The Court of Appeal has granted the SFC’s appeal against an order of the court discharging injunctions obtained to prevent dissipation of assets in an on-going insider dealing investigation. This is the first time that the Hong Kong Court of Appeal has considered the SFC’s civil remedies under section 213 of the Securities and Futures Ordinance (SFO).
The interim injunction, originally granted on 16 April 2008, froze the disposal of assets of up to HK$43m based on evidence and suspicion that “C”, whose identity has been protected by the court, was involved in insider trading in respect of a Hong Kong listed company’s shares. The court later discharged the interim injunction. The SFC appealed to the Hong Kong Court of Appeal against the court’s decision to discharge the interim injunction.
The unanimous decision of the Court of Appeal to allow the SFC’s appeal is significant because it confirms that:
- SFC has statutory authority under section 213 of the SFO to apply to the court for orders to freeze assets in cases of suspected insider dealing;
- Proceedings under section 213 of the SFO are entirely free-standing, and not contingent or conditional on there being other substantive proceedings;
- The court may grant permission to serve legal proceedings on persons outside of Hong Kong, where claims are made under section 213, so as to bring them within the jurisdiction of the Hong Kong courts; and
- The court may grant orders to restore all parties to transactions to their respective former positions, where those transactions contravene the SFO.