Tsien Pak Cheong David v. Securities and Futures Commission

CACV 226/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 226 OF 2010

(ON APPEAL FROM SFAT NO. 2 OF 2010)

--------------------

BETWEEN

--------------------

Before: Hon Tang Ag CJHC, Stock VP and Hartmann JA in Court

Date of Hearing: 22 March 2011

Date of Judgment: 14 June 2011

_______________

JUDGMENT

_______________

Hon Tang Ag CJHC:

Introduction

1.In January 2004, the Applicant (the Respondent in this appeal) (“Mr Tsien”) was an equity salesman employed by JP Morgan Securities (Asia Pacific) Ltd (“JP Morgan Securities”).  In 2009, the Market Misconduct Tribunal (“MMT”) found that Mr Tsien, whilst thus employed, was culpable of insider dealing, contrary to section 270(1)(c) of the Securities and Futures Ordinance, Cap. 571 (“SFO”), because he had passed inside information to others who then traded on the information, and prohibited him from taking part in the management of Value Partners Group Limited or its subsidiaries and from dealing directly or indirectly in securities for 9 months.  It further ordered him to pay costs of over $2 million. 

2.Mr Tsien was first registered as a representative and accredited to JP Morgan Broking (Hong Kong) Ltd in 1988.  He was appointed a director in 1994.  He held a license to carry on Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities under the SFO.  His license was revoked on 21 April 2006.  However, he remained a regulated person under section 194(7) of the SFO. 

3.On the basis of MMT’s findings, the Securities and Futures Commission (“SFC”), in its Notice of Proposed Disciplinary Action dated 21 October 2009, signed by Mr Keith Choy, Director, Enforcement, informed Mr Tsien that the SFC had conducted an investigation under section 182 of the SFO into his conduct, and that the SFC was inquiring into whether he has been guilty of misconduct or whether he was a fit and proper person to be licensed under section 194 of the SFO.  He was also told that:

“The SFC is of the opinion that:

(a) you are guilty of misconduct because of breach of section 270(1)(c) of the SFO; and

(b) your fitness and properness has been called into question, in that you failed to:

(i) act honestly, fairly and in the best interests of the integrity of the market by engaging in market misconduct, in breach of General Principle (‘GP’) 1 of the Code of Conduct for Persons Licensed by or Registered with the SFC (‘Code of Conduct’); and

(ii) comply with all legal and regulatory requirements applicable to the conduct of your business activities by engaging in market misconduct, in breach of GP 7.”

4.Mr Tsien was warned that:

“The proposed disciplinary action

36. [SFC] propose to prohibit you for life under section 194(1)(iv) of the SFO from doing all or any of the following in relation to any regulated activities:

(a) applying to be licensed as a representative;

(b) applying to be approved as a responsible officer of a licensed corporation;

(c) applying to be given consent to act or continue to act as an executive officer of a registered institution under section 71 C of the Banking Ordinance; and

(d) seeking through a registered institution to have your name entered in the register maintained by the Monetary Authority under the Banking Ordinance as that of a person engaged by the registered institution in respect of a regulated activity.

37. We believe that the disciplinary penalty is the most appropriate after taking into account all relevant matters, including:

(a) you engaged in market misconduct, specifically insider dealing, contrary to section 270(1)(c) of the SFO;

(b) you perpetrated insider dealing with intention;

(c) you engaged in market misconduct because you were motivated by your desire to earn a higher bonus;

(d) your conduct was serious and dishonest;

(e) your conduct threatened the integrity of the market and investor’s confidence in the market; and

(f) you had a clear disciplinary record.”

5.Mr Tsien was then informed that he could write to the SFC with his submissions to explain the matters contained in the notice and why they should not take the proposed disciplinary action against him, which he did by letter dated 20 November 2009 addressed to Mr Keith Choy. 

6.By letter dated 27 January 2010, Mr Keith Choy enclosed a Notice of Final Decision which was also signed by Mr Choy.  The notice informed Mr Tsien:

“Our final decision on penalty

65. In the NPDA, we proposed to prohibit you for life under section 194 of the SFO. Our disciplinary action must be proportionate to the seriousness of the misconduct in question in order to:

I. deter you from committing similar misconduct in the future;

II. deter other market participants from committing similar misconduct; and

III. protect market integrity and prevent investors from being misled by similar activities.

66. Having carefully considered the Representations, for the reasons set out above, we do not consider that they demonstrate any valid grounds which mitigate the seriousness of your misconduct or warrant a departure from the proposed disciplinary action.

