The issuance of a guidance note by the Securities and Futures Commission (SFC) in May 2001 clarifying regulatory requirements concerning online marketing and offering of Collective Investment Schemes (CIS) will help to regulate activities that are targeted at Hong Kong investors or are detrimental to the interests of the investing public or market integrity of Hong Kong.
The guidance note provides that every internet advertisement for CIS targeting the Hong Kong public needs to be authorized in advance by the SFC. Hard copies of web pages and, where audio visual technology is used, the scripts and description of the presentation must be submitted to SFC for prior approval. Normally, banner advertisements will not trigger a requirement for authorization unless they can be construed as product advertisements. Hyperlinks may be embedded in banners but they must not lead to unauthorized CIS materials.
Among other things, the guidance note provides that, in an online offering of CIS, an electronic prospectus must be provided and made easily accessible for investors to make informed investment decisions. The SFC expects that an electronic prospectus must be:
- available either on the website itself, or via hyperlink to another website where the prospectus can be read, printed and downloaded, though distribution using other methods may also be acceptable;
- identical to the most up-to-date paper version authorized by the SFC; and
- available "up front" in the sense that potential investors can gain access to application forms or web pages for subscription to CIS before having the opportunity to consult a full version of the prospectus.
The SFC's policy is to take enforcement or disciplinary actions against any person acting in contravention of the guidance note. Practical difficulties may, however, be encountered should the SFC seek to monitor online activities conducted by fund managers or financial intermediaries that are based in countries where the SFC would have no jurisdiction or means of effective enforcement.