News & Insights

Court of Final Appeal upholds judgment in SFC’s favour in Tiger Asia Case

On 30 April 2013, the Court of Final Appeal made a landmark ruling, upholding the SFC’s right to seek compensation under section 213 of the Securities and Futures Ordinance against a company (in this case an overseas company), without first having to prove them guilty of insider dealing or other malpractices. For the background to this case, please see the article in our April 2012 LADR newsletter.

The reasons given by the Court of Final Appeal for their decision were as follows:

  1. Because a criminal prosecution of Tiger Asia under Part XIV of the Securities and Futures Ordinance or civil proceedings before the Market Misconduct Tribunal (“MMT”) under Part XIII of that Ordinance would each involve a determination of whether it had contravened the prohibition on insider dealing and because the two procedures are mutually exclusive, it did not follow that it meant that prosecution or MMT proceedings were the exhaustive means for determining whether there had been a contravention.
  2. Remedies provided under Section 213 of the Securities and Futures Ordinance serve a different purpose from penalties that can be imposed by a criminal court or the MMT. The latter are imposed in the general public interest, to punish. On the other hand, Section 213 provides remedies for the benefit of those involved in the impugned transactions and includes injunctions, appointment of receivers to secure property with a view to recovery by the victims of market misconduct, orders that particular transactions be unwound, and orders declaring particular transactions to be void or voidable. In Section 213 proceedings, the SFC acts not as a prosecutor in the general public interest, but as a protector of the collective interests of the persons dealing in the market who have been injured by market misconduct.
  3. The question of whether Tiger Asia had committed a criminal offence remained entirely a matter for a criminal court and not a matter to be determined in Section 213 proceedings, which were clearly civil proceedings.

This decision puts to rest the issue of whether the SFC can continue to use Section 213 in insider dealing cases where it is common for the SFC to seek an injunction to freeze the money of people suspected of insider dealing, even though the SFC has not completed its investigation. Where, as in this case, the perpetrators of the market misconduct are based overseas, the availability of a Mareva injunction is useful as it might be difficult to pursue a criminal prosecution against them.

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Joseph Kwan

Partner | Litigation and Dispute Resolution

Email or call +852 2825 9324

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