67. We conclude that you are not fit and proper to be or to remain licensed under section 194 of the SFO.

68. We have decided to prohibit you for life under section 194(1)(iv) of the SFO from doing all or any of the following in relation to any regulated activities:

I. applying to be licensed as a representative;

II. applying to be approved as a responsible officer of a licensed corporation;

III. applying to be given consent to act or continue to act as an executive officer of a registered institution under section 71 C of the Banking Ordinance; and

IV. seeking through a registered institution to have your name entered in the register maintained by the Monetary Authority under the Banking Ordinance as that of a person engaged by the registered institution in respect of a regulated activity.”

7.In the Notice of Final Decision, Mr Tsien was informed that he could apply to the Securities and Futures Appeals Tribunal (“SFAT”) for a review of its decision under section 217 of the SFO.

Review

8.Mr Tsien duly applied to the SFAT and there was an oral hearing before the SFAT on 23 July 2010, where Mr Tsien was represented by Mr Martin Rogers of Clifford Chance. Mr Roger Beresford appeared on behalf of the SFC. 

9.By its decision dated 22 September 2010, the SFAT (chaired by Saunders J) set aside the prohibition for life and substituted a prohibition for 10 years.

10.This is the SFC’s appeal.  The SFC was represented by Mr Mark Strachan and Mr Roger Beresford; Mr Laurence Li appeared for Mr Tsien.

The appeal

11.In the appeal, the SFC raised as a point for decision an issue on the proper role and function of the SFAT on a review under section 270.

12.Mr Strachan relied on a decision of Stone J sitting alone as Chairman of SFAT in Hong Kong Forex Investment Ltd v SFC, SFAT No. 6 of 2007 (20 March 2009), where he said:

“91. In light of the principles expressly laid down over the past 6 years since the establishment of this Tribunal – which statutorily succeeded its forerunner in this area, the Securities and Futures Appeals Panel – I see no necessity to repeat in detail the content of accumulated Determinations dealing with the operation of these principles: suffice it to say, once again, that this Tribunal is not a regulator, that it neither has the skill nor the knowledge to be a regulator, and that it exists only as a statutory ‘check and balance’ to the exercise of executive disciplinary power in order to ensure that nothing has gone seriously wrong – ‘out of whack’ is the rather blunt colloquial term that has crept into the lexicon of this jurisdiction – or to ascertain whether, for any other reason, unfairness clearly can be demonstrated to have been visited upon an applicant for review.

92. In short, this Tribunal certainly does not exist to ‘rubber stamp’ the disciplinary actions of the SFC, but neither does it seek to substitute its own views for that of the market professionals ‘on the ground’: the fact that the Tribunal may, in its wisdom, have passed or have considered passing a different sentence at the SFC disciplinary level, is nothing to the point: unless and until a disciplinary action is demonstrated to be clearly wrong, either in principle or on the basis of mistaken/overlooked fact, this Tribunal will not interfere. Indeed, I venture the view that this conceptual approach is fortified by the occurrence of the present financial contagion, which by common consensus has arisen in no small part by reason of a lack of adequate financial regulation/oversight in many apparently sophisticated financial jurisdictions.”

13.Those passages were repeated by Stone J in his judgment in the Court of Appeal (with which Kwan JA and Bharwaney J agreed) in Li Kwok Keung, Asser v SFC, CACV 85/2010 (26 November 2010).

14.However, Stone J’s observations were not essential to the decision.  In that case, the applicant (Mr Li) had been prohibited for 10 years by the SFC.  His period of prohibition was reduced to 18 months by SFAT.  The Court of Appeal replaced the 18 months with a 3 years’ prohibition on the basis that 10 years was manifestly excessive and 18 months manifestly inadequate.

15.Ng Chiu Mui and Anor v SFC, CACV 141/2009 (Ma CJHC (as he then was), Le Pichon and Kwan JJA, unreported, Reasons for Judgment, 26 May 2010) was an appeal from the SFAT chaired by Stone J.  Le Pichon JA referred in her judgment (agreed to by the other members of the Court) to the fact that Mr Grossman SC, who appeared for the appellants, criticized paras. 84 and 117 of the SFAT’s Determination which read as follows:

“84. It seems to me that in this situation, unless it can be shown … that the regulator is plainly wrong in coming to its conclusions in the light of the available materials, bearing in mind that such conclusions are untrammelled by any positive contrary testimony on behalf of the applicant, or that the material which has been evaluated cannot reasonably support the inference/conclusion as drawn, then in my view there is and can be no proper basis for review intervention by this Tribunal; to the contrary, for what it be worth, the clear probability is that the SFC, qua reasonable regulator acting in good faith, in fact drew wholly appropriate conclusions/inferences from the data available to it, including the various records of interviews.

