• Sat
  • Jul 12, 2014
  • Updated: 11:09am

Prosecutor, jury and judge in one agency metes out 'justice'

PUBLISHED : Sunday, 14 November, 2010, 12:00am
UPDATED : Sunday, 14 November, 2010, 12:00am

The Securities and Futures Commission (SFC) has issued a reprimand to Mr Mok Kee Tong, a licensed representative of Lehin Securities Limited, and fined him $160,000 for illegal short selling

SFC press release

November 4

Yes, time to have a go at the SFC again and if you have noted that I do it often in this column, there is a reason. The SFC combines prosecutor, jury and judge into one agency with greater powers than any other arm of the law, and when you dispute its findings you have to go to its own tame appeal court.

This, in my view, makes it one of the biggest threats to civil liberties in Hong Kong.

What happened in the case cited above is that Mr Mok was earlier convicted at the Eastern Magistracy of illegal short selling, a heinous offence with blood and severed limbs scattered at the scene of the crime, and was fined HK$54,000.

But the SFC's magic profits calculator said he made at least HK$214,000 from this caper. So they took 214,000 less 54,000, pressed the equals button and the display showed a result of 160,000, which they then shoved at him as an extra fine after the judge had already finished with him.

We shall leave as a mystery how the SFC always manages to figure out the exact profit that financial miscreants make from their misdeeds. Could I have a calculator like that for Christmas, please?

But we shall leave it alone because the big question is, of course, how a law enforcement agency can take someone to court for a crime and, after the judge has passed sentence, decide that the sentence is not severe enough and raise it without any further reference to the judge. This question is easily answered. The SFC can do it because the law says it can.

Yes, and in China at present a man sits in jail on a two-and-a-half year sentence for causing trouble by complaining about tainted baby milk. He is undoubtedly guilty. He complained. All laws are good laws, are they? Hmmm ...

But then the argument you get is that if a lawyer is found guilty of a crime, the Law Society can impose an additional penalty on him for breaking its disciplinary codes. This is over and above the sentence the judge imposes. All lawyers accept this as fair.

Yes, but law is a profession. Dealing in the stock market is not. Lawyers who fall below the conduct expected of them taint their profession. Punters who make money over the grey edge of the law attract other punters who want to know how they did it. There is no standing of colleagues to protect. The analogy simply does not apply.

If it were made to apply, however, then we would need a Chartered Institute of Investors or a Punters' Society to constitute this new disciplinary body. It would be punters themselves who decide whether punting was besmirched and whether the offender ought to be punished, praised more likely.

Instead we have a government agency in which you are unlikely to find real investment experience above the level of the junior records clerk. The investigation and enforcement divisions are mostly staffed by lawyers and accountants who don't do things like that and who prefer the perks and guaranteed income of the public trough to a real job in finance.

Yet they have such a magnified opinion of their competence in financial affairs that they think nothing of first bringing a charge against someone they have identified as offending against their hugely complicated rule book, then taking up the jury's role to decide whether he is guilty and then turning judge to determine the penalty, all within one agency.

And when they do take it to a court of law and don't like what the judge rules, they just top it up with their own sentence. 'High-handed' does not come close to describing it.

Here are two things to bear in mind about this process if you are ever snared in it. The SFC can compel you to give evidence (what happened to the right to silence?) but cannot then use it in court in a criminal case. It can, however, use it as evidence for its own proceedings to hit you with a big fine and wipe out your career. Be warned.

Secondly, any appeal you make goes first to the Securities and Futures Appeal Tribunal, which likes to take the view that professional regulators know more about their job than a High Court judge and two members of the public do. Unless there has been a truly scandalous miscarriage of justice, your odds are not good. That's why I call it 'tame'. Be warned.

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