In a number of cases, private funds and discretionary accounts with concentrated, illiquid and interconnected investments were found to have irregular features.
The regulator warned about situations in which fund investors or discretionary account holders were either a substantial shareholder, director or affiliate of the companies that the funds or discretionary accounts invested in.
In other cases, a director of an asset management firm was also a director or CEO of listed companies in which the funds were invested.
The SFC cited another example of a company shareholder who sells his shares to a fund manager and then invests in that fund through a discretionary account.
The regulator describes these practices as questionable because they may conceal the shareholding of the fund investors or discretionary account holders in the listed companies.
“The SFC warns that asset managers should not turn a blind eye to dubious arrangements and transactions proposed by their clients,” the regulator said.
It added that it will continue to closely supervise asset managers and will not hesitate to take action against any firms, including their relevant managers-in-charge, for failure to comply with regulatory requirements.
“Asset managers are reminded that failure to act in the best interests of their clients and the integrity of the market is a very serious matter and directly impugns fitness and properness.”
