• Wed
  • Aug 20, 2014
  • Updated: 10:02pm

Rethink role of Market Misconduct Tribunal

PUBLISHED : Tuesday, 07 April, 2009, 12:00am
UPDATED : Tuesday, 07 April, 2009, 12:00am

With the first two insider traders sentenced to jail terms last week, perhaps it is time for the government to rethink the role of the almost-forgotten Market Misconduct Tribunal.

Before 2003, insider trading was not treated as a criminal offence, and the Securities and Futures Commission could only refer cases to the Insider Dealing Tribunal. This tribunal was a bit of a toothless tiger, in that in could only ban people from serving as directors for a couple of years and order repayment of up to three times the profit made from their wrongdoing.

The Securities and Futures Ordinance raised the stakes in 2003, making insider dealing a criminal offence so that people found guilty could face 10 years in jail and a HK$10 million fine.

The Insider Dealing Tribunal was also renamed the Market Misconduct Tribunal, chaired by a judge and two lay members, and could accept a lesser standard of evidence than a criminal case.

Six years on, it is time to measure the effectiveness of these two routes to dealing with white collar crime - should the SFC place suspected insider dealers before the criminal courts or should they be referred to the Market Misconduct Tribunal?

The answer seems quite simple. With the first insider dealers behind bars, anyone tempted to trade inside information will now think twice. The SFC brought five criminal prosecutions last year - a pretty good result.

The prosecutions also have alerted the public that insider dealing is a serious crime.

So what has happened to the Market Misconduct Tribunal? Well, until now it has only publicly announced the conclusion of one market misconduct case dating to June 2003. The penalty in that case was less than HK$1 million.

The tribunal had good intentions as evidence of white collar crime such as insider dealing, short selling and market manipulation is not always easy to collect. However, it seems to have several flaws, including lack of firepower.

Some legal experts say the tribunal's structure resembles the Insider Dealing Tribunal. Hearings are time consuming and the final reports uninteresting. Some cases conducted by the Insider Dealing Tribunal took years to complete.

The conclusion reports written by both tribunals were and are too long, the legal experts say.

Given enough evidence, a criminal prosecution is the better option for handling market malpractice. If it does not have enough evidence, it can choose to settle.

Two such settlements have occurred between the SFC and two brokerages over the Lehman Brothers minibonds sold to investors. They happened just six months after Lehman's collapse.

The Market Misconduct Tribunal does not seem to be working as intended and the government needs to take a look at its role and make changes.

Architect's perspective

In this week's podcast and video report, Ronald Lu, immediate past president of the Hong Kong Institute of Architects, is our guest.

Mr Lu has more than 35 years in the business and has designed residential schemes, hotels and industrial and commercial buildings. He will share his views on the evolution of architects in the city and his outlook for the industry.

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