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SFAT Casts Doubt On Legality Of Introduction Arrangements Between Hong Kong Brokers And Their Offshore Affiliates

A recent determination by the Securities and Futures Appeal Tribunal suggests that the introduction of trades from introducing brokers in Hong Kong to executing brokers based in London, New York or other financial centers may constitute active marketing by these offshore executing brokers, thereby subjecting these offshore executing brokers to licensing requirements. Prior to this determination, the industry generally believed that licensing requirements would not apply. In this article, we review the determination and explore its potential consequences on the industry in Hong Kong.

The PCCW Privatization: A Guide To The Applicable Law For Schemes Of Arrangement

Allegations of share splitting in the proposed privatization of PCCW have raised an important question as to how the statutory majority to approve a scheme of arrangement should be determined. This question is significant both in the short-term for investors trading PCCW and in the long-term in the context of future schemes of arrangement. In this article, we examine the applicable laws and regulations with a view to providing hedge funds and other investors with guidance.

New Proposals To Regulate Mis-Selling Of Investment Funds & Structured Products In Hong Kong: Right Or Wrong?

The recent global financial crisis has resulted in an upswing in regulatory action throughout world markets. In Hong Kong, the Securities and Futures Commission (SFC) has proposed a slew of new requirements, some of which have already been implemented retroactively and without industry consultation. In this article we examine these ongoing developments in SFC policy and their effectiveness in reaching a fair balance between investor protection and costs to the investor and the financial industry

Distressed Debt In Hong Kong: An Insolvency Primer For Private Equity

Recent shocks to the financial markets as well as deteriorating economic conditions have brought insolvency issues sharply back into focus. For some hedge funds and private equity funds, insolvency has come unwelcome in the form of a deteriorating financial condition of a portfolio company to whom loans have been made or whose debt the funds have acquired. In this article, we review basic Hong Kong insolvency law concepts and outline debt recovery options.

Managing The Risk Of Prime Broker Default: A Guide For Hedge Funds

The collapse of Bear Sterns, Lehman Brothers and Merrill Lynch globally and the collapse of Opes within the Asia Pacific Region have brought to the forefront the risk of prime broker default. In the aftermath of these collapses, what steps can hedge funds take to manage the risk of this important counterparty relationship?

Launching Innovative Retail Investment Funds In Hong Kong: Without SFC Authorization

It is commonly believed that an asset manager who wishes to offer an investment fund to the investing public in Hong Kong must seek authorization from the SFC. In this article, we challenge this belief and explore a possible new approach that may avoid SFC authorization altogether and open up new possibilities for asset managers to offer innovative investment funds that fall outside categories recognized by the SFC.

Insider Dealing: A Primer For Hedge Fund And Private Equity Managers

Whilst the objectives of restricting insider dealing are widely accepted and the conceptual framework is clear, Hong Kong statutory prohibitions on insider dealing can raise practical problems for hedge fund and private equity managers in their day-to-day activities. In this article, we summarize the relevant law and set out examples of common problems.

Global Employment Standards For Global Financial Institutions In Hong Kong

International banks, asset managers and other financial intermediaries with New York and London offices frequently second staff to their Hong Kong offices, potentially subjecting themselves and their staff to Hong Kong employment law. A recent interlocutory Court of First Instance decision suggests, however, that Hong Kong employment law may not apply in situations where the parties have designated the law of a different jurisdiction to govern their employment contract, even where the employee is based in Hong Kong.

Stock Exchange Of Hong Kong: Third Party Clearing At Last

With the introduction by the SEHK of third party clearing, brokers may delegate clearing and carrying broker functions to a third party. This development opens up the possibility for established clearing and carrying brokers and custodians to expand their scale of operations in the Hong Kong market and for brokers to focus on their core order execution franchise, leaving the clearing and, if desired, carrying functions to a third party.

Responding To SFC Enforcement Action: New Tactics?

A recent decision of the Hong Kong Court of Appeal has raised the issue of whether disciplinary proceedings against licensed and registered persons are civil or criminal in nature. While a subsequent decision of the SFAT has ruled that such proceedings are civil, the current state of the law remains unsettled with at least the possibility of a higher standard of proof available in certain instances. In this article, we examine these developments, and more importantly, what the repercussions could be for licensed and registered persons who find themselves in the crosshairs of the SFC.

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