Fund managers operating in Hong Kong are always careful when it comes to the marketing rules of the Securities and Futures Commission. The regulator is committed to enforcing its rules in order to protect investors from mis-selling. But in the case of Pacific Sun Advisors, it overreached.
Last week Hong Kong’s Eastern Magistracy ruled that Pacific Sun and its director, Andrew Pieter Mantel, did not contravene the Securities and Futures Ordinance, as alleged by the SFC.
“I didn’t do anything wrong,” Mantel says.
His firm has endured 15 months of difficulties as a result of the SFC allegations. He says Pacific Sun has no intention of changing its business practices because it operates legally.
The SFC alleged the small China-focused fund manager had promoted a collective investment scheme, the Pacific Sun Greater China Equities Fund, without SFC authorisation. The reason was the company’s mentioning the fund on its corporate website and in emails to prospective clients.
However the firm successfully argued before a court that it clearly intended to sell units of the fund to professional investors. For example, the website clearly stated that the fund was for professional investors only.
The court also accepted the firm’s argument that notification of funds solely aimed at professional investors do not need SFC approval to be mentioned or advertised.
The SFC’s argument had been that Pacific Sun could not prove it had not sold interests to retail (non-professional) investors.
The SFC says it is considering an appeal. For Mantel, however, the judge’s decision means the SFC owes him for his legal costs.