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Hontex Refund Decision Delayed, Judge Considers SFC’s Authority

A Hong Kong judge delayed hearing the Securities and Futures Commission’s application to refund investors in Hontex International Holdings Co., citing a related case where he is considering the regulator’s reach.

Judge Jonathan Harris of the Court of First Instance adjourned the case today until July 22 after saying he may block the regulator’s attempt to unwind alleged insider dealing transactions made by New York-based hedge fund Tiger Asia Management LLC in the absence of a civil or criminal trial.

The judge’s decision on Tiger, which he said might be handed down in the “next few days,” would put in doubt the SFC’s authority to restore Hontex’s IPO funds, part of which have been frozen, to the company’s current shareholders without bringing civil or criminal proceedings.

Hontex shares were suspended 14 months ago after the SFC alleged the company disclosed materially false or misleading information in its prospectus. The company’s audit committee admitted last year its prospectus was unreliable and said it would look to compensate investors.

Simon Westbrook, a lawyer for the SFC, said the people involved in the Hontex case are in Taiwan or mainland China.

“Unless they have much less sense than we realize, I don’t think they’re planning any shopping trips to Hong Kong anytime soon,” Westbrook said.

The SFC alleged Tiger Asia engaged in insider trading, and is seeking a court order to freeze assets valued at HK$38.5 million ($4.9 million) held by Tiger Asia, Hwang and officers Raymond Park and William Tomita. The regulator has asked for an order to ban the fund from trading in Hong Kong securities.

All of Tiger Asia’s employees are based in New York, according to the SFC.

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