Following the Court of Appeal's confirmation in May 2009 of the SFC's powers under section 213 of the Securities and Futures Ordinance (SFO), the regulator has successfully obtained a number of injunctions to prevent the dissipation of assets in on-going insider dealing and market manipulation investigations.
The landmark Court of Appeal decision confirmed:
- the SFC has statutory authority to apply to the court to freeze assets in the cases of suspected insider dealing;
- proceedings under section 213 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 an order to restore all the parties to transactions to their respective former positions where those transactions contravene the SFO. In other words, an order under section 213 may provide for compensation.
Referring to the Court of Appeal's decision, the SFC comments, "This is an important decision that will assist the SFC in tackling market misconduct even if the persons or assets involved are outside Hong Kong. It also extends the SFC's enforcement reach to offshore parties who take illegal profits from Hong Kong's markets".
The August issue of our Private Funds Newsletter stated that the SFC has successfully sought injunctive relief under section 213 against an overseas-operated fund. We would like to clarify that although the originating summons seeking the freezing order is dated 5 August 2009, as at publication the hearing for this application has not taken place.