Real estate agents selling overseas student accommodation in Hong Kong have suspended exhibitions until regulatory guidelines from the Securities and Futures Commission (SFC) are clarified.
The move comes after the SFC outlined regulations concerning offering and promoting Collective Investment Schemes (CIS). Property agents are examining them to ensure their projects are not included.
The SFC says a CIS generally has four relevant elements: it must involve an arrangement in respect of property; participants do not have day-to-day control over the management of the property even if they have the right to be consulted or to give directions about the management of the property; the property is managed as a whole by or on behalf of the person operating the arrangements, and/or the contributions of the participants and the profits or income from which payments are made to them are pooled; and the purpose of the arrangement is for participants to participate in or receive profits, income or other returns from the acquisition or management of the property.
Collective Investment Scheme is a term defined in Schedule 1 to the Securities and Futures Ordinance that applies to investment products of a collective nature that may cover any property, including real estate, whether located in Hong Kong or overseas.
Julie Harvey, International Sales and Marketing Director of Pinnacle MC Global that markets UK student accommodation schemes overseas, said: “It is not good news for companies like ourselves and our agents in Hong Kong. Our agents have temporarily stopped exhibitions in Hong Kong whilst we take legal advice to ensure that our developments cannot be classed as a CIS.”
The regulations may mean that Pinnacle and other agents have to alter how their developments are put together and marketed to Hong Kong investors.
Harvey added: “We may need to change the way we package our student developments in future for the Hong Kong market. The Hong Kong residents love investing in the U.K., so it will be very sad if a solution cannot be found. In the meantime, we are continuing to sell record numbers of student apartments via our agents in China, Singapore, Malaysia and increasingly in the U.K.”
The SFC is an independent statutory body set up to regulate the securities and futures markets in Hong Kong.
While outlining the regulations from the Securities and Futures Ordinance (SFO) governing the offer and promotion of CIS, the SFC issued a reminder to those intending to market a CIS that breaching the provisions may constitute a criminal offence.
It is an offence under the SFO to issue any marketing material which contains an offer to the Hong Kong public to acquire an interest or participate in a CIS unless it has been authorized by the SFC or an exemption applies.
Promoting a CIS may, in addition, constitute a business in a regulated activity, which requires a licence from the SFC, and failing to get one may lead to an offence being committed under the SFO.
“Any person who wishes to offer or promote any investment arrangement to the Hong Kong public should be aware of the restrictions under the SFO, and seek professional advice if in doubt to ensure compliance with the law,” the SFC advises.
Investors in doubt about the nature and regulatory status of any investment arrangement are also advised to seek professional advice prior to making an investment.
The CIS “embraces and modernizes the concepts of “unit trust”, “mutual fund corporation” and “investment arrangements”, as defined in the now repealed Securities Ordinance and the Protection of Investors Ordinance,” said the SFC.
This story was first published by OPP Connect and is published as part of an editorial partnership between OPP Connect and PropertyGuru Group.
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