Securities & Futures Commission of Hong Kong

Professional investors

Q1:

Can a subsidiary having a sole business of holding investments, and wholly owned by a corporation which is a professional investor, be treated as a professional investor as well for the purposes of the Professional Investor Rules (the Rules)?

A:

The Securities and Futures Ordinance (SFO) and the Rules do not provide for such a subsidiary to be treated as a professional investor. However, section 134(1)(xiv) of the SFO provides that the Commission may, upon application, grant a licensed corporation or registered institution a modification or waiver in respect of requirements of any provision of rules made by the Commission under the SFO. A licensed corporation or registered institution can therefore apply for a modification of the Rules for treating such a subsidiary as a professional investor.

Q2:

Can a corporation having a sole business of holding investments, and whose shareholders are all professional investors, be treated as a professional investor as well for the purposes of the Professional Investor Rules (the Rules)?

A:

The Securities and Futures Ordinance (SFO) and the Rules do not provide for such a corporation to be treated as a professional investor. However, section 134(1)(xiv) of the SFO provides that the Commission may, upon application, grant a licensed corporation or registered institution a modification or waiver in respect of requirements of any provision of rules made by the Commission under the SFO. A licensed corporation or registered institution can therefore apply for a modification of the Rules for treating such a corporation as a professional investor.

Q3:

In determining an individual investor's portfolio for the purposes of the Professional Investor Rules (the Rules), can the portfolios held by corporations, wholly owned by the investor and having a sole business of holding investments, be aggregated to the portfolio held in the investor's own account and treated as part of the investor's portfolio?

A:

The Rules do not provide for such an aggregation of portfolios. However, section 134(i)(xiv) of the Securities and Futures Ordinance (SFO) provides that the Commission may, upon application, grant a licensed corporation or registered institution a modification or waiver in respect of requirements of any provision of rules made by the Commission under the SFO. A licensed corporation or registered institution can therefore apply for a modification of the Rules to enable aggregation of such portfolios for treating relevant individual investors as professional investors.

4.1243 s