The ongoing insider trading court case between Hong Kong’s financial regulator, the SFC, and New York-based hedge fund Tiger Asia Management LLC, is proving a real challenge to how the regulator tackles offshore targets reported Bloomberg this week. The SFC wants to ban Bill Hwang’s fund from trading in the city and freeze assets of involved parties (Bill Sung Kook Hwang, Raymond Park and William Tomita) who are alleged to have contravened Hong Kong’s laws prohibiting insider dealing and market manipulation. The Court of First Instance ruled against the SFC back in the summer, stating that only a criminal court or the Market Misconduct Tribunal (MMT) had the jurisdiction to determine whether such activity took place.

Next week, the SFC will try to overturn the court ruling. The legal battle will determine whether the agency can sue independently for relief before asking government departments to bring criminal or civil market misconduct cases. Nick Hunsworth, a disputes partner at Mayer Brown JSM in Hong Kong said that if the SFC was being told their first line of attack (the injunction to freeze assets) wouldn’t work “it would impose on them a radical rethinking of their strategy”. Mark Steward, the SFC’s enforcement director, was quoted as saying: “If a person is not in the jurisdiction but their assets are, then the court can decide whether there are grounds to freeze them,” adding: “Clearly we are attacking some vested interests who have a lot to lose if we succeed.”
 
Were the SFC to win the Tiger Asia case it would give the SFC a broader power to sue targets and would be a significant weapon it its arsenal said Hunsworth. “If you come and play in the Hong Kong market and you are accused of doing something wrong, you could immediately be faced with civil proceedings.”