Asset Management and Fund Products
Asset management questions test the boundary between wholesale and retail: which fund vehicles exist, when a product may be offered to the Hong Kong public, and what a Type 9 manager must do.
Authorisation and the marketing perimeter
- Section 103 of the SFO prohibits issuing advertisements or invitations to the public to acquire interests in a collective investment scheme unless the product is authorised by the SFC or an exemption applies.
- Authorisation is a disclosure and structural check, not a merit endorsement.
- The main exemption is an offer to professional investors; other exemptions cover certain institutional and private placements.
- Authorised funds need an SFC-approved management company, trustee or custodian and offering document.
Fund vehicles
- Unit trusts remain the classic authorised retail vehicle; the open-ended fund company is a Hong Kong corporate vehicle under Part IVA of the SFO, with its own registration and tax regime.
- MPF schemes are registered under the MPF Schemes Ordinance and supervised by the MPFA, not authorised by the SFC.
- REITs are governed by the REIT Code and listed on SEHK; ETFs are SFC-authorised and typically track an index.
Professional investors
- An individual professional investor needs a portfolio of at least HK$8 million; a corporation needs a portfolio of at least HK$40 million or total assets of at least HK$80 million.
- Institutional professional investors include banks, insurers, licensed intermediaries and authorised funds.
- Professional investor status relaxes some conduct requirements but does not permit misrepresentation or bad faith.
Worked example
A bank plans to distribute a Cayman fund through retail branches with a minimum subscription of HK$1 million. The fund is unauthorised. A HK$1 million minimum does not convert retail customers into professional investors; each investor would need to satisfy the professional investor definition, and the bank would need written confirmation. Marketing to the general public breaches section 103, and the bank's Type 1 licence does not cure it.
Traps
- Equating a high minimum investment with professional investor status.
- Assuming an open-ended fund company is automatically retail-authorised.
- Treating MPF products as SFC-authorised funds.
- Overlooking that the professional investor portfolio test excludes real estate.