THE substantial fines imposed by the Insider Dealing Tribunal in its long-awaited ruling on the Public International Investments Limited (PIIL) case send the first really clear signal to the business community that insider trading will not be tolerated. It is long overdue.
Hong Kong's reputation as an insider trader's paradise has long undermined the regulators' efforts to give the market a more modern and honest image internationally. Even now, insider trading is not a criminal offence for which the offender can face a period in prison. But the law does permit the tribunals to impose heavy financial penalties and prohibit offenders from acting as directors or managers in listed companies. By availing itself of both punishments, the tribunal will have improved the territory's reputation immeasurably.
Reputation, however, is one thing. Reality is quite another. The truth is that a tribunal as slow as this one can never do more than ripple the surface of Hong Kong's murky financial waters. It took the tribunal a full year from the start of the hearings to reach its findings and a further month to announce the penalties. Meanwhile, the Government has admitted there are already five or six more cases which could be brought to the tribunal. Even when a second tribunal is established later this year, it would take three years at the current rate of hearings to clear the backlog. The possibility of coming before a tribunal sometime after 1997 is unlikely to be much of a deterrent to really determined insider traders. If there is any hope of speeding things up, it will require at least one more new tribunal and faster procedures.
Moreover, the composition of the tribunal, originally intended to provide balance and impartiality, has become an embarrassment and delaying factor in its own right. The Bench consists of one judge and two laymen. But in the small and highly incestuous world of Hong Kong finance, it will be hard to find a layman who has no ties or relationships with the defendants in the dock. The hearings into the PIIL case had to be suspended for a long period while such an impartial outsider was found. Such problems are bound to arise again.
Don Lau Yuen-leung, Amy Foog Swee-heng and Leong Kwok-nyem have paid a high price for trying to con the public. But it may be a long time before enough sharp operators are brought to book to bring about serious change in Hong Kong's anything goes financial culture.