Financial markets regulator fights calls to strip it of power to prosecute

Rift between SFC and Department of Justice revealed as regulator rejects suggestion it should be stripped of legal right to prosecute

PUBLISHED : Tuesday, 20 August, 2013, 12:00am
UPDATED : Tuesday, 20 August, 2013, 5:20am

The Securities and Futures Commission has defended its right to prosecute financial wrongdoers, but brokers are supporting a call to strip it of those powers.

Kevin Zervos, the outgoing director of public prosecutions, said in a report released yesterday that law enforcement agencies should not carry the responsibility for prosecuting because it may conflict with their role as investigators and regulators.

Zervos said the SFC's right to prosecute on its own - which it has in certain market-related cases before magistrates - should be transferred to the prosecution service, as the SFC is "a regulatory and investigatory agency with extensive coercive powers". Leaving prosecutions to the Department of Justice would provide a check on its powers.

The SFC disagreed.

"The SFC firmly believes it has adhered to norms that have been in place for many years in relation to criminal prosecutions and which are embedded in the law," a spokesman said yesterday. "The SFC has been conducting summary prosecutions without any concerns as to the appropriateness of doing so since 1989.

"The Financial Conduct Authority in the UK is empowered to conduct both indictable and summary prosecutions in its name. The Australian Securities and Investments Commission in Australia is also able to conduct its own criminal prosecutions."

Zervos, who steps down next month, revealed tension has arisen between the SFC and the prosecutions division of the Department of Justice.

The SFC spokesman said the regulator "looked forward to working actively with the new DPP to safeguard the integrity of Hong Kong's financial market".

The SFC would not commence any market misconduct prosecution summarily under the Securities and Futures Ordinance in the Magistrate's Court unless the director of public prosecutions had first examined the case and had had the opportunity to decide whether to prosecute it on indictment on its own.

"All criminal cases investigated and instigated by the SFC are determined by an independent judge following due process, whether a case is pursued on indictment or summarily. The SFC can never be a judge in its own cause," the SFC spokesman said.

Financial services sector legislator Christopher Cheung Wah-fung supported Zervos' call.

"The SFC is too powerful as it is the investigator and then it decides whether to prosecute brokers and the others," Cheung said. "The SFC should work like the police, in that after its investigation, it should let the Department of Justice decide whether to prosecute anyone."

Jojo Choy Sze-chung, vice-chairman of National Resources Securities, said: "It would be better to let a third party act as prosecutor."