Home Knowledge Central Bank to Allow Irish Funds Access to Stock Connect

Central Bank to Allow Irish Funds Access to Stock Connect

July 16, 2015

The Central Bank of Ireland has announced that it will allow Irish authorised UCITS and AIFs to acquire Chinese shares through the Shanghai-Hong Kong Stock-Connect programme (Stock Connect). The programme allows foreign investors to gain exposure to the previously hard to access China A-share market.

Stock Connect is a joint collaboration between Hong Kong Stock Exchanges and Clearing Limited and the Shanghai Stock Exchange. Stock Connect involves two central securities depositaries – Hong Kong Securities Clearing Company Limited (HKSCC) and China Securities Depository & Clearing Corporation Limited (ChinaClear).

The Central Bank is imposing certain conditions on access to Stock Connect including:

  • The depository must satisfy itself that the manner in which the shares are to be held allows it to meet its legal obligations under UCITS/AIFMD rules and any conditions imposed by the Central Bank.
  • The depositary (or its sub-custodian) must ensure that it retains control over the shares at all times.
  • A broker of the fund that is a participant of HKSCC, but not a sub-custodian of the fund, will not satisfy the provisions of the relevant legislation.
  • The depository (or its sub-custodian) must identify the level of participation in HKSCC, if any, which would be in line with its legal obligations as a depository. The levels of participation are: General Clearing Participant, Direct Clearing Participant or Custodian Participant.
  • The depository must review and keep under review its Stock Connect arrangements to ensure that its legal obligations can be met.

The Central Bank has updated its UCITS and AIFMD Q&As to reflect the regulatory considerations around access to Stock Connect.

To view the updated UCITS Q&A, please click here.

To view the updated AIFMD Q&A, please click here.

To view a previous article on Stock Connect, please click here.