A former executive director of Hong Kong’s Insurance Authority has been acquitted of misconduct after she was alleged to have coerced insurer Prudential into hiring her daughter-in-law, as the magistrate ruled that her actions did not cause “actual damage” to public trust in the regulator.

Magistrate Minnie Wat Lai-man on Thursday found Carol Hui Mei-ying and digital strategy consultant Chan Tsz-wai not guilty of conspiracy to commit misconduct in public office.

The pair previously stood trial...