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Jake Van Der Kamp

'This case is somewhat out of the ordinary in that the action of the SFC has been taken upon the basis of that which has happened in the civil courts of Hong Kong, and absent independent investigation on the part of the SFC'

Securities and Futures Appeals Tribunal,

June 30

MY COLLEAGUE JANE MOIR reviewed the case in question here on Friday in this section of the newspaper but there is another angle of it that needs highlighting, one that does not put the  Securities and Futures Commission in a good light.

Briefly stated, a client of financial  adviser Andrew Barber sued him for steering her into a risky geared investment that went sour and won the case on the basis that he had not sufficiently acquainted her with the risk.

Later events suggested that he had in fact warned her adequately but Mr Barber chose to represent himself in court and did not do it as well as he might have done. He appealed but the damage to him in the original proceedings was too great and he lost the appeal.

Meanwhile the SFC decided to impose a  six-month suspension on him for his conduct in the case. It held off doing so when he notified it that he was appealing against the court decision but imposed the suspension when he lost the appeal.

He then appealed against the suspension and, after hearing more evidence, the SFC Appeals Tribunal came to a majority decision to reduce the suspension to one month.

Now go back to that excerpt at the beginning from the Appeals Tribunal determination. The SFC never conducted its own investigation of the affair. It simply relied on the court decision, nothing more.

The difficulty here is that a decision in the civil courts is made on the basis of the balance probabilities, not on the basis of the much higher standard in criminal courts of proof beyond a reasonable doubt.

There is some question about the required standard of proof in SFC disciplinary cases but it is generally accepted that it has to be more than the balance of probabilities and that the more serious the charge, the stronger the evidence should be.

Thus it seems odd that the SFC should have ordered a  six-month suspension, a penalty that could have serious implications for Mr Barber's career, when it never investigated the matter at all and relied on a lower standard of proof than fitted the circumstances. A civil court hearing is far from the same thing as an SFC disciplinary investigation.

I am not the only person to think so. The Appeals Tribunal in its findings itself stated that it was 'unable to grasp' how the findings of a civil court could be determinative of an issue not the subject of civil action. Here follows an excerpt from one of several relevant paragraphs: '... the result of that earlier litigation cannot be decisive of the present application, and in determining the case now before it this Tribunal is  not  bound by the findings or conclusions of the learned Deputy Judge in the Court of First Instance.'

On this basis the Appeals Tribunal decided to rehear the totality of the evidence in the case and uncovered evidence that put Mr Barber's conduct in a much more favourable light.

It is not my part to speculate on why it then still ordered a one-month suspension of Mr Barber but suffice it to say that its members were 'firmly divided' and the minority view was 'most strongly of the opinion' that he was not in breach of required conduct.

Let us get back to the main point, however. It was only last year that the SFC was slapped on the wrist - 'does not represent the SFC's finest hour' - in a case in which it withdrew findings on which it had ordered a six-month suspension once that case went to the Appeals Tribunal.

You would think they would have learned but apparently not. What we have here is indications of a very lackadaisical approach to slapping penalties on investment practitioners. Let me stress the point again. It was done in the Andrew Barber case with no investigation.

At the very least, the successor to SFC chairman Andrew Sheng, who is now stepping down, should make it his first order of business to ensure that this sort of thing is not done again in the future.

More than that, it reinforces my long held view that the SFC, supposedly one of the guardians of the rule of law in Hong Kong, is an example of regulation gone mad and has itself become an insidious threat to the rule of law.

We desperately need that appointment of an outside chairman to keep these people in line.



SFC's kangaroo court approach an insidious threat to rule of law