Hong Kong court hears arguments in Chinese stock trader’s bid to review evidence that led to his US$174 million fine
Tang Hanbo was fined for breaking regulations over trading in some Chinese stocks, but is now seeking a judicial review
Lawyers for a Chinese trader fined for market manipulation, and for Hong Kong’s market regulator, presented their arguments on Wednesday in a judicial review brought by the trader, who is seeking an invalidation of some of the evidence in the case.
Tang Hanbo, a Chinese citizen living in Hong Kong, was fined 1.2 billion yuan (US$174 million) last year by the China Securities Regulatory Commission (CSRC) for breaching securities rules over trading in a number of Shanghai-listed stocks.
Tang also faced Securities and Futures Commission (SFC) investigation on his trading in two Hong Kong-listed firms – Heng Xin China Holdings and Tian Ge Interactive Holdings, during August 2015 and June 2016.
Tang is seeking to have evidence collected by Hong Kong’s regulator, the SFC, which assisted its mainland Chinese counterpart in the investigation, declared invalid on the grounds that it was obtained during an unlawful search of his home.
The one-day hearing has ended and the presiding judge, Mr Justice Anthony Chan, said he would give a judgement later.
Held in Hong Kong’s High Court, Tang’s lawyer Edward Chan told the judge the SFC had applied for a warrant to search Tang’s home in Sha Tin to collect evidence concerning his dealing in two Hong Kong stocks.
But in fact, the lawyer said the SFC had passed information in Tang’s computer and smartphone to the CSRC under a memorandum of understanding (MOU) within the rules of the Stock Connect scheme that links Hong Kong and mainland Chinese investors.
The two regulators had discussed the case in a meeting and the CSRC had verbally requested that the SFC help to collect information if it searched Tang’s home or office, Edward Chan said.
He told the court that when the SFC applied for the warrant to a magistrate, the Hong Kong regulator did not say that any information would be passed to the CSRC, so the information it did pass on should be disqualified as evidence.
Benjamin Yu, for the SFC, said the CSRC made a written request to the SFC about the investigation on Tang. He admitted the SFC had not informed the magistrate about the CSRC investigation but added he did not consider that would affect the decision on the granting of the search warrant.
Yu said the Stock Connect’s rules clearly state the SFC and CSRC can exchange investigative information or set up task forces for cross-border investigations, so any transfer of information between the two regulators is lawful.
The SFC lawyer said the commission was not conducting the search for the CSRC but instead it was doing its own investigation. But if it found evidence relevant to any CSRC investigation, the SFC under the Stock Connect MOU can pass that information to the mainland regulator.