Andy Mantel, director at Hong Kong investment manager Pacific Sun Advisors, has denied a criminal charge against him and his company from the Securities and Futures Commission.
The SFC alleges that Pacific Sun advertised a fund without SFC authorisation. In November 2011, the firm launched its second fund, the long-only Pacific Sun Greater China Equities Fund, which is currently named on its website and identified as “available to qualified professional investors”.
The SFC says that the firm sent out emails to existing clients to notify them of the launch, and that constitutes a breach in licensing rules that prohibit advertising of unauthorised collective investment products. The rules are meant to protect retail investors from unscrupulous advertising behaviour.
The Greater China Equities Fund’s custodian is DBS, the administrator is Apex Fund Services, the auditor is Deloitte and legal services are supplied by Bingham.
The Pacific Sun team boasts a number of investment and research professionals, all Mandarin speakers with China experience. There is no dedicated COO.
Pacific Sun’s other fund, the China Mantou Fund, is a long/short product launched in 2003 that is also meant exclusively for qualified professional investors. Its prime broker and fund administrator is UBS.
This is not the first time Mantel has faced SFC enforcement action. In 2004, the SFC sought to revoke his licences for having allowed the firm’s capital to dip below the required $100,000. That was a civil proceeding involving an SFC disciplinary action.
Ermanno Pascutto, a former SFC deputy chairman, came to Mantel’s aid during the 2004 episode. Pascutto savaged the SFC before an appeals tribunal for “reprehensible behaviour” in revoking Mantel’s licence over a trivial slip-up, as reported by the South China Morning Post.
Pascutto went on in that article to describe the SFC at the time as allowing bigger firms to get away with bigger infractions while coming down disproportionately on a small fund manager for a trivial violation. Mantel’s appeal then was successful and he got off with a reprimand.
In 2002, the SFC reprimanded Mantel and Pacific Sun Investment Management for failing to submit annual audited accounts on time, again a civil proceeding.
In the current action against Mantel, however, the SFC is pursuing a criminal case before the Magistrate’s Court. The Securities and Futures Ordinance gives the SFC power to discipline those it licenses or registers, including the option to take a case to law courts or to the Market Misconduct Tribunal.
SFC spokesmen declined to say under what circumstances a case is deemed civil or criminal, and the SFC’s website does not either in describing its enforcement philosophy or process.
The SFC has won court cases with regard to unauthorised marketing of collective investment schemes.
In 2006, it prosecuted Centaline (China) Property Consultants, Dalian Victory Plaza Development Company and an unnamed individual for issuing advertisements related to a collective investment scheme without SFC authorisation. The parties used their websites, newspaper ads and other media to promote the selling of shop units.
In 2007, the SFC prosecuted Chief Securities over unauthorised ads for an unauthorised fund called Chief Treasure, and a court found the firm’s director and responsible officer guilty.
Mantel is a founding member and portfolio manager of an early fund management business in China, Shanghai International Asset Management, set up in 1992 in Hong Kong and Shanghai.
That was in the days before China promulgated its regulatory framework for mutual funds. Mantel had also helped establish a qualified foreign institutional investor (QFII) business for Capital Securities in Taiwan.