……

117. It seems to me, with respect, that the content of the Amended Grounds as filed to underpin Mr Law’s application for review may have contained possibilities for further inquiry, and possibly even potential for success given the nature of the evidence adduced against him, but in the absence of any response whatever from Mr Law, whether sworn or unsworn, at any time subsequent to the NPDA, I fail to see how the Tribunal now can act on these grounds without, in effect, second guessing the SFC, which over the past years is a course this Tribunal consistently has declined to adopt – save, of course, in instances in which it can be shown, and shown clearly, that the regulator is in error or is plainly wrong, which in my judgment is not the case in this instance; in fact, looking at this matter largely and liberally I should have been surprised if the SFC had not pursued this case after assembling the evidence that it did in the course of its inquiries into the activities of CHI.”

16.Le Pichon JA went on to explain:

“33. The thrust of Mr Grossman’s submission was that since the Ordinance gave a very wide discretion to the Tribunal in the conduct of the review, on the basis of the very powerful tool given the SFC by dint of its myriad roles, it was incumbent on the Tribunal to do more than not to second-guess the SFC, and merely accept, without independent evaluation, its findings.

34. The appellants’ criticism of the Tribunal’s approach appears to have been predicated on the Tribunal proceeding on the assumption, without actually having examined the material underlying that assumption, that everything the SFC had done must be right and that the burden was on the appellants to show that the SFC was wrong. In support, Mr Grossman made reference to a passage in the transcript where the Tribunal stated that there had to be ‘some very clear error’ for the Tribunal to interfere with the regulator as indicative of its general approach.

35. I do not agree that that was the approach of the Tribunal. Take § 84 of the Determination on which much reliance was placed. While Mr Grossman focused on the words ‘unless it can be shown …that the regulator is plainly wrong…’, properly read, it is clear that the Tribunal was not merely accepting the SFC’s conclusions without more.

36. First, those conclusions were considered ‘in light of the available materials’. Next, the Tribunal took into account the fact that those conclusions were ‘untrammelled by any positive testimony’. It is also clear that a relevant consideration was whether the material that had been evaluated ‘could not reasonably support the inference/conclusion as drawn’. In other words, contrary to what has been submitted, the Tribunal did not proceed as Mr Grossman suggested, that the SFC’s findings/conclusions were necessarily correct, without any regard to the underlying materials.

37. For my part, while the appellants sought to present the issue as one that involved reversing the burden of proof, I do not consider that any such issue arises. In my view, the Tribunal’s conduct of the review was perfectly proper and entirely beyond reproach.”

17.These passages showed that Le Pichon JA had not rejected the submission that the SFO “gave a very wide discretion to (the SFAT) in the conduct of the review”.  It follows that, in my view, there is no authority binding on us on the proper role and function of the SFAT on a review under section 270.

18.The SFO came into force on 1 April 2003.  It had a long gestation.  When enacted, SFO repealed, amongst other ordinances, the Securities and Futures Commission Ordinance, Cap. 24 (“SFCO”) and the Securities Ordinance, Cap. 333 (“SO”).

19.Prior to SFO, the administrative disciplinary powers of the SFC could be found in Part VI of SO.  Amongst the powers conferred on the SFC by the SO was the power to revoke or suspend the registration of a registered person which included, for example, dealers, investment advisers, investment representatives.  A right of appeal from such a decision of the SFC was conferred by section 19 of SFCO.  The appeal was to the Securities and Futures Appeals Panel (“SFAP”) established under Part III of SFCO, which consisted of a chairman or a deputy chairman and two members appointed under section 18(2)(b).  The SFAP was by tradition always chaired by a leading counsel, serving part time.  The other members were appointed by the Chief Executive, and they were persons “whom he considers suitable for appointment as members who are not directors or employees of the Commission”.  See section 18(2)(b).

20.Under the SFO, the disciplinary powers of the SFC are found in Part IX.  Such powers covered, for example, a regulated person as defined in section 194(7) of SFO.  The appeal from the exercise of such disciplinary powers can be found in Part XI, in particular, section 217.  The SFAP has been replaced by the SFAT which is chaired by a judge serving full time defined in the SFO.

21.Under Schedule VIII of SFO:

“2. The Chief Executive shall appoint persons to a panel comprising such number of members, who are not public officers, as he considers appropriate.”

22.Otherwise the composition of the SFAT is not materially different from the SFAP.  Both the composition of the SFAT and the SFAP underlined their independence from the SFC.  Nor is section 217 materially different (in any relevant sense) from the section 19 of SFCO.  I note, however, that section 21 of SFCO provided for an appeal to the SFAP whereas section 217 enables an aggrieved person to “apply to the Tribunal for a review of the decision”.  I do not believe the change to be significant.

