In 2009, the Market Misconduct Tribunal (“MMT”) found that Daniel Tsien Pak Cheong (“Mr Tsien”), had been guilty of insider trading whilst employed as an equity salesman of JP Morgan, contrary to Section 270 (1)(c) of the Securities and Futures Ordinance, Cap 571 (“SFO”). The MMT suspended Mr Tsien's trading licence for nine months and ordered him to pay over HK$2 million costs.
On the basis of the MMT's decision, the Securities and Futures Commission (“SFC”) took disciplinary action against Mr Tsien and banned him for life from carrying out any regulated activities, under Section 194 (1)(iv) of the SFO. Mr Tsien applied to the Securities and Futures Appeal Tribunal (“SFAT”), under Section 217 of the SFO, for a review of that decision. The appeal was successful and the SFAT replaced the life long ban with a 10 year one.
The SFC then appealed to the Court of Appeal, where one of the points raised by the SFC for decision, was the proper role and function of the SFAT on a review under Section 217 of the SFO.
Until then, the SFAT's approach had been not to interfere with a SFC ruling, unless it was plainly wrong. However, the Court of Appeal held that the SFAT's powers of review are not limited and that it could conduct a full merits review and come to its own decision. For example, where a finding of misconduct is disputed, the SFAT may hear evidence and make up its own mind. The SFAT is entitled, the Court of Appeal said, to exercise its own independent judgment on a review.
The Court of Appeal rejected the SFC's argument that the SFAT should give SFC decisions “special respect” i.e. the same level of respect which a court would give a decision of say a disciplinary tribunal of a profession, such as The Law Society. The Court of Appeal said that a review by the SFAT is a “full merits review” and the SFAT may conduct a review as if it were the original decision maker. Mr Justice Tang said: “The contention that a person's reputation or livelihood could be so seriously affected by a regulator, acting as prosecution and judge, without a genuine full merits review by an independent tribunal is so abhorrent to our system, that I reject it unhesitatingly.“
The Court cannot interfere with an SFAT decision unless it has erred in law. In this case the Court of Appeal held that it had not made any error in law. The 10 year ban imposed by it was eminently reasonable and a life ban manifestly excessive. Accordingly, the Court of Appeal dismissed the SFC's appeal and ordered it to pay Mr Tsien's costs.
This decision is important because prior to it, the SFAT's approach was not to interfere with SFC decisions, unless they were plainly wrong. The Court of Appeal has now made it clear that a SFAT's review should be a “full merits” review and may be conducted as if the SFAT was the original decision maker.
The decision will probably lead to an increased number of appeals by licensed persons against decisions made by the SFC which they consider excessive or not justified.