Hong Kong SFC Argues Free Speech Is Limited in Andrew Left Case

  • SFC supports chairman’s view on freedom of speech restrictions
  • Citron lawyer says Citron founder Left wasn’t negligent

Hong Kong’s market regulator told a tribunal reviewing a case against U.S. short-seller Andrew Left that free speech rights in the city are limited for publishers of investment research, citing an earlier case against Moody’s Investors Service.

The Securities and Futures Commission claims that Left, the founder of Citron Research, “was reckless or negligent” and misled investors on June 21, 2012, with a report on Evergrande Real Estate Group Ltd., causing the company’s shares to plunge as much as 20 percent. Left, who denies the charges, cited his sources and used only information for his report that he could publicly verify, said Laurence Li, who represented Left in the hearing.

A separate tribunal chaired by Michael Hartmann in March fined Moody’s and subjected it to a public reprimand for a 2011 report it published on 61 Chinese companies. The U.S. firm appealed the judgment in April, denied any wrongdoing and argued that the SFC shouldn’t be able to regulate the content of research publications.

Moody’s freedom of expression is guarded by the Hong Kong’s Bill of Rights, the tribunal said in the March determination. “The freedom, however, is not absolute,” the panel said and the SFC can intervene when reports and commentaries are part of credit rating services, which are regulated by the SFC.

“We would respectively invite the chairman to adopt the same approach” in the case of Left, Peter Duncan, a presenting officer for the SFC, told Friday the Market Misconduct Tribunal also chaired by Hartmann. “He stepped outside the boundaries of free speech.”

Los Angeles-based Left isn’t licensed or regulated by the SFC, and Left wasn’t negligent, said Timothy Loh, another of his lawyers. Furthermore, he said, the city’s Bill of Rights should guarantee Left’s freedom of speech whatever the topic.

“For a market to have credibility, anyone who is doing proper due-diligence on a stock or industry should be allowed to make it public,” said Brett McGonegal, chief executive officer of Capital Link International. “They need to police the analyst community in a way to protect the licensing aspect, not the opinions.”

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