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China VIE structure for foreign investment under attack from multiple directions
will it emerge (relatively) unscathed or is its very survival threatened?
Historically the VIE structure and its predecessors essentially came about as a "workaround" to allow indirect non-equity based "investment" in industries in China in which foreign investment was restricted or prohibited, e.g., telecommunications services and media.
Hedge fund euthanasia?
Are the Courts sealing the fate of struggling hedge funds too early or should they be given further time to recover and realize their potential for investors?
A Primer to Buying Securities Firms, Asset Managers, Insurers and Banks
The meltdown in global financial markets has triggered a consolidation of the financial services industry as securities firms, asset managers, insurers and banks alike spin-off assets and restructure their operations to shore up capital. These transactions are often global in nature, involving substantial Hong Kong operations. In this article, we review the basic Hong Kong legal and regulatory framework for these transactions and present some lessons learned.
New Proposals to Regulate Mis-Selling of Investment Funds & Structured Products in Hong Kong
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.
The lender’s Holy Grail
Indira Birkwood of Harneys outlines the advantages of using a BVI company for financing transactions
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 the 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.
How to Start a Hedge Fund in Hong Kong: A Legal Primer
Hong Kong is a premier centre for hedge fund management in Asia, boasting easy access to North Asia deal flow, world-class infrastructure, an internationally regarded regulatory framework and a relatively benign tax environment. This article provides the portfolio manager with an overview of the key legal issues that are likely to arise when establishing and managing a hedge fund in Hong Kong, covering the choice of fund structure, business licensing requirements and capital raising.
Communications from Collective Investment Schemes Authorized in Hong Kong: SFC Proposals
Proposed changes will reduce regulatory burdens by dispensing with pre-vetting by the SFC of a wide range of notices and advertisements issued by collective investment schemes authorized by the SFC. At the same time, they will harmonize requirements for advertisements. However, the changes introduce now complexity into the regulatory regime and shift greater responsibility and liability on the issuers of such notices and advertisements.
Challenging the SFC: What Every Compliance Officer Needs to Know
Licensed and registered persons generally prefer to work with the SFC rather than against the SFC. Nevertheless, circumstances may arise where the SFC adopts a hostile posture or takes a position that is commercially undesirable. While it is the rare licensed or registered person who is unafraid to challenge the SFC, the past 4 years have demonstrated that where the SFC acts unreasonably, in bad faith or otherwise improperly, a remedy may be available through the SFAT. In this article, we review strategies for challenging the SFC through the SFAT.
For more information, please contact:
Timothy Loh - tloh@timothyloh.com
Hong Kong: +852 2899 0179
Howard Burchfield - hburchfield@timothyloh.com
Hong Kong: +852 2899.0119
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.
For more information, please contact:
Timothy Loh - tloh@timothyloh.com
Hong Kong: +852 2899 0179
Take Private Transactions: Possible New Pitfalls for Private Equity
Proposals by the Securities and Futures Commission in Hong Kong to harmonize the regulatory treatment of asset purchases with the regulatory treatment of share purchases and schemes of arrangement will give minority shareholders greater veto power over acquisitions of Hong Kong public companies by asset purchase. As a result, private equity firms who wish to take such companies private will face an increasingly difficult environment.
For more information, please contact:
Timothy Loh - tloh@timothyloh.com
Hong Kong: +852 2899 0179
Howard Burchfield - hburchfield@timothyloh.com
Hong Kong: +852 2899.0119
Non-Hong Kong Investment Funds: Relaxation of SFC Authorization Practices
This article looks at recent developments which suggest a relaxation of SFC authorization requirements for collective investment schemes based outside of Hong Kong. First, the SFC has expanded the ability of managers of authorized schemes to delegate their investment management functions to sub-managers in jurisdictions previously considered to be generally unacceptable. Secondly, the SFC appears to have softened its policy of insisting that investment management agreements and custodian agreements preserve the jurisdiction of the Hong Kong courts.
For more information, please contact:
Timothy Loh - tloh@timothyloh.com
Hong Kong: +852 2899 0179
Gavin Cumming - gcumming@timothyloh.com
Hong Kong: +852 2899.0149