Securities and Futures Commission v. Pacific Sun Advisors Ltd and Another

HCMA 430/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO 430 OF 2014

(ON APPEAL FROM ESS NO 30881-84 OF 2012)

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J U D G M E N T

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Introduction

1.This is an appeal by the appellants against their convictions and sentences pronounced by Mr Joseph To, a Magistrate at Eastern Magistrate’s Court (the Magistrate), on 10 June 2014, following a remittance of the case from Bokhary J (the Judge) on 24 January 2014.  The decision of the Judge went on appeal to the Court of Final Appeal and in consequence of its decision dated 20 March 2015, it is agreed that the convictions should be quashed and the sentences set aside.  See Securities and Futures Commission v Pacific Sun Advisors Ltd and Andrew Pieter Mantel, FACC No. 11 of 2014, 20 March 2015, unreported. 

Background

2.The underlying criminal proceedings were instituted by the Securities and Futures Commission (the SFC) against the 1^st and 2^nd appellants and the case came on before the Magistrate on 17 January 2013.

3.The 1^st appellant was charged by way of two summonses (ESS 30881 and 30883 of 2012) with the issue of two advertisements, invitations or documents relating to a fund launched by the 1^st appellant, being the Pacific Sun Greater China Equities Fund (the Fund), without obtaining an authorization from the SFC for the issuing of the advertisements, contrary to s 103(1)(b) and s 103(4)(b) of the Securities and Futures Ordinance, Cap 571 (“SFO”).

4.The 2^nd appellant was at all material times the sole director of the 1^st appellant and he was also charged, by way of two summonses (ESS 30882 and 30884 of 2012) that corresponded to those laid against the 1^st appellant, under s 390 of the SFO in relation to the 1^st appellant’s alleged breaches of s 103(1)(b) of the SFO.

5.The appellants contested the proceedings and after trial on 21 March 2013 the Magistrate acquitted them in respect of all summonses.  It appears the Magistrate’s verdict was based on two matters. First, he was unable to conclude that the advertisements in question contained an invitation to the public to invest in the Fund, and secondly, the professional investor exemption as provided for in s 103(3)(k) of the SFO applied. 

6.The SFC appealed by way of case stated to the Court of First Instance on the basis that the Magistrate erred in respect of these two matters.  On 24 January 2014, the SFC’s appeal was allowed in relation to both matters and the acquittals were set aside and the Judge remitted the matter back to the Magistrate to continue with the case. 

7.The appellants appealed the decision of the Judge to the Court of Final Appeal in relation to the applicability of the professional investor exemption. 

8.In the meantime, the trial proceeded before the Magistrate and on 10 June 2014 he convicted both appellants in respect of all summonses.  He sentenced the 1^st appellant by way of a $10,000 fine on each summons and the 2^nd appellant to concurrent terms of 4 weeks’ imprisonment suspended for 12 months on each summons.  The appellants appealed against the Magistrate’s convictions and sentences and this is the appeal before me now.

The Court of Final Appeal decision

9.On 20 March 2015, the Court of Final Appeal allowed the appellants’ appeal and held that the professional investor exemption applied on the facts as originally found by the Magistrate.  Fok PJ in his judgment (with whom the other judges agreed) said:

“56. … It follows also that I would set aside the Judge’s order remitting the matter to the Magistrate to continue the case since his original decision acquitting the appellants was correct and should not have been reversed. The Magistrate’s subsequent convictions following the remitter are under appeal and although the disposition of that appeal is not a matter before us, its outcome will now follow this judgment. …”

The SFC’s position

10.The SFC acknowledges that in the circumstances it accepts that the subsequent convictions following the remitter ought to be quashed on the basis of the decision of the Court of Final Appeal that the professional investor exemption applied.  As stated by Fok PJ, the further hearing was unnecessary and the original acquittals ought to have stood as valid.  The SFC also acknowledges that it cannot resist the appellants’ entitlement to the costs of these proceedings and below.  

11.The SFC, however, expressly states in its submissions that it does not accept that the Magistrate’s findings in the second trial in relation to the question of whether the advertisements in this case contained an invitation to the public to invest in the Fund were wrong.  The appellants in their notices of appeal dispute the findings and argue that the Magistrate should have taken other factors into account when determining whether the relevant communications were advertisements by virtue of s 103(10) of the SFO. 

12.It is not a matter for me to address or resolve as the SFC accepts that the convictions should be quashed and the sentences set aside, so I make no decision on the issue. 

Disposition of the appeal

13.In light of the foregoing, I make the following orders by agreement of the parties:

(1) The Magistrate’s convictions in ESS 30881, 30882, 30883 and 30884 of 2012 dated 10 June 2014 be quashed;

(2) The Magistrate’s order in ESS 30882 and 30884 of 2012 that the 2^nd appellant be sentenced to a period of imprisonment for 4 weeks suspended for 12 months on each of the charges be set aside;

(3) The Magistrate’s order in ESS 30881 and 30883 of 2012 that the 1^st appellant pay a fine of $10,000 on each of the charges be set aside and the fines already paid be refunded to the 1^st appellant; and

(4) The 1^st and 2^nd appellants’ costs of this appeal and all the proceedings below be paid by the SFC, to be taxed if not agreed.

Mr James Sherry, instructed by Tanner De Witt, for the 1^st and 2^nd appellants

Mr Derek C.L. Chan, instructed by and for the Securities and Futures Commission