible individual investors. Northbound trading (investors in Hong Kong trading Hong Kong stocks) was open to all Hong Kong and overseas investors. The relaxation in March 2015 allowed fund managers to launch new publicly offered securities investment funds that invest in the Hong Kong stock market through the Stock Connect without needing QDII status, which was a significant expansion of access for Mainland investors to Hong Kong equities. The Mutual Recognition of Funds (MRF) initiative, signed in May 2015 and effective from July 2015, allows eligible Mainland and Hong Kong funds to be offered in each other’s markets through streamlined procedures, which is a separate but complementary initiative to the Stock Connect. Therefore, the most significant expansion of access for Mainland investors to Hong Kong equities, beyond the initial launch, was the allowance for fund managers to launch new funds investing in Hong Kong via the Stock Connect.