'The Insider Dealing Tribunal's practice of forcing people to give incriminating evidence against themselves was unconstitutional, the Court of Appeal said, in a ruling which could affect other cases the tribunal has dealt with or is still hearing.'
SCMP, May 31
With all the things that happen in this town to make you worry that we are sliding down the slippery slope, and there is plenty to occasion that worry, every now and then something comes up to restore your faith in Hong Kong.
Here we have an example of it. The Court of Appeal has ruled that constitutional rights are constitutional rights and the Securities and Futures Commission has no business breaching them just to suit its own convenience on the flimsy argument that it would otherwise find convictions for insider dealing harder to obtain.
Hurrah! I've made that point on many occasions in this column but I always thought that the SFC had got away with this defiance of our rights and I wasn't aware that there was a court ruling on it still to come. My faith in our judiciary has been confirmed. The rule of law comes first, even for highly self-esteemed regulators.
Unfortunately, there is also an element here of closing the stable door after the horse has bolted. With new legislation four years ago, market misconduct tribunals have replaced insider dealing tribunals.
These new tribunals can investigate more than insider dealing alone but their punitive powers are fewer. They can ban people from directorships and make them disgorge ill-gotten profits but they cannot impose heavy fines on them.
They may thus not fall under this Court of Appeal ruling, which essentially said that if the SFC wants to punish people with criminal-style penalties, it will have to do so with convictions obtained through criminal court rules of evidence.
It ought to strike you, however, that there is something odd here and indeed there is. Four years after the new legislation was passed, there are still cases being heard under the old insider dealing tribunal system. I don't know how many are pending, but it is noteworthy that the case on which the Court of Appeal ruled dates back to 2001.
Now this is all wrong not only because justice is best done when it is swiftly done and not only because it suggests huge inefficiency in the whole system of proceedings against insider dealers.
It is most of all grossly unfair to people who have been accused of insider dealing and find their lives ground down for many years without being able to resolve the accusations, particularly if they are then found innocent.
I know a few people who have suffered through this before being cleared. It is one of the cruelest punishments any court, or in this case a quasi-judicial government agency, can inflict. I sometimes wonder if the SFC does it deliberately when it does not have the evidence it needs but still wants its pound of flesh from its victims.
But with the Court of Appeal having made it clear that the SFC was under a huge misapprehension about its powers in insider dealing cases, I think this is an appropriate time to drop all the ones still pending under the old system and work under the new 2004 rules alone.
I fully appreciate your objections, however. That would just let some big crooks off the hook, you say. What are we going to do to protect the investing public from insider dealers if we let a number of them get off scot-free this way?
In answer to this, I must suggest first of all that we not fall prey to the SFC's publicity campaigns about the nature of the evildoers out there on the market.
I don't recall anyone who lost life or limb or who even suffered bodily injury as a result of the doings of insider dealers. I have never seen anyone held up at gunpoint by them. Insider dealing is a very modern idea of crime. Only a matter of decades ago, it was no crime at all, just sharp practice.
I do not say I approve of it but I do say that it is always prevalent in stock markets, that almost all investors prize inside information highly even if they will not say so publicly, that regulators hugely overestimate the damage it does to markets, that their efforts to rid markets of it are always doomed and that trying to do it by trashing constitutional rights is a worse offence.
If you want to protect yourself from insider dealers (and there are worse things to protect yourself from), then put your money with a fund manager rather than investing it directly or restrain yourself from dealing too often. Insider dealers can only get you when you deal. You're safe from them when your stock stays in the safe, too.
And now please join me in congratulating our Court of Appeal for protecting our civil liberties from a greater threat than any amount of inside information could ever be.