I recently attended a seminar presented by Laurence Li, who is currently a Barrister-at-Law and the ex-SFC director in Corporate Finance Division. He talked about an interesting topic: the conflict between HK's securities regulatory regime and protection of human rights. Over the past years, many challenges to SFC's enforcement action on human rights grounds were not successful until the recent legal case of Koon Wing Yee. Laurence Li published an article about this case in July 2007's "Hong Kong Lawyer". Here I just give a summary.
As the public knows, Koon Wing Yee was the chairman of Easyknit International Holdings and Easy Concepts International Holdings. There had been heavy turnover and substantial price increases in both stocks in the few days before their suspension on 31 Jan 2000. The companies announced that a third party was taking over Easy Concepts on 18 Feb 2000. Upon that announcement, the share prices of them soared by several times.
SFC commenced an investigation into suspected insider dealing and exercised its statutory powers by compelling Koon and others to answer questions during the interviews. Then Financial Secretary directed the Insider Dealing Tribunal (IDT) to initiate the proceedings. IDT admitted SFC's interview records into evidence. In 2005, IDT found that Koon had engaged in insider dealing (including "tipping") and thus imposed heavy penalties (about $48m) on him. Koon was also disqualified to act as a director or take part in the management of any company for 5 years.
Koon appealed to the Court of Appeal. The Court held that IDT proceedings involve the determination of a criminal charge within the meaning of the Bill of Rights Ordinance. That means:
- Evidence obtained by SFC by compulsion from a suspected insider dealer is inadmissible in IDT proceedings.
- IDT can't require a suspected insider dealer to appear before it to give evidence.
- IDT shall apply the criminal standard of proof (i.e. beyond reasonable doubt).
After the commencement of SFO in Apr 2003, SFC can establish the Market Misconduct Tribunal (MMT) to replace the old IDT. MMT can cover market misconducts other than insider dealing, like false trading, price rigging, disclosure of false or misleading information. MMT has the advantages of requiring less restrictive rules of evidence and lower standard of proof. However, the Koon Wing Yee case indicates that MMT's sanction powers are subject to human rights challenges. As Laurence Li said: for the dog to bite civilly, it cannot have teeth.
Recently I went to a seminar organised by ACCA. The speaker talked about the penalty provisions of the IRO that might contravene international human rights conventions. My $200 was not wasted. In addtion to the refreshment, the seminar was good and interesting. Although I have none interest in tax law, the discussion was food for thought.
ReplyDeleteWhile a presumed bad guy should be given the right to defend himself; "human rights" has give them protection especially those wealth ones. How to strike a balance is the thing we have to look at.