23.SFAT has power:

(1) “... to hear and determine any question or issue arising out of or in connection with any review, in accordance with (Part XI) and Schedule 8.” Section 216(1),

(2) Following which, the SFAT may:

“(a) confirm, vary or set aside the decision, and, where the decision is set aside, substitute for the decision any other decision which the Tribunal considers appropriate;

(b) remit the matter in question to the relevant authority with the directions it considers appropriate, which may include a direction to the relevant authority to make a decision afresh in respect of any matter specified by the Tribunal.” Section 218(2).

24.It is important to note that the SFAT:

“(5) ... shall not determine a review without first giving the parties to the review a reasonable opportunity of being heard.” Section 218(5),

and that under section 219 SFAT could receive and consider any material including oral evidence under oath, written statements or documents, even if the material would not be admissible in evidence in civil or criminal proceedings in a court of law. It had power to punish, for failure to comply with an order of the SFAT and was given power under section 221 to the same powers as the Court of First Instance to punish for contempt, and to award costs.

25.And that

“(7) Subject to section 221(3), the standard of proof required to determine any question or issue before the Tribunal shall be the standard of proof applicable to civil proceedings in a court of law.” Section 218(7).

26.Lastly, section 229 provided for an appeal from SFAT to the Court of Appeal on a point of law.

27.I have no doubt that given its composition as well as its powers, the power of review by the SFAT of a decision of the Commission is not limited as Stone J perceived it to be.  As noted, section 218(5) requires the SFAT to give “the parties to the review a reasonable opportunity of being heard”.  Indeed, that would be the only hearing since there would have been no hearing before the SFC. There could be no adversarial hearing at the stage at which the SFC makes its decision because at that stage the SFC is both prosecutor and judge.  I do not overlook the fact that there are rules which are designed to ensure that the procedure adopted by the SFC should be as fair as can be achieved when the prosecutor is also the judge.  But it is a fact that at the first stage the SFC is both prosecutor and judge.

28.It is fair to say that Mr Strachan accepted that in a suitable case, the SFAT may conduct a full merits review and come to its own decision on the matter, for example, where a finding of misconduct is disputed, the SFAT may hear evidence on the matter and make up its own mind.  However, I do not accept that the power to give a full merits review is confined to factual disputes.

29.Mr Strachan submitted that the matter turned on the proper construction of section 217, in particular, the word “review”.  Review is a word of wide import and is often used when it is intended that the tribunal making the review should act as if it were the original decision maker, as the following observation in the judgment of Northdrop J in Boucher v Australian Securities Commission (1996) 20 ACSR 485 at 491 shows:

“Many statutes confer rights on a person under which a claimant makes application for the grant of an entitlement and the relevant authority considers the material and makes a decision to refuse or grant the application. In some cases, the legislation permits a review of the decision to intermediatory groups and eventually the Administrative Appeals Tribunal. Many authorities show that the Administrative Appeals Tribunal in making the review, is exercising the powers of the original decision-maker and in fact is acting as if it were the original decision-maker.”

30.Incidentally, Boucher was concerned indirectly with a banning order.  Northdrop J pointed out that a decision by the Australian Securities Commission:

“... may be reviewed by the Administrative Appeals Tribunal”. Page 491

31.Here, we are not concerned with a self regulating profession which has power to regulate its members.  Indeed, many regulated persons would not be members of any recognized profession.  One would expect, as is the case with, say, solicitors and doctors, there would be an impartial tribunal made up of one’s peers and some independent persons.  Most importantly, in such tribunals, the prosecutor is not also the judge.

32.Here, we are not concerned with a decision of a self-regulating profession.  We are concerned with a decision by a regulator.  It is true that the regulator has been given substantial disciplinary powers by statute.  No doubt, for good administrative reasons.  One must remember that many disciplinary proceedings would not proceed beyond the SFC because the SFC accepted the explanation of the regulated person.  Or, because the infraction is trivial (and the penalty, if any, equally so). Or the conduct is so gross that any application for review would be pointless.  That the SFC has been given such disciplinary powers does not mean that in the event of a review by the SFAT, the review is not a full merits review.  The contention that a person’s repetition or livelihood could be so seriously affected by a regulator, acting as prosecution and judge, without a genuine full merits review by an independent tribunal, is so abhorrent to our system, that I reject it unhesitatingly.

Legislative material

33.I have said above that the SFO has had a long gestation.  Mr Lawrence Li for Mr Tsien has put before us some of the legislative material.

34.Mr Strachan submitted that we should not look at the legislative materials, and that the requirements of Pepper v Hart are not satisfied.  In Lam Pak Chiu and Another v Tsang Mei Ying and Another (2001) 4 HKCFAR 34, the Court of Final Appeal has expressly left open the question whether, and if so, to what extent, the approach favoured by the majority of the House of Lords in Pepper v Hart is appropriate for Hong Kong.

