What is a professional investor? Someone who wears a suit and tie as opposed to shorts and a T-shirt or reads Bloomberg rather than the form guide?
Following the minibond debacle, the Securities and Futures Commission and the Hong Kong Monetary Authority really need to work out what and who exactly is a professional investor.
The SFC and the HKMA announced a HK$6.3 billion settlement package with 16 banks last Wednesday, under which 29,000 investors in minibonds issued or guaranteed by Lehman Brothers would be repaid up to 70 per cent of their funds.
Corporate investors and about 1,500 so-called 'professional investors', however, would be excluded. The Securities and Futures Ordinance defines 'professional investors' as those with a portfolio worth more than HK$8 million and at least two years of investment experience.
This has raised fears among some investors who have HK$8 million but would not call themselves professional investors. The retirees or housewives who spend their whole day in brokerage houses or banks trading stocks, warrants or currencies - should they be called professional investors?
The HKMA later explained the settlement would only exclude those who had signed a document confirming they agreed to be treated as professional investors.
This is not the first time the term 'professional investors' has come under the spotlight. Last year, many investors who had had their fingers burnt by the risky derivative products known as accumulators complained they were misled by banks when they signed a document confirming they were professional investors.