On 3 October 2023, the Financial Supervisory Commission (FSC) announced a ruling based on Sub-paragraph 9, Paragraph 1, Article 23 of the Regulations Governing Offshore Funds to transform the content of the offshore fund substantial review principle into a formal ruling (Ruling). The Ruling stipulates the investment restrictions for six types of offshore funds, including equity fund, fixed-income fund, high yield bond fund, emerging market bond fund, balanced fund and money market fund. We summarize the major changes below:
1.Fixed-income fund: Unless otherwise provided by laws and regulations, a fixed-income fund may not invest in stocks and equity type securities;
2.Restriction on investment in Rule 144A bonds: The said restriction shall apply to fixed-income fund, high yield bond fund, emerging market bond fund and balanced fund;
3.Money market fund: To remove the exception that the investment or deposit may be increased up to 20% of the Fund’s NAV if the company or the financial institution meets the credit rating requirements prescribed by the FSC. Which means that the percentage can only be 10% .
The Ruling took effect form October 3 and only applicable to the fund registration filed/reported afterwards.
Mike Lu/Jeffrey Liu/Amy Su