35.It is not necessary in the present appeal to consider any of the conditions in Pepper v Hart. I have come to the clear view, without the benefit of any of the legislative material, that the SFAT is entitled, indeed, I will say, obliged, to exercise its own independent judgment on a review.

36.I am glad to note that the legislative material supports this view.

37.In a “Guide to Legislative Proposals on Establishing a Securities and Futures Appeals Tribunal” dated 5 July 1999 (“the Guide”) it was stated that:

“7. The SFAP comprises a Chairman and Deputy Chairman, each of whom must be a barrister or solicitor (in practice a Senior Counsel). Other members of the SFAP are drawn from persons in the community with expertise in the financial services field, usually lawyers, accountants, business people or merchant bankers. All members of the SFAP are appointed by the Chief Executive and are independent of the Commission. …

……

12. A merits review procedure has obvious advantages. It focuses on the substantive issues at stake and gives an applicant a meaningful remedy. …

……

17. In comparison with the SFAP, the SFAT will be a body of superior status. It will be headed by a full-time High Court judge or deputy judge. The two other members who will make up a tribunal to hear an appeal will be chosen as appropriate in any given case because of their expertise in the fields of business, financial services, law or accountancy.”

38.In the Consultation Document on the Securities and Futures Bill published in April 2000, it was said:

“9.1 … The SFAT will be independent of the SFC, headed by a judge assisted by two lay members with relevant experience. Its review of any SFC decision will be on the full merits of the case, and it will have the power to affirm, vary, or substitute that decision. The SFAT will be a powerful safeguard in ensuring that the SFC decisions are correct, proper and fair.” (My emphasis)

39.In the Bills Committee, Paper No. 8A/01 (Revised), a “Summary of public comments and Administration’s Response on Part IX of the Securities and Futures Bill”, recorded concerns raised by the Hong Kong Stockbrokers Association (“HKSbA”) in relation to Part IX that:

“The SFC is the investigator, prosecutor, judge and jury. There must be more checks and balances.”

40.The Administration’s response was:

“Appeal to the SFAT provides a powerful remedy (than judicial review) to the persons affected by SFC’s decisions as the SFAT will be able to review both the merits of an SFC decision and its procedural regularity and legality. The SFAT will be able to substitute its own decisions for SFC’s decisions and the appeals will be de novo – the SFAT can entirely re-hear the matter.”

41.I do not know if Stone J had considered any of the legislative material.  Whatever may be the requirements of Pepper v Hart, and whether they are satisfied for a court of law, I do not believe the SFAT, where strict rules of evidence do not apply, could be in any way inhibited from consulting such material.  In my opinion, the SFAT would be entitled to consider the legislative material, which shows quite clearly that the review was intended to be “on the full merits of the case”,

“The SFAT will be able to substitute its own decisions for SFC’s decisions and the appeals will be de novo - the SFAT can entirely re-hear the matters.”

Of course, if the language of the legislation compels a different conclusion, effect must be given to it. But this is not the case.

42.Mr Strachan submitted that it was Stone J’s view that the SFAT did not have the expertise.  Stone J said the SFAT “is not a regulator, that it neither has the skill nor the knowledge to be a regulator”.  That it is not a regulator may be so.  But the SFAT is not required to act as a regulator.

43.Nor do I believe Stone J meant to make light of the quality or qualification of the members.

44.I agree with Mr Laurence Li that the SFAT has independent and relevant expertise.  As the Government stated in its Consultation Document on the Securities and Futures Bill, April 2000, in each SFAT case, the presiding judge will be “assisted by two lay members selected on account of their expertise in relevant field” (at ¶9.5(a)).  In the Legislative Council Brief SU B38/31 (2000)dated 10 November 2000, the Government explained that “the members will primarily be business people, professionals or academics appointed by CE on account of their impartiality, standing in community and, most important of all, ability to bring relevant experience or expertise to bear in considering an appeal against specified decisions of the SFC” (at Annex A, p13, item 11.2)

45.With respect, they are eminently suitable to determine fairly and impartially what is needed to safeguard the integrity and reputation of the financial markets in Hong Kong.

Special Respect

46.Mr Strachan relied heavily on his submission that the SFAT should accord the decision of the SFC with special respect.  In other words, the same level of respect which a court would accord a decision of say the disciplinary tribunal of a profession, such as the Law Society.

