In view of recent enquiries it has received concerning the regulation of collective investment schemes (CIS), Hong Kong's Securities and Futures Commission (SFC) has outlined the relevant provisions in the Securities and Futures Ordinance (SFO) governing their offer and promotion.
The SFC reminded those intending to market such a scheme, which may cover any property or assets, including real estate, whether located in Hong Kong or overseas, that, under the SFO, a CIS must involve an arrangement in respect of property or assets, and participants must not have day-to-day control over the management of the property even if they have the right to be consulted or to give directions about the management of the property.
In addition, the property should be managed as a whole by or on behalf of the person operating the arrangements and/or the contributions of the participants, and the profits or income from which payments are made to them, should be pooled; and the purpose of the arrangement should be for participants to "participate in" or receive profits, income or other returns from the acquisition or management of the property.
The SFC also stressed that it is an offence under the SFO to issue any marketing material which contains an offer to the Hong Kong public to acquire an interest or participate in a CIS unless it has been authorized by the SFC or an exemption applies. Furthermore, promoting a CIS may constitute a business in a regulated activity which requires a license from the SFC, failing which may also lead to an offence under the SFO.
In that case, any person who wishes to offer or promote any investment arrangement to the Hong Kong public should be aware of the restrictions under the SFO, and seek professional advice if in doubt to ensure compliance with the law, while investors in doubt about the nature and regulatory status of any investment arrangement are also advised to seek professional advice prior to making an investment.A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
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