HKSI Paper 6 General regulatory framework question: Part IV of the SFO

HKSI Paper 6General regulatory framework

Victoria Gate Securities Ltd, licensed for Types 1 and 4, posts on its public website an invitation to subscribe for units in a Cayman hedge fund that the SFC has not authorised. Nothing limits the offer to professional investors or to persons outside Hong Kong. What is its position under Part IV of the SFO?

A It risks the s.103 offence, as the intermediary exemption does not cover unauthorised CIS interests
B A website posting is not an advertisement issued to the public, so s.103 is not engaged
C It may proceed, because Type 1 intermediaries are exempt for unlisted securities, fund units included
D The invitation is lawful if the Cayman regulator has authorised the fund for public sale

Show the answer and explanation

Answer: A. It risks the s.103 offence, as the intermediary exemption does not cover unauthorised CIS interests

Section 103(1) makes it an offence to issue an advertisement, invitation or document inviting the public to acquire an interest in a CIS unless the SFC has authorised the issue under s.105(1). Section 103(2)(a) exempts intermediaries licensed for Type 1, 4 or 6 in respect of listed and unlisted securities, but s.103(11) says that exemption does not apply to interests in a CIS not authorised under s.104. Under s.103(10)(b), material directed at, or likely to be accessed by, the public is an invitation to the public, which covers a public website. Authorisation by a home regulator is not SFC authorisation. Source: SFO (Cap. 571) s.103(1), (2)(a), (10)(b), (11); s.105(1) (as at October 2026).

Common mistake

Relying on the Type 1 intermediary exemption for fund units. It never covers interests in unauthorised CISs.

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