Investigators in turf war over HKMEx investigation

Police believe watchdog should 'back off' to avoid any conflict of interest in investigating the commodities-trading platform's collapse

PUBLISHED : Wednesday, 29 May, 2013, 12:00am
UPDATED : Wednesday, 29 May, 2013, 5:37am

Police probing the collapse of the Hong Kong Mercantile Exchange (HKMEx) are concerned that their criminal investigation could be hampered by the Securities and Futures Commission's (SFC) own inquiry into the failed trading platform.

Sources with knowledge of the situation have told the South China Morning Post that the police have sent "written concerns" to the SFC after they experienced difficulties with the probe. Details are unclear but it is understood that the force is keen for the entire investigation to be left to its officers.

The HKMEx, headed by Barry Cheung Chun-yuen, a key adviser to Chief Executive Leung Chun-ying, collapsed earlier this month after Cheung handed back its licence to the SFC amid poor trading and question marks over its financial position.

The SFC believes its investigation - probing possible offences under the Securities and Futures Ordinance - is justified because the police are looking into other aspects of the case. Two sources familiar with the SFC said it would focus on whether the HKMEx had breached the ordinance and whether executives of the company had made false statements to the regulator.

The source said the SFC could decide what information it needed to share and when this should be handed over to the police. "If the information is more relevant to the SFC investigation, it makes sense for the commission to keep the information."

Another source said similar cases had happened before. In 2003, for example, the collapse of orchid grower Euro-Asia Agricultural Holdings was under simultaneous investigation by both the SFC and the police.

A source close to the police investigation said: "The situation as it stands could mean the SFC has been a victim in all of this, and/or people within the SFC require to be looked at by the police. Either way, the SFC forms a key component of the investigation.

"There's a definite feeling that they should back off and leave the investigating to the police as anything they uncover could be likely to overlap with the criminal investigation."

Another source with knowledge of the situation said: "This is a sensitive disagreement so officially no one wants to acknowledge it. But there is no doubt the police would be happier if they were in complete charge of all aspects of the investigation, and have made that clear in written correspondence [to the SFC]."

Yesterday the Harrow International School of Hong Kong confirmed that Cheung had resigned as a director of the school, chairman of its board of governors and director of the school's foundation.

So far, police have arrested five people in connection with the case, three of whom have been charged with possessing false instruments with intent and who have been remanded in custody until their next court appearance, on July 19.

The other two, a 60-year-old man and a mainland woman, aged 35, were released on bail and must report to police next month.

Barry Cheung and three other senior executives of the failed exchange have also been questioned by the police.