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Acquittals overturned in unauthorised advertisements case

Following an application by the SFC, the Court of First Instance (CFI) has overturned the acquittal of Pacific Sun Advisors Limited (Pacific Sun) and its director. The case was remitted back to the magistrate for reconsideration.

Pacific Sun and its director were charged with issuing advertisements to promote a collective investment scheme in an email and on their website without the authorisation of the SFC in contravention of section 103(1)(b) of the Securities and Futures Ordinance (SFO).

The magistrate acquitted the defendants on the basis that the materials they sent out did not constitute advertisements, as they only contained an invitation to seek further information about the fund. Further, even if the materials were considered to be advertisements, the exemption under section 103(3)(k) of the SFO would apply as the fund was intended for professional investors only. The magistrate accepted the defendants' claim that a screening process was carried out to ensure that all investors in the fund were professional investors.

The SFC argued that the acquittal was based on legal errors and the CFI agreed. The CFI found that marketing materials should be clear from their face whether they are confined to professional investors to the exclusion of other members of the public. The intended arrangement and screening process adopted by Pacific Sun were irrelevant.

Furthermore, the CFI stated that an advertisement which contains information likely to lead, even if only indirectly, to members of the public acquiring an interest in a collective investment scheme shall be regarded as an advertisement to the public. The CFI ruled that the materials concerned could, therefore, constitute an invitation to the public to acquire an interest in the fund and remitted the case back to the magistrate for reconsideration.

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