Irish UCITS and AIFs Permitted to Invest via Stock Connect

Irish UCITS and AIFs Permitted to Invest via Stock Connect
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Irish UCITS and AIFs Permitted to Invest via Stock Connect

The Central Bank of Ireland (“CBI”) issued an update to its Q&A documents on 15 July 2015 for both UCITS and AIFMD FAQ (“Q&A”) which clarifies how Irish funds can invest in Chinese shares via the Shanghai-Hong Kong Stock Connect Scheme (“Stock Connect”). Stock Connect is a trading link between the Hong Kong and Shanghai Stock Exchanges that allows non-Chinese investors to buy certain Shanghai-listed equities without a foreign investor quota.

This green light for Stock Connect by the CBI follows a detailed engagement by it with the funds industry in Ireland, the Hong Kong Stock Exchange and depositary firms and comes months after the November 2014 launch of Stock Connect. During this period, nearly a hundred U.S. 1940 Act funds have amended their disclosure documents to permit Stock Connect investments and in Luxembourg, where approval for Stock Connect is on a fund by fund basis, more than twenty funds have been approved to invest in Mainland China via Stock Connect.

The engagement by the CBI was not concerned with the approval of the market infrastructure but rather with understanding how depositaries of Irish authorised funds could carry out their safe-keeping duties.

The framework of Stock Connect is complicated and comprises a multi-tiered central securities depository, including both the Hong Kong Securities Clearing Company Limited (“HKSCC”) and China Securities Depository and Clearing Corporation (“ChinaClear”); HKSCC holds the Stock Connect securities of all Hong Kong participants in a special account with ChinaClear. As a result, the records maintained by ChinaClear reflect only the nominal interest of HKSCC—and not the beneficial interests of Hong Kong exchange participants who act on behalf of funds and other investors. The key concern has always been whether and how these beneficial interests would be recognised under the laws of Mainland China. However, HKSCC expressly disclaimed any beneficial interest in Stock Connect securities and agreed to otherwise protect the interests of its exchange participants, and the Chinese regulator ultimately issued its own statement affirming that beneficial ownership would be respected in the Mainland.

Clarifications such as this are helpful in allowing the CBI to permit the use of Stock Connect by Irish UCITS and AIFs. The CBI Q&A simply places an onus of the depositary to ensure that its legal and regulatory obligations can be met through Stock Connect and, at a minimum, expects the depository (or their local sub-custodians) to be a HKSCC participant and that the Stock Connect arrangements are kept under review.

It is expected that a significant number of Irish funds will seek to use Stock Connect as soon as possible and that the depositaries of these funds will be able to provide the level of comfort required by the Q&A . Based on Stock Connect’s market volumes, the recent turbulence in the China market does not appear to have significantly affected foreign investors’ interest in investing in Shanghai-listed securities. Furthermore, the market decline has spurred Chinese regulators into action and may accelerate further opening of Stock Connect to both additional Shanghai-listed securities and shares listed on China’s growth-oriented exchange in Shenzhen.

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  1. Loved RDR. And loved that character, assuming this is actually you. :)nThat said, I always have to snicker a little bit when voice acto1 start talking about residuals and bonuses. I, myself, an a game artist (and have been for about 13 yea1 now), so I have a somewhat tainted opinion of it. With all due respect, movie acto1 essentially drive a movie. People are going to the movie to SEE the acto1 and to SEE the director&1quo;s vision. Everyone is important in making a movie, of cou1e, but that is what people are primarily wanting.nWhen people play RDR, they aren&1quo;t playing to SEE Irish. They are playing to imme1e themselves into the entire experience – a world. Yes, Irish plays a role in that, but it&1quo;s the DESIGNERS, PROGRAMMERS, and ARTISTS that are the sta1.nAnd do you think they get huge bonuses and Maseratis? No, we get a 2 grand bonus (that is taxed in half, mind you) and more often than not, get laid off at the end of the project (as RDR was!). So basically enough money to pay off a credit card that was racked up from the last time we got laid off from the last company.nI&1quo;m not bitter – this is the industry that I have chosen. But I&1quo;m also not calling for unio1 and millio1 of dolla1. I&1quo;m in it to MAKE GAMES, because I love MAKING GAMES. If you wanna make millio1, then get some nice headshots and get into movies, man.nBecause while I agree that voice acto1 are all hard working and they GOOD voice work is hard to come by (again, I liked your work!), it is not essential (see Journey, for example). People want to play great games. Great voice acting is the cherry on top. You don&1quo;t get to lay claim to residuals for 6 days in a booth while everyone else was crunching for YEARS only to get sacked when it was done.nSorry, but that&1quo;s the truth.

  2. disqus_z4lqazpsHc : March 1, 2014 at 7:33 am

    This is a tax! There should be NO exemptio1 for low-income – they cant carry a recycle bag? Thats where this law looses me, either we all pay it or no one does – let our elected officials know your disapproval here http://www.bagthetaxnyc.com

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