Hong Kong’s Securities and Futures Commission has won a legal battle to enable it to prosecute Tiger Asia, a New York-based hedge fund, for alleged insider trading and market manipulation.
The case dates back to the SFC’s initial move in 2009 to freeze up to HK$29.9 million of assets held by Tiger Asia and its three principles, Bill Hwang Sung-Kook, Raymond Park and William Tomita, even though the individuals are located overseas.
The Tiger Asia fund focuses on equity investments in China, Japan and Korea. It dates back to 2001 and is one of many Tiger-branded funds seeded by Julian Robertson after he closed his own hedge fund in the US.
The charges were related to the trio’s dealings earlier that year in China Construction Bank stocks. The SFC later added additional charges and asset freezes related to placements of Bank of China shares by UBS and RBS.
In July 2011 the story took a dramatic turn when a Hong Kong court decided that claims of insider dealing and market manipulation could not be pursued without those claims having been first substantiated by a market-misconduct tribunal or a criminal court.
That ruling threatened to declaw the SFC from taking practical, independent measures against suspected market manipulators. The Tiger Asia case is the first in which the SFC had applied to ban a foreign entity from trading in Hong Kong-listed securities and their derivatives.
Yesterday’s ruling by the higher Court of Appeal sided with the SFC’s argument that, under the Securities and Futures Ordinance, it did have authority to act independently. The Honourable Mr. Justice VP Tang described this power as “much needed ammunition” to help protect investors.
The SFC alleges that Tiger Asia realised information from a placement agent regarding CCB shares was confidential and price sensitive, but its principals went on to use that information to short the stocks, making a notional profit of HK$29.9 million.
Tiger Asia is alleged by the SFC to have further used inside information to trade BoC shares, and to have engaged in downward manipulation of CCB share prices.