The Court of Final Appeal (CFA) today dismissed the appeal by Mr Eric Lee Kwok Wa, a solicitor, and his two sisters, Ms Patsy Lee Siu Ying and Ms Stella Lee Siu Fan, against the decision of the Court of First Instance (CFI) which had been upheld by the Court of Appeal (CA).
In December 2010, the SFC commenced civil proceedings under section 213 of the Securities and Futures Ordinance (SFO) in the CFI against Lee, his two sisters and another solicitor Ms Betty Young Bik Fung for fraud/deception in transactions involving the shares of Taiwan-listed Hsinchu International Bank Company Limited (Hsinchu) and for insider dealing in the shares of Asia Satellite Telecommunications Holdings Limited (AsiaSat).
In January 2016, the CFI found that Young, Lee and his sister Patsy Lee had contravened section 300 of the SFO by engaging in fraud or deception in transactions involving Hsinchu shares and section 291 of the SFO by insider dealing in AsiaSat shares and granted orders under section 213 against all four defendants (Notes 1 & 2).
In February 2016 the four defendants appealed against the CFI’s decision to the CA. Young withdrew her appeal before the CA heard the case. In November 2017, the CA dismissed the appeal (Note 3).
In a judgment handed down today, the CFA unanimously dismissed the appeal of Lee and his two sisters and held that:
- section 300 of the SFO is directed at fraudulent/deceptive conduct perpetrated in connection with or in relation to transactions involving securities;
- the transactions involving securities which section 300 of the SFO targets cover a variety of activities including the steps that are taken with a view to profit, or avoid loss, by the misuse of inside information, such as the opening of a securities trading account and the giving of trading instructions to intermediaries;
- insider dealing is a species of fraud and a fraud on the public. It is not a victimless crime;
- where there is conduct which answers the definition of an insider dealing offence in the SFO, the perpetrator(s) should be prosecuted for the relevant, specific insider dealing offence under the SFO. It should not be prosecuted for an offence under section 300 of the SFO; and
- although Hsinchu shares were not Hong Kong-listed securities, the fraudulent or deceptive conduct of Young, Lee and his two sisters in respect of their dealings in Hsinchu shares can properly be dealt with under section 300.
The SFC’s Executive Director of Enforcement, Mr Thomas Atkinson, said: “We are pleased with the CFA’s judgement clarifying the interpretation of section 300 of the SFO. The SFC will continue to robustly pursue enforcement actions where the misuse of inside information occurs in Hong Kong even if the actual execution of transaction takes place on overseas exchanges. We also take this opportunity to remind market participants including professional parties not to misuse inside information.”
Notes:
- Hsinchu Bank was a listed company on the Stock Exchange of Taiwan in September 2006 and Asia Satellite was a listed company on the Stock Exchange of Hong Kong in February 2007.
- Please see the SFC’s press release dated 15 January 2016.
- Please see the SFC’s press release dated 9 November 2017.
