Guidance

1. If an Exempt Fund can no longer meet the relevant conditions set out in Rule 3.3.3 to be classified as an Exempt Fund, the Fund Manager of that Fund is required, under Section 112 of the FSMR, to apply for the winding up of that Fund. Alternatively, the Fund Manager may have that Fund moved to the classification of a Public Fund, which requires the satisfaction of the requirements and formalities specific to that type of Fund. An Exempt Fund may also, if it wishes to, convert to a Qualified Investor Fund provided it meets the conditions applicable to a Qualified Investor Fund in Rule 3.3.4.
2. In addition to the requirements specific to Exempt Funds, such a Fund must also meet, except where otherwise provided, the other requirements that are common to all Domestic Funds, which are set out in Rules 11 and 12 of these Rules.
3. Units of Exempt Funds can only be Offered by way of Private Placement and to Professional Clients, but must meet the additional criterion of a minimum subscription test of US$50,000. The definition of Professional Client is set out in Rule 1.2.1.
4. Generally a firm will not be able to undertake mass marketing activities relating to Units of Exempt Funds because such marketing would not meet the Private Placement requirement, and would be likely to amount to a public offer, which can only be made in respect of a Unit of a Public Fund.