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20 January 2015
Investment funds are an important means of furthering economic development by attracting savings and reducing the risk inherent in any investment across a variety of assets held in portfolios. However, the management of such instruments requires sophisticated professional knowledge of the functioning of financial markets and the rules that govern the activity of their operators. Also, as funds are managed in the interest of third parties (shareholders), these must:
In Macau, the management of funds is regulated by Decree-Law 83/99/M, which governs the constitution and operation of investment funds and investment fund management companies. The law defines an 'investment fund' as an:
"autonomous collection of assets comprising a portfolio diversified according to a principle for spreading risks, and generated by the investment of capital obtained from the public, by the purchasing, by these one, of participation units representing the value of that collection of assets."
Investment funds are further composed of participation units, which are defined by law as "equity representing each part of equal value into which the net assets of an investment fund are divided".
Investment funds may be open ended or closed ended, depending on whether they consist of a variable number of participation units (which can be redeemed at their updated value) or a fixed number of participation units (which can be redeemed only when the fund is liquidated). Investment funds may also be split into two further kinds of fund:
Two kinds of open-ended securities investment fund exist:
The creation of funds is conditional to prior authorisation from the Monetary Authority of Macau. Moreover, funds can be administrated only by a managing entity that is:
The prior authorisation of the Monetary Authority for the creation of an investment fund must be supported by an initial application which requires:
The Monetary Authority may at any time order the managing entity to produce additional information or introduce changes it deems necessary to the management regulations, prospectus or any contracts relating to the investment fund. If the Monetary Authority decides in favour of the creation of the fund, it will post an information notice in Macau's Official Gazette with the contents of the authorisation and the full version of management regulations.
Investment funds are further composed of participation units, which may be represented in bonds of one or more units each, and be certificated or uncertificated. The managing entity of the fund may convert certificated participation units into uncertificated units (and vice versa) with the prior authorisation of the monetary authority. Registration and control of uncertificated participation units is regulated by notice from the Monetary Authority.
The information prospectus must be:
The information to be contained therein is specified in the decree-law. It should include information necessary to give investors a correct idea about the proposed investment and should be offered to investors before subscription.
The annual report of the investment fund must be closed on December 31 each year and submitted to an external auditor approved by the Monetary Authority, which must indicate its opinion on the fund manager's assessment of the securities included in the fund's assets. The annual report must contain the information provided by law, as must the half-term report, to be published and made freely available to interested parties in the two months following each semester of the year. Fund managers must also publish the balance sheet and profit-and-loss account for each investment fund along with a report and opinion of an external auditor by April 30 of each year, and also a quarterly report in the Official Gazette of Macau indicating:
As for investment funds domiciled abroad or administered by a fund manager with its head office abroad, the decree-law stipulates that advertising, marketing, distribution and sales in Macau of participation units in such funds are also subject to prior authorisation by the Monetary Authorisation. Authorisation can be granted only if the investment funds have been duly authorised in their country of origin and the respective fund managers and custodians are subject there to supervision by the competent authority.(1) Also, the promotion of such funds in Macau must:
For further information on this topic please contact Pedro Cortés orJosé Filipe Salreta at Rato Ling Vong Lei & Cortés Advogados by telephone (+853 2856 2322), fax (+853 2858 0991) or email (firstname.lastname@example.org or email@example.com). The Rato Ling Vong Lei & Cortés Advogados website can be accessed at www.lektou.com.
(1) In general, foreign investment funds authorised for distribution in Macau are already registered with the Hong Kong Securities and Futures Commission. The Monetary Authority of Macau may also consider approving foreign investment funds registered in other countries or territories on a case-by-case basis.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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