47.Mr Strachan relied on Bolton v Law Society [1994] 1 WLR 512, a decision of the English Court of Appeal, which was concerned with the Solicitors Disciplinary Tribunal. In that case, a practising solicitor was suspended from practice for 2 years by the Solicitors Disciplinary Tribunal.  On the solicitors’ application by way of appeal to the Divisional Court, the tribunal’s order was stayed.  The Divisional Court admitted fresh evidence of good character in mitigation of sentence and concluded that in view of that evidence, and since there had been no finding of dishonesty and the practical effects of suspension and striking off were much the same, the tribunal’s sentence was disproportionate to its findings.  It then quashed the penalty of suspension and imposed a fine in substitution. On appeal, by the Law Society, Sir Thomas Bingham MR (as he then was) quoted at 516 the following statement of the Judicial Committee of the Privy Council in McCoan v General Medical Council [1964] 1 WLR 1107 at 1113:

“Their Lordships are of opinion that Lord Parker C.J. may have gone too far in In re A Solicitor [1960] 2 Q.B. 212 when he said that the appellate court would never differ from sentence in cases of professional misconduct, but their Lordships agree with Lord Goddard C.J. in In re A Solicitor [1956] 1 W.L.R. 1312 when he said that it would require a very strong case to interfere with sentence in such a case, because the disciplinary committee are the best possible people for weighing the seriousness of the professional misconduct.”

48.The Master of the Rolls, having said that it was

“… important that there should be full understanding of the reasons why the tribunal makes orders which might otherwise seem harsh.” (518F)

went on to say (518G-H):

“… In most cases the order of the tribunal will be primarily directed to one or other or both of two other purposes. One is to be sure that the offender does not have the opportunity to repeat the offence. This purpose is achieved for a limited period by an order of suspension; plainly it is hoped that experience of suspension will make the offender meticulous in his future compliance with the required standards. The purpose is achieved for a longer period, and quite possibly indefinitely; by an order of striking off. The second purpose is the most fundamental of all: to maintain the reputation of the solicitors’ profession as one in which every member, of whatever standing, may be trusted to the ends of the earth. To maintain this reputation and sustain public confidence in the integrity of the professional it is often necessary that those guilty of serious lapses are not only expelled but denied re-admission. …”

49.Mr Strachan also emphasized the following remarks of the Master of the Rolls (at 519D) “the essential issue, which is the need to maintain among the members of the public a well-founded confidence that any solicitor whom they instruct will be a person of unquestionable integrity, probity and trustworthiness” and (at 519E) that “the reputation of the profession is more important than the fortunes of any individual member.  Membership of a profession brings many benefits, but that is a part of the price”.

50.Mr Strachan reminded us and I accept that:

“… The Bolton approach has also been applied in the regulation of a full range of professionals and those in other occupations, including barristers, doctors, dentists, pharmacists, nurses and midwives, accountants, veterinary surgeons, police officers and, even, farriers.

The approach in Bolton is followed also in Australia.”

51.A more recent decision is Raschid v General Medical Council [2007] 1 WLR 1460, where at 1472A-D Laws LJ said:

“… As it seems to me the fact that a principal purpose of the panel’s jurisdiction in relation to sanctions is the preservation and maintenance of public confidence in the profession rather than the administration of retributive justice, particular force is given to the need to accord special respect to the judgment of the professional decision-making body in the shape of the panel. ... the High Court will correct material errors of fact and of course of law and it will exercise a judgment, though distinctly and firmly a secondary judgment, as to the application of the principles to the facts of the case.”

52.But I reject Mr Strachan’s submission that the SFAT should regard a decision of the SFC as a court would regard a decision of, say, the Law Society’s disciplinary tribunal.  There is a short answer.  If, I am right that the review is a full merits review, so that SFAT may conduct the review as if it were the original decision maker, Mr Strachan’s submission must be rejected.

53.Moreover, it is a false analogy.  The power and function of the SFAT is different from that of the SFC.  As I have said, and quite unlike the role of a professional disciplinary tribunal, the SFC is both prosecutor and judge, amply brought home by the fact that Mr Choy signed both the Notice of Proposed Disciplinary Action and the Notice of Final Decision.  SFAT on the other hand is designed to ensure an independent and impartial decision.  It is chaired by a judge, and its members must not be public officers and are chosen by the Chief Executive:

“... from persons in the community with expertise in the financial services field …”

And as I have said eminently suited to decide fairly independently and impartially what punishment is necessary to safeguard the integrity and reputation of the financial markets in Hong Kong. Furthermore, it may not be appropriate to regard regulated persons as if they are members of a profession or professions since they may be people of different training, function or responsibility.

54.Mr Strachan has referred us to Australian Securities Commission v Kippe and Another (1996) 137 ALR 423, which explained the character of a banning order under the Australian Corporations Law, the Full Court of the Federal Court of Australia said (at 431):

“Although a banning order has the consequence of excluding an individual from acting as a representative of a dealer or investment adviser, the making of such an order is not designed to punish or impose a penalty on that person for an offence or contravention of any norm of conduct. ... The immediate and direct legal effect intended by a banning order is not to impose a penalty or punishment on the person concerned, but to be preventive in that it removes a perceived threat to the public interest and to public confidence in the securities and futures industry by removing that person from participation therein.”

