Hong Kong's SFC Aims To Protect Investors With Online Investment Advertising Guidelines

by Mary Swire, Tax-news.com, Hong Kong

07 May 2001

One of the main objectives of Hong Kong's Securities and Futures Commission (SFC) is to protect the investing public who, says the SFC, can be "better served by reducing regulatory uncertainties and making the regulatory process more transparent to practitioners." Having often received enquiries about the acceptability of certain practices in relation to advertising and offering of collective investment schemes (CIS) on the Internet, the SFC issued a Guidance Note last week which provides regulatory guidance to fund management companies and other financial intermediaries who advertise or offer CIS via the Internet to Hong Kong investors.

A draft Note was in fact published last year for public consultation. Eleven written submissions were received and the SFC also met with some of the respondents. Having considered the comments of the financial services industry, the SFC has introduced some changes, which have generally been welcomed by the industry

A requirement to make an electronic prospectus available in an online offering of a CIS is generally considered necessary to ensure investors have the opportunity to access information that they may need for making an informed investment decision. The SFC said, however, that it is prepared to consider alternative arrangements that may satisfy the same objective. Unit trust and mutual fund providers as defined in the SAR's Securities Ordinance both fall within the remit of the Guidance Note.

The Guidance Note is effective immediately, although there is a grace period of three months for existing websites to make any necessary amendments. It is important to note that the Guidance Note does not seek to impose any new rules or requirements nor does it have the force of law behind it. It is also not intended to deal with commercial or detailed operational matters such as electronic payment; system integrity (such as security and reliability); other online services (e.g. access to client account information); or dealing and confirmation procedures (e.g. issuance of electronic contracts).

A statement from the SFC said: 'People residing in Hong Kong are free to seek out and to take advantage of financial services and products made available over the Internet. However, the provision of such services and products may fall within the SFC's purview and hence trigger regulatory concern. The SFC will not seek to regulate activities that are conducted from outside Hong Kong and over the Internet, provided that such activities are not targeted at persons residing in Hong Kong and are not detrimental to the interests of the Hong Kong investing public or to the market integrity of Hong Kong.'

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