Asset Management and Investment Products
This domain tests Type 9 asset management, the Fund Manager Code of Conduct, SFC-authorised funds, collective investment schemes and professional-investor rules.
Type 9 and fund management
Type 9 covers managing a portfolio of securities, futures contracts or OTC derivative products for another person, including discretionary accounts. Advice-only activity is Type 4 or Type 5, not Type 9. The Fund Manager Code of Conduct (FMCC) applies to Type 9 managers and addresses best execution, soft-dollar arrangements, conflicts of interest, client-asset custody, liquidity risk management, leverage and disclosure. Client assets must be segregated and not commingled with the manager’s own assets.
A collective investment scheme (CIS) marketed to the Hong Kong retail public generally requires SFC authorisation under the Code on Unit Trusts and Mutual Funds (UT Code) unless an exemption applies. Authorisation is not a recommendation or guarantee. Product types include unit trusts, mutual funds, exchange-traded funds, REITs under the REIT Code, open-ended fund companies and listed funds. A professional investor is an institution, an individual with a portfolio of at least HKD 8 million, or a corporation with a portfolio of at least HKD 40 million. The Companies Ordinance “accredited investor” concept is different.
Worked example
A Type 9 manager proposes a pooled fund investing 15% in unlisted shares and 20% in futures, marketed to retail clients. Because it is a CIS offered to the retail public, SFC authorisation under the UT Code is required and the UT Code’s investment limits apply. If the fund is offered only to professional investors, it may be unauthorised, but the marketing restrictions and FMCC standards still apply. The manager needs Type 9; if it also advises clients on securities, Type 4 is engaged. Client money must be held in segregated accounts.
Traps that cost marks
Do not treat discretionary management as Type 4 advice. “SFC-authorised” does not mean “SFC approved” or “safe”. A professional-investor-only fund is not automatically free of all marketing rules. Soft dollars must be for eligible research or brokerage services, not travel or entertainment. Performance fees and conflicts must be disclosed, not merely netted from returns.