Hong Kong’s highest court has confirmed that Hong Kong’s Securities and Future Commission can independently sue parties for financial wrongdoing absent either criminal prosecution or a proceeding before Hong Kong’s Market Misconduct Tribunal.
The SFC had targeted New York hedge fund Tiger Asia for alleged insider trading and sought a court order freezing the fund’s assets in Hong Kong and barring it from trading in the territory. Tiger Asia had challenged the SFC’s actions on the grounds that the regulator lacked authority to bring such actions absent a separate criminal or civil finding.
The Hong Kong Court of Final Appeal ruled Tuesday that the SFC did have such authority under Section 213 of the Securities and Futures Ordinance. Chief Justice Geoffrey Ma said the court would release its reasoning at a later date.
The SFC has recently been more aggressive in its use of Section 213. Last year, the SFC invoked the section to sue Chinese fabric maker Hontex International Holdings Co. Ltd. for allegedly disclosing materially false information in its 2009 initial public offering prospectus. Hontex settled the case and agreed to pay shareholders $132.7 million.
The SFC first brought its case against Tiger Asia in 2009, alleging the fund traded shares of Bank of China Ltd. and China Construction Bank Corp. Ltd. using inside information in 2008 and 2009.
Tiger Asia, which has denied the charges in Hong Kong, had initially won a ruling in 2011 that the SFC must first seek a criminal prosecution or civil inquiry before it can sue to recover investors’ losses. But that decision was overturned last year by an appellate court.
Tiger Asia was represented by
Hong Kong partner Alan Linning.
Though Tiger Asia has denied the charges in Hong Kong, the fund pleaded guilty in December to a criminal fraud charges in U.S. federal court and agreed to civil and criminal settlements of more than $60 million.