Hong Kong's Securities And Futures Commission: Court Rules On Appeals Over Unlicensed Activities

The Court of First Instance has dismissed an appeal of C.L. Management Services Limited (C.L. Management) and its sole owner and director Ms Clarea Au Suet Ming against their convictions for holding out as providing advisory services on corporate finance without a licence. 

The Court also has dismissed an appeal of the Securities and Futures Commission (SFC) on a point of law against the decision of the Eastern Magistracy to acquit C.L. Management and Au of the offence of carrying on a business in advising on corporate finance (Notes 1 & 2).

On 29 April 2014, C.L. Management and Au were convicted on three counts of holding out charges and acquitted of one count of carrying on a business in advising on corporate finance without a licence at the Eastern Magistracy after trial.  They were fined a total of $1.5 million.  Au was also sentenced to a total of six months’ imprisonment suspended for 18 months.  They appealed against the convictions.  The SFC also lodged an appeal against the decision of the Eastern Magistracy in acquitting them.  Both cases were heard before the Hon Madam Justice M. Poon of the Court of First Instance on 28 April 2016 (Note 3).

Madam Justice M. Poon dismissed both appeals.  In dismissing the appeal of C.L. Management and Au, the Court found that there are no merits in any of the grounds advanced on behalf of them.  In particular, the Court rejected their argument the offence of carrying on a business of regulated activity without a licence requires proof of a mental element.

In relation to the appeal of the SFC, the Court found that the Magistrate did not make any error in law.  On the basis of the evidence, the Magistrate was entitled to make the factual finding to acquit C.L. Management and Au of the offence of carrying on a business of advising on corporate finance without a licence.  

Notes:

1. Under the Securities and Futures Ordinance (SFO), advising on corporate finance is a regulated activity which requires a Type 6 (Advising on Corporate Finance) licence from the SFC.
2. Under section 114(1)(a) and 114(8) of the SFO, a person commits an offence when the person, without reasonable excuse, carries/carried on a business in a regulated activity without a licence.
3. Please see SFC’s press release dated 19 May 2014.
4. Please see the judgments (HCMA 288/2015 and HCMA 382/2014) which are available on the Judiciary’s website (www.judiciary.gov.hk).