Insider dealer or unknowing participant: HK court of appeal confirms SFC’s broad powers to pursue insider dealing and fraud offences

Abstract

Purpose

The purpose of this paper is to provide an overview of a recent Court of Appeal case regarding the Securities and Futures Commission’s (SFC’s) powers to seek remedial orders with respect to market misconduct.

Design/methodology/approach

This paper summarises the decision of the Court of First Instance and the judgement on appeal to the Court of Appeal, and the practical implications for financial institutions in preventing and detecting the disclosure and use of confidential material price-sensitive information.

Findings

The Court of Appeal’s decision reconfirms the extensive powers of the SFC to pursue conduct involving insider dealing, including where this involves trading in overseas-listed shares and a substantial measure of the elements of the offence that occurred in Hong Kong. The decision also affirms the breadth of the SFC’s powers to seek remedial orders against anyone involved in such offences, even where the person is unaware of the particular contravention.

Practical implications

Organisations should ensure they have adequate systems and controls established to prevent and detect the disclosure or use by employees of confidential material price-sensitive information, including strong information barriers. Insider dealing policies should also expressly cover both Hong Kong and overseas-listed securities, and employees should be given regular training to ensure that they are aware of their obligations with respect to such inside information.

Originality/value

This paper presents a summary that assesses developments in the case of law regarding the SFC’s powers to pursue remedial orders by experienced contentious regulatory lawyers.

Citation

Hughes, G., Comber, J. and Austin, E. (2018), "Insider dealer or unknowing participant: HK court of appeal confirms SFC’s broad powers to pursue insider dealing and fraud offences", Journal of Investment Compliance, Vol. 19 No. 2, pp. 38-41. https://doi.org/10.1108/JOIC-04-2018-0022