Investing can be a great way to grow your wealth, but it can also be complicated. There are many different types of investments, and each comes with its own set of legal documents and agreements. One such agreement is the fund distribution agreement, which is commonly used in Hong Kong.
A fund distribution agreement is a legal document that outlines the relationship between a fund manager and a distributor. In Hong Kong, fund distribution agreements are often used by investment managers to distribute their funds to a wider audience. The agreement sets out the terms and conditions of the distribution, including the responsibilities of both parties.
Under a fund distribution agreement, the fund manager agrees to provide the distributor with marketing materials, investment information, and other support necessary to promote the funds. The distributor, on the other hand, agrees to promote the funds to potential investors, handle the sale of the funds, and provide ongoing customer service.
One key aspect of a fund distribution agreement is the commission structure. The distributor is typically compensated by the fund manager through a commission based on the amount of money invested by the distributor’s clients. The commission can be a flat fee or a percentage of assets under management.
Another important consideration in a fund distribution agreement is the exclusivity clause. This clause sets out whether the distributor has the exclusive right to distribute the funds in a particular market. If the distributor has exclusivity, they are the only party authorized to market and sell the funds in that market.
In Hong Kong, fund distribution agreements must comply with the Securities and Futures Ordinance (SFO). The SFO governs the distribution of securities and futures contracts and includes provisions to protect investors. For example, the SFO requires that investment products be approved by the Securities and Futures Commission (SFC) before they can be offered to the public.
If you are considering investing in a fund that is distributed in Hong Kong, it is important to read and understand the fund distribution agreement. The agreement will provide you with valuable information about the relationship between the fund manager and distributor, the commission structure, and any exclusivity arrangements. It is also important to ensure that the fund is approved by the SFC and that the distributor is licensed by the SFC to distribute securities.
In summary, a fund distribution agreement is an important legal document that outlines the relationship between a fund manager and distributor. In Hong Kong, fund distribution agreements are often used to promote and sell investment funds to a wider audience. If you are considering investing in a fund distributed in Hong Kong, it is important to understand the terms and conditions of the fund distribution agreement and ensure that the fund is SFC-approved and the distributor is licensed.