55.I accept the characterization.  Nor do I doubt that the function of the SFC includes the protection of investors, the maintenance of integrity of the financial services in Hong Kong, as well as the reputation of persons who were involved in the financial industries.  I also accept that such objectives are important.  I have no doubt that the SFAT would have in mind similar objectives.

56.I agree with Mr Li that the following dictum from Jackson LJ in Salsbury v. Law Society [2009] 1 WLR 1286 (at 1296 ¶30) applies with equal force to a decision of the SFAT:

“... The correct analysis is that the Solicitors Disciplinary Tribunal comprises an expert and informed tribunal, which is particularly well placed in any case to assess what measures are required to deal with defaulting solicitors and to protect the public interest. Absent any error of law, the High Court must payconsiderable respect to the sentencing decisions of the tribunal...”

57.I agree that the SFAT is such an expert and informed tribunal.  It is the SFAT’s decision which should command the court’s special respect. However, one must note that an appeal from a SFAT is limited to “a point of law” (section 229), whereas, for example, an appeal from Solicitors Disciplinary Tribunal is not so limited.  Section 13(1) Legal Practitioners Ordinance, Cap. 159.  So, strictly speaking, it is inappropriate to say that this Court should treat a decisive of the SFAT with special respect.  The test is more stringent: We cannot interfere except on a point of law.  But it underlines my belief that it is important for this Court not to be astute to find fault.  Nor be too ready to find errors of law.  One must bearing in mind that, a SFAT is an administrative tribunal chaired by a judge with 2 lay members, and is:

“an expert and informed tribunal, which is particularly well placed in any case to assess what measures are required to deal with (persons in the financial services) and so protect the public interest.”

Appeal from SFAT

58.The appeal is on a point of law only.  Section 229.

59.In para. 6 above, I have set out the penalty imposed by the SFC.  This was referred to as a life time ban or prohibition.

60.The SFAT substituted a ban or prohibition for 10 years.  The difference between a 10 year ban and a life time ban is that, in the former, at the end of 10 years, Mr Tsien can apply.  It is acknowledged that although Mr Tsien may apply for a license or approval after 10 years, whether the application will succeed will depend on the circumstances at that time.

61.It is also relevant to note that unlike the position in Australia or the United Kingdom, the SFO contains no provision permitting the SFC to vary or cancel a banning order.  So, a life time ban will remain a life time ban whatever the circumstances.

62.Mr Strachan relied on the fact that insider dealing is a serious matter and that Sir Anthony Mason NPJ said in Koon Wing Yee v InsiderDealing Tribunal (2008) 11 HKCFAR 170 at paras. 46 and 47:

“46. That insider dealing amounts to very serious misconduct admits of no doubt. It is a species of dishonest misconduct. …

47. … insider dealing is a form of conduct which can be readily characterized as criminal conduct. ...”

63.In the event of criminal prosecution, in a suitable case on conviction on indictment, a person is liable to a fine of $10 million and to imprisonment of 10 years.

64.Mr Strachan pointed to the fact that previous decisions showed that the SFC took a very serious view of insider dealing.  Quite rightly so. Mr Strachan suggested that offences of false trading or stock market manipulation, offences involving fraudulent or deceptive devices in transaction in securities etc, are less serious.  He said that insider dealing is insidious and difficult to detect.  That may be so.  But insider dealing is often more easily and quickly detected than offences of false trading or market rigging.  Insider dealing which depends essentially on fore knowledge of price sensitive information is often detected when unusual and substantial transactions took place prior to the public disclosure of the price sensitive information.  In the case of false trading or false market, it is often not detected (if at all) until after a spectacular collapse.  Mr Strachan made the point because it is clear from the information that we have been supplied that in cases where false trading is involved, the banning or prohibition orders tended to be for a limited (and relatively short) period of time.

65.In order to supply an error of law, Mr Strachan submitted that the SFAT failed to accord the SFC’s decision with special respect.  Mr Strachan complained that the SFAT has not exercised a “distinctly and firmly secondary judgment” but, instead, without identifying any error of fact or law on the part of the SFC, has “engaged in its own sentencing exercise and has disregarded the decision of the Commission”.  Arguments which I have already rejected.

66.I agree with Mr Li that the SFAT has to make an independent assessment of all the circumstances of a case and arrive at its own decision.  That decision is entitled to at least special respect.  Indeed, unless the SFAT has erred in law, we cannot interfere.

67.Mr Strachan also complained that the SFAT:

“... (has) failed to acknowledge and/or confuse the distinction which the authorities have recognized between the statutory disciplinary/regulatory process contained in the Ordinance (which is under consideration here) and the criminal law process (which is not under consideration here)”.

