12 June 2025

AIMA issues practical working guidance on Hong Kong’s Securities and Futures Commission’s Guidelines for Market Soundings

• AIMA’s paper unpacks the Securities and Futures Commission (SFC) of Hong Kong’s Guidelines for Market Soundings, which went live on 2 May 2025.
• The Guidelines for Market Soundings aim to enhance market integrity by addressing potential misuse of confidential information entrusted by a client during a market sounding.
• AIMA engaged closely with the SFC and other industry associations as part of drafting the original guidelines and emphasised the need for balancing responsibilities of the management of the process between buy and sell-side firms in proportion to their relationship to the disclosing party.

The Alternative Investment Management Association (AIMA), the world’s largest alternative investment trade body, has published a Hong Kong Market Sounding Guidance Paper to support hedge fund manager members’ adoption of the Securities and Futures Commission’s (SFC) Guidelines for Market Soundings, which came into effect on 2 May 2025.

The SFC guidelines cover the principles and requirements for Hong Kong licensed or registered persons when they conduct market soundings—a practice that involves confidential pre-deal discussions between sell-side brokers and buy-side investment managers to assess potential interest in a prospective transaction.

They also refer to practical guidance and examples issued by the SFC in the form of Frequently Asked Questions.

AIMA contributed to the development of the SFC guidelines through close engagement with the regulator and other industry bodies, advocating for proportional responsibility sharing between sell-side and buy-side firms, and reducing some of the initial burden that was being levied on Market Sounding Information recipients.

The final guidance reflects a more balanced approach, tailored to the operational realities of asset managers, but there still remains some practical challenges to adoptions with both buy and sell side firms will need to tackle.

• A summary of new obligations for asset managers
• Practical guidance and illustrative templates
• Insights into areas of ongoing regulatory interpretation

AIMA’s paper was developed by the industry, for the industry, bringing together input from buy-side managers, sell-side professionals, and legal experts. AIMA extends its thanks to:

• Derek McGibney (Cognitive GRC)
• Hannah Cassidy and Simone Hui (Herbert Smith Freehills)
• Matthew Zayco (UBS)
• Kenneth Hui (Simmons & Simmons)
• And other manager members who preferred to remain anonymous

The guidance paper is designed to be the most-up-to-date and practical guide, providing a summary of the buy-side obligations, practical guidance and templates as well as discussion on those areas still subject to some interpretative uncertainty. As such, the paper will continue to be reviewed and updated as the practical impact of the Guidelines emerges from the remaining uncertainties.

Kher Sheng Lee, Managing Director, Co-Head of APAC and Deputy Global Head of Government Affairs, said: “The new market sounding framework marks a significant milestone for Hong Kong’s asset management industry. This guidance paper demonstrates AIMA’s commitment to proactive industry collaboration and a practical, bottom-up approach tailored specifically to managers’ compliance and implementation needs. Leveraging our unique position as the leading and largest global body for the alternatives sector, we will continually refine this resource to support our members in effectively navigating the new framework.”

Hannah Cassidy, Partner, Head of Financial Services Regulatory, Asia, at Herbert Smith Freehills Kramer – which assisted AIMA in writing the guide – added: "Managers have worked hard to implement the new guidelines by the deadline, but there will be more to do as firmer consensus forms around certain aspects of the regime. For example, firms will need to determine the extent to which the new guidelines apply to public sales and trading discussions.”

Background information

SFC Guidelines for Market Soundings explained

The SFC guidelines aim to enhance market integrity by addressing potential misuse of confidential information entrusted by a client during market sounding i.e. market sounding information (MSI). 

The market sounding is typically conducted with a small group of buy-side firms. The new requirements cover areas such as:

• Protocols to protect the confidentiality of the MSI,
• Governance to oversee the market sounding process,
• Policies and procedures relating to market soundings, and review and monitoring controls to detect the misuse or leakage of MSI.

What is ‘market sounding’?

In broad terms, market sounding refers to the communication between a sell-side firm or broker and a buy-side firm on a potential investment to gauge interest and explore possible terms for the potential investment, such as timing, size, pricing, structure and trading method.