Summer 2015

LEGEAL EASE: Hong Kong frees up fund advertising

Scott-CarnachanA recent Court of Final Appeal judgment opens the way for wider advertising of unauthorised collective investment schemes in Hong Kong than has been the industry practice. Section 103(3)(k) of the Securities and Futures Ordinance (SFO) exempts from the requirement for authorisation under section 103(1) an offer made in respect of interests in collective investment schemes “that are or are intended to be disposed of only to professional investors”. The scope of this exemption was considered by the Court of Final Appeal in its judgment of March 20, 2015 in Securities and Futures Commission v Pacific Sun Advisors.  In that case, Pacific Sun Advisors sent an email to various recipients informing them of the launch of the Pacific Sun Greater China Equities Fund and subsequently published information about the fund on its website.  The fund was not authorised by the Securities and Futures Commission (SFC) under section 103 of the SFO.  Pacific Sun stated (and the court accepted) that the fund was or was intended to be available solely to professional investors and was not available for investment by the general public. However, this intention was not stated in the emails or in the information posted on the website. The SFC brought an action against Pacific Sun alleging a breach of section 103 of the SFO.  The SFC was unsuccessful at the initial hearing, but successful on appeal. Pacific Sun then appealed that decision to the Court of Final Appeal. The Court of Final Appeal found in favour of Pacific Sun and stated: (i) There is no requirement under the exemption that the advertisements or other materials contain an express statement that the collective investment scheme is intended to be disposed of only to professional investors. (ii) In order for Pacific Sun to rely on the exemption, it needed to show as a matter of fact that the fund was intended to be disposed of only to professional investors. Whilst it would be helpful for the party seeking to rely on the exemption to include a statement to this effect in advertisements or other materials, that is not sufficient to fall within the exemption. (iii) Accordingly, it is necessary to consider the steps the person seeking to rely on the exemption undertakes to ensure that only persons who are professional investors are permitted to invest in the collective investment scheme. The burden of proving that is the case rests on the person seeking to rely on the exemption (in this case, Pacific Sun). The SFC says it will study the decision to determine whether there should be any proposal to amend section 103 of the SFO. Scott Carnachan is a consultant at Deacons in Hong Kong ©2015 funds global asia

Sponsored Profiles

Sponsored feature: How is DLT changing the global securities services landscape?

Oct 17, 2019

By Jeslyn Tan, global head of product management, securities services, at Deutsche Bank

Sponsored feature: A new base for fund distribution

Oct 16, 2019

To get the most value out of the digitisation of investment fund distribution, a blockchain-based infrastructure is fundamental. By Olivier Portenseigne, Managing Director and Chief Commercial Officer, Fundsquare.

Sponsored profile: Bridging the gap

Mar 11, 2019

Private equity is a core part of the business for Caceis’ Hong Kong office, which looks after clients in China and Europe. David Li, chief executive officer, explains why private equity enjoys strong client demand and how it is being used to fund China’s international infrastructure ambitions.

SPONSORED FEATURE: Market knowledge key to fund distribution in Asia

Jan 11, 2019

The highly fragmented investment markets in the Asia-Pacific region require detailed knowledge of each market’s unique characteristics and framework. By Lou Kiesch, Partner, and Marc Noirhomme, Director, at Deloitte Luxembourg.

Executive Interviews

Executive interview: ‘Bull markets don’t die of old age’

Dec 12, 2019

Having a balanced portfolio in the midst of the longest expansion in history is an investment imperative, Chris Alderson, co-head of global equity and head of international equity at T Rowe Price...

Executive interview: Timing the market

Oct 17, 2019

Amy Cho, Schroders’ Hong Kong chief executive and regional head of intermediary clients, tells Romil Patel about Hongkongers’ love of investing, staying nimble in a volatile market and following...


Singapore roundtable: A horizon to hold long-term assets

Dec 12, 2019

Panellists discuss the geopolitical fractures concerning asset owners, Singapore as a hub for fintech start-ups and why it makes sense to raise capital from a Variable Capital Company (VCC). Chaired by Romil Patel in Singapore.

Roundtable: Priming for Asia’s growth

Oct 17, 2019

Panellists discuss expanding product capability across Asia-Pacific, the opportunities and regulatory challenges around data and the prospects for ETFs in the region. Chaired by Romil Patel in Hong Kong.