Hong Kong’s securities regulator, whose attempt to ban New York-based hedge fund Tiger Asia Management LLC last year from trading was blocked by a court, said it should have the right to redress investors.
“If private individuals can seek civil remedies, why does the SFC have to wait?” Benjamin Yu, a lawyer representing the Securities and Futures Commission, told Hong Kong’s Court of Appeal yesterday.
The regulator is trying to overturn a court ruling that it lacks the power to unwind Tiger Asia’s transactions in the market and ban the hedge fund and employees from trading in Hong Kong before proving insider trading allegations in a tribunal or criminal court.
The SFC alleges the hedge fund traded on inside information from bankers arranging placements of China Construction Bank Corp. and Bank of China Ltd. shares in 2008 and 2009, pocketing HK$38.5 million ($4.9 million). Tiger Asia, which has no employees and physical presence in Hong Kong, denied the allegations in an Oct. 12, 2010 letter to investors.
The legal battle, which both the SFC and Tiger Asia’s founder Bill Hwang have pledged to take to Hong Kong’s top court, will determine whether the agency can sue independently for relief without working through government departments to bring a criminal case or civil inquiry. Tiger Asia’s lawyers argue the regulator can’t use a provision for freezing assets to bring its own lawsuit against them.
“It was never intended that the SFC should have an unchecked ability to seek a contravention of market misconduct,” Charles Sussex, representing Tiger Asia and its officers, argued before the court yesterday.
The regulator has also invoked the same law in cases against Hontex International Holdings Co., as well as former executives of China Forestry Holdings Ltd. (930) and Gome Electrical Appliance Holding Ltd.
Criminal proceedings or a civil tribunal inquiry “are not preconditions to investors taking action,” said Judge Robert Tang from the bench yesterday. “If small investors don’t have to wait, why should the SFC have to wait?”
The three appeals court judges reserved their judgment and will hand down their decision at a later date.
The case is Securities and Futures Commission and Tiger Asia Management LLC, Sung Kook Hwang Bill, Raymond Park, William Tomita, CACV178/2011 in the Hong Kong Court of Appeal.
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