68.He seemed to complain that in its decision, the SFAT had compared the present case with HKSAR v Du Jun DCCC 787/2008.  Mr Du was convicted in the District Court of insider dealing and was sentenced to 7 years’ imprisonment.  Mr Strachan submitted that no proper comparison can be made between the disciplinary proceedings which had been taken against Mr Tsien and the criminal proceedings which were taken against Mr Du.

69.Mr Strachan’s complaint is less than fair to the SFAT.  The SFAT was doing no more than to make the obvious point that not all insider dealing would attract the same sentence.  To contend otherwise is absurd.  No one would contend that on conviction an insider dealer must be imprisoned for 10 years (the maximum sentence).  Depending on a host of considerations, the sentence may vary greatly.  With respect, Mr Strachan has misunderstood Bolton.  Bolton is not authority that, for any particular disciplinary offence, the only possible sentence is that a solicitor should be struck off.  So that, for example, if in any particular case, a disciplinary tribunal has decided on a lesser penalty, that must be wrong.  Rather it is authority that if a Solicitors Disciplinary Tribunal strikes off a solicitor because it perceives it necessary to maintain the reputation of solicitors, the court would accord the decision special respect, because such penalty serves the second and most fundamental purpose identified by the Master of the Rolls.  How much weight should be given to this second purpose is for the disciplinary tribunal to decide.  Here, the relevant tribunal is the SFAT and not the SFC.

70.Nor does Mr Strachan’s reference to the dicta of Mason NPJ in Koon Wing Yee help, the SFAT rejected the submission on behalf of Mr Tsien that he was not guilty of dishonesty.

71.The SFAT then identified factors which its view:

“18. ... set this case of insider dealing towards the bottom end of the range of cases of insider dealing.”

72.First that the amount involved was small.  The notional loss avoided was only $1.4 million, and that there was no immediate personal gain in monetary terms made by Mr Tsien as a result of the information he gave to the fund managers.

73.Then, the fact that the SFC chose to bring Mr Tsien and the fund managers before the MMT rather than laid criminal charges demonstrated that the case was at the lower end of an insider dealing cases.

74.I can see no error of law.

75.Mr Strachan submitted that in some cases, the SFC might prefer to proceed before a MMT rather than to prosecute because of the nature of evidence available to the Commission.  The SFAT was entitled to take the view that since in this case, the conversation between Mr Tsien and the persons to whom he had imparted the insider information had been recorded, there was nothing to show that the SFC lacked evidence for a criminal prosecution.

76.Lastly, Mr Strachan complained that there is no reference to Bolton or to the importance of maintenance of reputation in the decision.  But it is obvious in the written submissions made on behalf of the Commission to the SFAT as well as from the transcript of the oral submissions, that Bolton was very much in focus.  I reproduce the following exchange between Mr Beresford and the chairman:

Mr. Beresford:

“The second purpose is the most fundamental of all: to maintain the reputation of the solicitors’ profession as one in which every member of whatever standing may be trusted to the ends of the earth. To maintain this reputation and to sustain public confidence in the integrity of the profession, it is often necessary that those guilty of serious lapses are not only expelled but denied the readmission.”

The Chairman:

“Yes, but how are they denied readmission? By the expulsion or by the refusal to re-admit them when an application is made subsequently?”

77.Also Mr Rogers for Mr Tsien had referred to Chu Kwok Shing,Godwin v SFC, SFAT No. 1 of 2009 (30 June 2010) where Saunders J as chairman had said:

“100. Mr. Westbrook correctly set out the purposes of disciplinary sanctions. They are, first, punishment; second, deterrence; third, where suspension, revocation or prohibition is involved, to ensure that the offender does not have the opportunity to repeat the offence, either for a limited period or indefinitely; and finally, and fundamentally, to maintain and promote confidence in securities and futures industry.”

78.Mr Li had referred us to a digest of Australian decisions where banning orders of different durations were given for insider dealing.  It is unnecessary for me to consider them.  I am convinced that, with respect, the SFAT has not made any error of law.  In any event, I find its decision eminently reasonable and if the matter had been left to me, I would have decided similarly.  I have no doubt that a lifelong ban is manifestly excessive.

79.I would dismiss the appeal and make an order that the SFC pays Mr Tsien’s costs to be taxed unless agreed.

Hon Stock VP:

80.I have had the advantage of reading in draft the judgment of the Acting Chief Judge.  I agree with it and with the orders he proposes, and I have nothing to add.

Hon Hartmann JA:

81.I agree with the judgment of the Acting Chief Judge.

Mr. Mark Strachan & Mr. Roger Beresford instructed by the Securities and Futures Commission for the Respondent

Mr. Laurence Li instructed by Messrs Clifford Chance for the Applicant