Tiger Asia ordered to pay investors HK$45 million

In our April 2012, May 2013 and August 2013 newsletters, we reported on the case of Securities and Futures Commission v Tiger Asia Management LLC & others.

On 20 December 2013, the Court of First Instance ordered Tiger Asia Management LLC (“Tiger Asia”), a New York based asset management company, and two of its senior officers, Bill Sung Kook Hwang and Raymond Park (“the Tiger Asia Parties”), to pay HK$45,266,610 to investors affected by their insider dealing involving two Hong Kong-listed banking stocks. The court orders were made following admissions by the Tiger Asia Parties in the proceedings brought by the Securities and Futures Commission (“SFC”) under section 213 of the Securities and Futures Ordinance (“the SFO”).

In respect of trading in Bank of China Limited (“BOC”) shares, the Tiger Asia parties admitted that:

• Tiger Asia was given advance notice and was invited to participate in two placements of BOC shares by UBS AG and Royal Bank of Scotland Group PLC on 31 December 2008 and 13 January 2009 respectively;
• Tiger Asia was provided with details of both placements after being told the information was confidential and price sensitive;
• Tiger Asia agreed not to deal in BOC shares after receiving the information;
• Tiger Asia short sold 104 million BOC shares before the placement by UBS AG on 31 December 2008, making a notional profit of around $9 million; and
• Tiger Asia short sold 256 million BOC shares before the placement by Royal Bank of Scotland Group PLC on 13 January 2009, making a notional loss of around $10 million.

In respect of trading in CCB shares, the Tiger Asia Parties admitted that:

• on 6 January 2009, before the market opened, a placing agent in Hong Kong invited Tiger Asia to participate in a proposed placement of CCB shares in Hong Kong by the Bank of America Corporation;
• the placing agent told Tiger Asia about the size and the discount range of the proposed placement;
• this information was confidential and price sensitive and the Tiger Asia Parties knew this;
• Tiger Asia then short sold 93 million CCB shares on 6 January 2009, before the news of the CCB placement was made public, making a notional profit of around HK$32 million;
• Tiger Asia covered its short sales with the placement shares that it bought on 7 January 2009 at a discount to the prevailing market price; and
• Tiger Asia manipulated the CCB share price during the closing auction session on 6 January 2009.

The Tiger Asia Parties have made the same admissions of insider dealing and market manipulation in the SFC’s proceedings against them in the Market Misconduct Tribunal (MMT). The SFC will be seeking a cease and desist order as well as an order prohibiting the Tiger Asia Parties from dealing in Hong Kong without leave of the court for up to five years. If the MMT finds there has been market misconduct, it can make a range of orders, including orders prohibiting a person from acquiring or disposing of or otherwise dealing in securities, futures contracts or leveraged foreign exchange contracts in Hong Kong without leave of the court for a period of up to five years.

The court orders made by consent on 20 December 2013, under section 213(2)(b) of the SFO, will return a total of HK$45,266,610 (the restoration amount) to around 1,800 investors in Hong Kong and overseas who traded with Tiger Asia in the relevant transactions. The Tiger Asia Parties have already paid the HK$45,266,610 into court.

The restoration amount is the difference between the actual price of BOC and CCB shares sold by Tiger Asia and the value of those shares, taking into account the inside information known to Tiger Asia, as assessed by expert evidence.

In respect of the MMT proceedings, the MMT has fixed three days, starting on 7 May 2014, to hear submissions as to what orders, should be made against the Tiger Asia Parties.

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