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Wider scope for the Securities and Futures Commission (SFC) enforcement action confirmed

15 July 2013

Market participants can expect increased use by the SFC of s213 of the Securities and Futures Ordinance to seek remedial orders in relation to market misconduct following a recent ruling of the Court of Final Appeal (Hong Kong’s highest court) in the Tiger Asia case.
The Court of Final Appeal confirmed that the Court of First Instance has the power, on the application of the SFC, to make a final finding that market misconduct had occurred and to grant final orders under s213. Some had previously thought that a pre-condition to the court having these powers was that either the Market Misconduct Tribunal (MMT) or the criminal courts would need to find that market misconduct had occurred.

This ruling also leaves foreign market participants more vulnerable to enforcement action by the SFC. A foreign participant, without a presence in Hong Kong, accused of market misconduct, would not be vulnerable to criminal proceedings and, although MMT proceedings could be brought, these proceedings are regarded as relatively slow and cumbersome. The confirmation that s213 is available means that the SFC has a further tool that may be applied against foreign participants that operate in a far more streamlined fashion.

Contributed by Kevin Kee

The SFC is likely to rely increasingly on s213, as an application under that section is likely to result in final orders more quickly than if the matter needed first to be determined by the MMT or the criminal courts.