Yesterday the Hong Kong Court of Final Appeal, led by Chief Justice Ma, ruled in favour of the Securities and Futures Commission (“SFC”) in the long running and high-profile Tiger Asia Management LLC (“Tiger Asia”) matter. In doing so, the Court of Final Appeal firmly put beyond doubt the broad scope of section 213 of the Securities and Futures Ordinance (“SFO”), to allow the SFC to combat market misconduct and protect investors.

The Court of Final Appeal’s decision means that the Court of Appeal decision handed down in February 2012 stands. That decision held that the SFC is entitled to pursue alleged wrongdoers through section 213 as a free-standing provision without the need for proceedings before the Market Misconduct Tribunal or relevant criminal court, stands. Please see our previous alert on section 213 here.

To re-cap, as a result of an SFC investigation into allegations of insider dealing by Tiger Asia, the SFC sought orders under section 213 of the SFO to freeze Tiger Asia’s assets, prohibit Tiger Asia from trading in derivatives and securities in Hong Kong in like situations and unwind the alleged insider dealing transactions.

Tiger Asia made submissions on the following two points before the Court of Final Appeal:

  1. Section 213 was not intended to be a free-standing provision and can only be used in conjunction with Market Misconduct Tribunal proceedings or criminal proceedings; and
  2. The use of section 213 as a free-standing provision is unconstitutional as it allows the SFC to side-step not only the fundamental rights afforded by the Hong Kong Bill of Rights but also the legislative intent behind the already existing avenues under the SFO when pursuing insider dealing.

The Court of Final Appeal dismissed the appeal upon completion of Tiger Asia’s submissions and did not hear submissions from the SFC. The reasons for the Court of Appeal’s decision are to be handed down at a later date at which time we will provide a detailed analysis.