The Hong Kong Securities and Futures Commission showed its harsh approach to any breach of regulatory requirements recently when it decided to revoke the investment adviser licence of Pacific Sun Investment Management (Hong Kong) Limited and its founder and portfolio manager, Andy Mantel.
The SFC alleged that Pacific Sun breached the Financial Resources Rules (FRR) for the month of October 2003. Pacific Sun has applied to the Securities and Futures Appeals Tribunal (SFAT) to set aside the Commission's decision. Pacific Sun has taken the position that there was no breach and that even if there was it was a minor technical breach which was corrected the same month. As an investment adviser there was never any risk to client assets.
In reviewing an SFC decision, the SFAT will not substitute its view as to the appropriate sanction. However, the Tribunal will intervene when the SFC makes an error in principle, acts unreasonably or comes to decision that is based on a faulty exercise of discretion. In other cases involving more serious breaches of FRR (breaches by dealers who held client assets, lasting up to three years in duration and amounts involved up to HK$20 million ($2.5 million) and where misleading reports were filed with the SFC) the penalties for the responsible director ranged from a public reprimand to a two-month suspension. Pacific Sun argued that the revocations were unreasonable, an excessive and disproportionate penalty and inconsistent with other decisions of the SFC. The SFAT reserved its decision.
Troutman Sanders is representing Pacific Sun and Andy Mantel.
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