Hong Kong’s securities regulator has accused Tiger Asia and three of its executives of insider trading.

The Securities and Futures Commission announced yesterday it instigated a formal market misconduct tribunal against the New York-based hedge fund and Bill Hwang, Raymond Park and William Tomita on trades executed on Bank of China and China Construction Bank Corporation shares.

The SFC initially sought to freeze Tiger Asia’s assets back in August 2009 after it found that on January 6, 2009, a placing agent in Hong Kong invited Tiger Asia to participate in a proposed placement of China Construction Bank shares. The agent informed Tiger Asia of the size and discount range of the deal, and even though Tiger Asia knew the information was confidential, shorted 93 million CCB shares that day ahead of the announcement, only to cover its short the next day and collect profits of HK$32 million ($4 million).

Similarly, the SFC states that Tiger Asia was invited to purchase Bank of China shares on December 31, 2008 and on January 13, 2009. After receiving “confidential and price sensitive information” and “agreeing not to deal in BOC shares after receiving the information”, Tiger Asia shorted 104 million BOC shares before the December 31, 2008 placement, making a profit of around HK$9 million, and shorted 256 million BOC shares before the placement on January 13, 2009, registering a loss of HK$10 million.

The purpose of the SFC’s tribunal, formerly announced yesterday, is to determine if any market misconduct took place, to identify the people engaged in the misconduct, and to establish profits gained or lost.

If the SFC does find misconduct has taken place, it can prohibit parties from dealing in securities, futures contracts or leveraged foreign exchange contracts in Hong Kong for up to five years.

The SFC is not pursuing criminal charges against Tiger Asia or the executives mentioned because Tiger Asia, Hwang and Park have already been prosecuted in the United States, and such proceedings are recognised under Hong Kong law.

The US Securities and Exchange Commission and the US attorney’s office for the district of New Jersey began proceedings against Tiger Asia on December 12, 2012.  

Tiger Asia pleaded guilty to criminal offences under US law. Hwang and Park were charged with civil offences by the SEC.

It is likely the both the US Attorney’s office proceedings and the SEC’s proceedings will be classified as criminal proceedings under Hong Kong law, which could bar criminal proceedings in Hong Kong on the basis of double jeopardy – a legal principal that protects a person from being criminally prosecuted twice for the same conduct.

On April 30, the Court of Final Appeal dismissed the appeal of Tiger Asia parties against legal proceedings brought by the SFC under section 213.

Tiger Asia has no physical presence in Hong Kong.

It was funded by hedge fund titan Julian Robertson in 2001, now retired.