Property conglomerate Cheung Kong, controlled by Asia's richest man, Li Ka-shing, said on Monday it will cancel sales of hotel units at a Hong Kong project after regulators ruled the deals were unauthorized investments.
Cheung Kong in February raised HK$1.4 billion ($180 million) by selling 360 hotel units at its Apex Horizons project, drawing scrutiny from the government which was concerned that Li was using legal loopholes to try to avoid a residential stamp duty introduced in October.
The sale of hotel room units appeared to constitute a Collective Investment Scheme (CIS) that would require authorization for documents, including advertising and marketing, the Securities and Futures Commission (SFC) said on Monday.
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"Investors in a CIS are entitled to more information before investing than was provided in this case," SFC chief executive Ashley Adler said in a statement.
The ruling is a symbolic victory for the government after Li's move to sell the units was seen by some as a direct challenge to the authority of Hong Kong's chief executive, Leung Chun-ying, who was sworn in last July amid pledges to make housing more affordable.
In an unusual move, Li publicly voiced his support for Leung's scandal-plagued opponent, Henry Tang, even after authorities in Beijing had signaled support for Leung.
"It (Cheung Kong) will not be so innovative in its future flat sales strategy," said Alex Wong, a director at Ample Finance Group.
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Cheung Kong said on Monday that while it disagreed with the SFC ruling, it would pay the legal and other expenses for buyers involved in the units.
Shares of Cheung Kong closed down 2 percent on Monday ahead of the announcement, lagging a 1.4 percent drop on the benchmark Hang Seng Index.