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Court reaffirms SFC’s power of issuing restriction notices

Issue date: 2023-03-22 16:20:18

The Court of First Instance has dismissed a judicial review application against the Securities and Futures Commission (SFC) relating to restriction notices issued in an ongoing investigation into a suspected “ramp-and-dump” scheme (Notes 1 & 2).

The judicial review application, brought by Mr Chen Wencan and Ms Su Jiaqi, sought to challenge the restriction notices issued on 9 February 2021 by the SFC under sections 204(1)(a) and 205(1) of the Securities and Futures Ordinance (SFO) to freeze their assets in various trading accounts held with certain licensed corporations. 

The applicants contended that sections 204(1)(a) and 205(1) exercised on the basis of section 207(e) of the SFO was, amongst other things, not prescribed by law and a disproportionate interference with their property rights and was therefore unconstitutional.  The arguments were previously dismissed by the Court in another similar judicial review application relating to another suspected “ramp-and-dump” scheme (Note 3).

The SFC’s Executive Director of Enforcement, Mr Christopher Wilson, said: “We welcome the Court’s decision reaffirming the SFC’s statutory powers to issue restriction notices to freeze suspects’ assets held with licensed corporations. This enables the SFC to take front-loaded actions to protect investors and the public interest.”

In the Court’s judgment, the Hon Mr Justice Coleman said he is not persuaded that there are any significant differences or additional matters raised by the applicants which point to any reason why a different view should be taken in these proceedings than was taken in the previous similar application.

The Court also ordered the applicants to pay the SFC’s costs in relation to these proceedings.

End

Notes:

1. The judgment is available on the Judiciary’s website (Court Reference: HCAL366/2022).
2. “Ramp-and-dump” scheme is a form of market manipulation where fraudsters use different means to “ramp” up the share price of a listed company and then “dump” the shares to other investors at an artificially high price.  The fraudsters also used social media platform to lure the unsuspecting investors to buy the shares at an artificially high price while the syndicate members were offloading for profit leaving innocent victims with substantial financial losses.
3. Please see SFC’s press release dated 28 September 2022.

News captured as of:2023-03-22 16:20:19

Source: SFC