SFC Consults the Public on Draft Hedge Funds Reporting Guidelines and Launches Programmes to Enhance Investors' Understanding of Hedge Funds

The Securities and Futures Commission today releases a consultation paper on hedge funds reporting requirements for public comment.

In May 2002, the SFC issued the hedge funds guidelines. Under the guidelines, authorized hedge funds are required to issue annual audited reports, semi-annual reports and quarterly reports to investors. The SFC is consulting the public on proposed additional guidance regarding hedge funds' on-going reporting obligations.

In particular, the SFC invites specific comments on the following areas under the proposals:

Mrs Alexa Lam, SFC's Executive Director of Intermediaries and Investment Products, said: "These proposals are designed to promote informed investment choices for investors and encourage greater transparency of the market. In this consultation, we are asking for views from different sectors of the market and the public to help us to arrive at the most useful and meaningful disclosures for investors without jeopardizing the strategies of hedge funds."

In drafting the consultation paper, the SFC has taken into consideration the prevailing industry best practices in the hedge funds industry and conducted informal discussions with various interested parties and practitioners.

The consultation will end on 30 September 2002. To promote an informed debate, the SFC, with the consent of the respondents, will publish their comments on the SFC website. Following the consultation, the SFC will prepare a consultation conclusions document to summarize the views expressed by the respondents before incorporating the hedge funds reporting requirements into the Code on Unit Trusts and Mutual Funds.

The SFC expects that the Hong Kong public can start buying hedge funds in the fourth quarter. To prepare for the introduction of hedge funds in retail market, the SFC has today rolled out a host of investor education initiatives. Ms Tina So, Director, Investment Products, has issued an open letter to investors to explain the proposed continuous disclosure requirements and remind investors to read the hedge fund's offering documents before they buy this new and different product.

The SFC has also published a new leaflet entitled "How Much Do You Know About Hedge Funds?" and featured articles to tell investors about the characteristics and risks of hedge funds, as well as issues investors should consider before investing in them.

More education materials on understanding hedge fund's offering documents and regular reports, regulatory safeguards, and dealings will be released in due course.

Apart from investor education, the SFC will issue a circular to remind intermediaries to adopt best practices when marketing and selling funds to investors.

Copies of the consultation paper and investor leaflet are available for collection at the SFC Office. Investor leaflets are also distributed at the 12 Consumer Advice Centres of the Consumer Council.

The consultation paper, the open letter to investors, and the investor leaflet are accessible on the SFC website at www.hksfc.org.hk. Other investor education materials can be found on the SFC-operated Electronic Investor Resources Centre at www.hkeirc.org.