On 8 December 2017, Anthony Chan J of the Court of First Instance confirmed in a decision that the Securities and Futures Commission in Hong Kong ("SFC") was entitled to provide assistance to the China Securities Regulatory Commission ("CSRC") and, in obtaining a warrant, the SFC did so properly.
Under the International Organization of Securities Commissions Multilateral Memorandum of Understanding, and also the Memorandum of Understanding between the CSRC and the SFC on Strengthening of Regulatory and Enforcement Cooperation under Shanghai-Hong Kong Stock Exchange Connect, the SFC is empowered and entitled to provide assistance to the CSRC.
In June 2016, the CSRC first sought the SFC's assistance to obtain information and documents from Tang Hanbo, a PRC national residing in Hong Kong, for the purpose of its investigation of Tang for market manipulation arising from his trading in shares of a company listed on the Shanghai Stock Exchange.
The CSRC's investigation happened at around the same time as the SFC's own investigation into Tang and his wife Li, in relation to their trading of shares of various companies listed on the HK Stock Exchange.
In July 2016, a warrant was obtained and executed by the SFC. Tang's computers and mobile phones were seized. All of the information obtained under the warrant was or might have been relevant to the SFC's own investigation into Tang. Pursuant to the written request by the CSRC, such information was also transmitted by the SFC to the CSRC.
In March 2017, the CSRC published a decision sanctioning Tang and a Mr Wang Tao for market misconduct. This was the first case involving stock manipulation via Stock Connect. Tang and Wang were convicted and penalties totalling RMB 1.2 million were imposed by the CSRC in the two cases.
Tang applied for a judicial review of the warrant obtained by the SFC, alleging that the SFC had obtained the warrant by misleading the Magistrate as to the true purpose behind it, in that the SFC failed to inform the Magistrate that it was seeking to obtain information to assist the CSRC, and that it intended to transmit the evidence obtained under the warrant to the CSRC.
At the hearing of the judicial review, Anthony Chan J, having gone through all the evidence in detail, rejected Tang's arguments and found that there was nothing sinister in the SFC's provision of information to the CSRC and upheld the validity of the warrant.
This decision clarifies the SFC's entitlement to obtain and transmit evidence to the CSRC, if such information was obtained in the course of the SFC's own investigation.
