The Court of Final Appeal made a landmark ruling yesterday, upholding the Hong Kong regulator's right to seek compensation from United States fund house Tiger Asia Management over its insider dealings in the city.
SCMP, May 1
Let's be a little careful here, my dear colleagues, about assuming that people have committed crimes when they have not even been tried for them.
As even the Securities and Futures Commission, now crowing over this Court of Final Appeal decision, must concede, Tiger Asia has not been convicted of insider dealing, nor even brought to trial for it.
The question is whether section 213 of the Securities and Futures Ordinance empowers the SFC, through a court order, to seize the assets of someone who it thinks may have committed insider dealing but who has not been convicted of it and may never be.
The ordinance (I hesitate to disgrace the word "law" by calling it such) says the SFC does not need a conviction in a proper court of law or even in one of its own kangaroo courts (market misconduct tribunals) to get a seizure order. What is required is only a declaration to the Court of First Instance that it "appears" to the SFC that an offence "has occurred, is occurring or may occur".
When the SFC tried to pull this fast one off in the Tiger Asia case, it was told by the Court of First Instance to take a hike. People have some rights in a jurisdiction that supposedly observes the rule of law, the court said in so many words. If you want a court seizure, you get a court conviction first.
We're appealing, said the SFC in instant response (and a fit of pique). The ordinance says we can do it, so there. We don't need a conviction.
And a Court of Appeal judge agreed. As the SFC quoted him in its press release on this appeal decision, "section 213 'provides valuable tools to the commission to protect the investing public, which is an important objective of the [ordinance] …' and '… much needed ammunition to the commission to protect investors'".
We have some curious ideas here. Catching thieves is an important objective of the police in their mission to protect the public, and waterboarding suspects could prove a valuable tool in achieving this end. Yet in civilised society we don't allow it. Some things are more important than valuable tools.
Likewise the much-needed ammunition. If the SFC truly needs more ammunition (which it doesn't), it might find that dum-dum explosive bullets have a wonderful deterrent effect on insider dealers.
In law, however (as opposed to certain ordinances), the effectiveness of ammunition is not the final determining factor in what ammunition we allow law enforcement agencies to use. Hong Kong is not Afghanistan.
I do not know what reasons Court of Final Appeal Chief Justice Geoffrey Ma will now offer for siding with SFC. He will hand down his written reasons later and I suppose he is constrained by the fact that the ordinance does actually say that the SFC needs no conviction. I would not like to be holding his pen just now.
It was a sad day for legal rights when the Legislative Council passed this travesty of justice, although it's not the first blatant invasion of the rule of law we have suffered in recent years.
Now I know the SFC may say that a seizure order is not punishment but a precautionary measure to ensure that investment assets are available should a court later order them forfeited after a conviction.
But the problem with such a precautionary measure in the investment industry, where reputation is paramount, is that it can easily destroy a thriving business as well as the livelihoods of people involved in it, driving them into penury and misery for the rest of their lives.
As a non-punishment, its effect can be not much short of a very long-term prison sentence, which is all the more reason why it should not be imposed without a criminal conviction.
Would the SFC care to post bonds for full compensation to victims of such precautionary measures should no convictions ensue? The sums could run into the billions.