Hong Kong’s Court of Final Appeal upheld an appeal by Pacific Sun Advisors and its director Andrew Pieter Mantel, who were charged in 2013 with issuing unauthorised ads for a collective investment scheme to the public in violation of section 103 of the Securities and Futures Ordinance.
However, Pacific Sun Advisors was successful in arguing that its ads to promote a collective investment scheme were intended for professional investors even though that intention was not stated in the ad.
The firm’s position was that it could rely upon an exclusion contained in section 103(3)(k) of the Ordinance, which states that “an advertisement does not need SFC authorisation when the advertisement is in respect of securities, structured products or interests in a CIS that are or are intended to be disposed of only to professional investors”.
The ruling “means advertisements of CIS that may be unsuitable for retail investors can be issued to the general public even if the issuer only intends to sell them to professional investors”, the Securities and Futures Commission said in a statement.
But the professional investor exemption “would not apply if a person published an unauthorised offer to the public and sold the advertised securities to a retail investor”.
In addition, “contravention of section 103 of the SFO, which occurs upon issue of a relevant unauthorised offer to the public, can only be established well after the offer to the public has been issued”.
The Court’s ruling overturned a decision by the Court of First Instance on the interpretation of section 103 of the Securities and Futures Ordinance.
The SFC said it would study the decision to determine whether section 103 of the SFO should be amended.