On 10 May 2013, the Court of Final Appeal (CFA) handed down its Reasons for Judgment in Securities and Futures Commission v Tiger Asia Management LLC and Others (FACV Nos 10, 11, 12 and 13 of 2012). The appeal by Tiger Asia Management LLC, a hedge fund, and three of its officers (the Tiger Asia parties) was unanimously dismissed by the CFA. Hong Kong's highest court held that the Court of First Instance has jurisdiction to make expedited final orders under Section 213 of the Securities & Futures Ordinance (SFO) on the basis of a contravention of the insider dealing provision under the SFO, without a prior determination by the Market Misconduct Tribunal (MMT) or a criminal court.

Background to the Tiger Asia case

In August 2009, the Securities and Futures Commission (SFC) applied to the Court of First Instance seeking relief under Section 213 of the SFO. Section 213(2) of the SFO gives the Court of First Instance the power to make various orders, including: injunctions (which includes freezing injunctions); orders to direct a person to take steps to restore the positions of the parties to any transaction; orders to appoint an administrator of property; and/ or orders to declare contracts void. In this case, the SFC alleged that in December 2008 and January 2009, the Tiger Asia parties entered into transactions which contravened the insider dealing provision under the SFO. However, before the Court of First Instance determined the allegations by the SFC, the Tiger Asia parties applied to strike out the SFC's case. They did so on the basis that, in the absence of a prior determination by the MMT or a criminal court of there having been a contravention of the insider dealing provision, the Court of First Instance did not have jurisdiction in an application under Section 213 of the SFO to determine whether there is such contravention and make final orders.

At first instance, the Court of First Instance agreed with the argument of the Tiger Asia parties and struck out the SFC's application. However, in March 2012 the Court of First Instance's decision was reversed by the Court of Appeal. The Court of Appeal held that the Court of First Instance has the jurisdiction to determine whether there has been a contravention of market misconduct and make orders pursuant to Section 213 in the absence of a criminal conviction or adverse finding by the MMT.

The Court of Appeal found the purpose of the MMT and the criminal courts was to deal with the conduct of the wrongdoer. On the other hand, Section 213 was remedial in nature and more concerned with handling the consequences of wrongdoing. In contrast to the mutually exclusive jurisdictions of the MMT and criminal courts, the Court of Appeal held that Section 213 are stand alone proceedings and intended to assist the SFC to protect investors and provide remedies for contraventions of market misconduct.

Decision of the Court of Final Appeal

Lord Hoffmannn, who delivered the judgment of the CFA, entirely agreed with the reasoning and conclusion of the Court of Appeal. The CFA held that the words 'where a person has contravened any of the relevant provisions’ in Section 213(1) of the SFO, which is the precondition for the Court of First Instance to make the orders in Section 213(2) of the SFO, should not be construed to mean 'where a person has been found by a criminal court or the MMT to have contravened any of the relevant provisions’. Criminal proceedings and the MMT are not jointly exhaustive of the procedures by which market misconduct may be determined. The CFA also held that Section 213 of the SFO serves to provide remedies for the benefit of parties involved in the impugned transactions and in proceedings under Section 213 of the SFO, the SFC acts as a protector of the collective interests of the persons dealing in the market who have been injured by market misconduct.