HKSAR v. CHAN CHIN TAT AND ANOTHER

 DCCC687 & 691/2009 (CONS)

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 687 & 691 OF 2009

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Reasons for Sentence

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1.  I have convicted both of you after trial of charges of failing to answer questions raised by an investigator employed by the Securities and Futures Commission, contrary to section 184(1)(d) of the Securities and Futures Ordinance, Cap.571.

2.  On 15 August 2006, the Securities and Futures Commission had reasonable cause to believe that during or around the period from 1 August 2005 to 5 September 2005 that offences contrary to sections 295, 296, 299 of the Securities and Futures Ordinance might have been committed in respect of the dealings in the shares of a company called Asia Standard Hotel Group Limited.

3.  The Securities and Futures Commission also had reasonable cause to believe that persons might have engaged in market misconduct contrary to sections 274 and 275 of the Securities and Futures Ordinance in respect of the dealings in shares of that company.

4.  A senior manager of the commission, a Mr Chan Tak‑ching whom I will refer to as PW1, was directed by a delegate of the SFC under section 182(1) of the Securities and Futures Ordinance to be an investigator to investigate and report to the commission the matters under investigation.

5.  On 7 November 2007, PW1 sent a letter to the 1st defendant, informing him that he was a person under investigation. He sent to him a written notice requiring the 1st defendant to attend for an interview at the commission on 14 November. The notice told him that he was required to answer any questions relating to matters under investigation that the officer might raise with him.

6.  A number of documents were sent to the 1st defendant, including copies of the relevant sections of the ordinance. The documents specifically informed the defendant as of his obligation to answer every question at the interview and his right to take objection on the basis of self-incrimination under section 187(2) of the ordinance to prohibit the direct use of the questions and his answers in evidence in criminal proceedings, and there were certain exceptions to that.

7.  The 1st defendant attended for interview on 14 November at the offices of the commission. That interview was conducted in the presence of two lawyers engaged by the 1st defendant. At the outset, one of the lawyers attending made it quite clear that he had given certain legal advice to the defendant that he had the right not to answer any questions put to him by PW1. PW1 reminded the defendant and his legal advisers of the relevant statutory provisions, and the defendant still refused to answer any questions put to him by the investigator.

8.  In respect of the 2nd defendant, a letter was sent to him on 7 November and it was in similar terms to the letter sent to the 1st defendant. The 2nd defendant attended for interview on 16 November, and again he was accompanied by two lawyers, the same lawyers that had accompanied the 1st defendant, and again the 2nd defendant refused to answer any questions or indicated he refused to answer any questions.

9.  At the time of the offences, both defendants had a clear record. Both defendants have since appeared before this court on 26 November 2009, and in respect of a charge of conspiring to carry out false trading, each of them was sent to prison for a period of 26 months and were ordered to pay costs.

10.  I am told that when those matters came before the District Court, the charges now before the court were consolidated with the conspiracy charges, but defence lawyers made a successful application that they be severed and dealt with separately.

11.  I accept what has been said by counsel on behalf of the defendants that both defendants were actually acting in a genuine manner; they had taken legal advice and they had accepted that legal advice. They are both mature gentlemen. The 1st defendant is 43, the 2nd defendant is 55, and both of them prior to this had led crime-free lives and both had worked and risen from working-class backgrounds to do well for themselves. Both are married. The1st defendant has a child. The 2nd defendant is now retired. They have supported themselves throughout their lives.

12.  There was no evidence presented to the court that the investigation by the commission was hampered by their actions, and there was no evidence that they were active in any cover-up. There was no active defiance on their part. Their actions were taken after receiving legal advice.

13.  These charges are serious charges. These offences were created by the legislature who are concerned about the international reputation of Hong Kong as regards matters of market misconduct and manipulation, and the legislature have taken the step of putting in place this legislation to assist in the investigation and uncovering such behaviour. So I have to weigh that up in the balance when I look at your conduct.

14.  As I have said, I accepted that you acted in a principled manner and you were not acting in a defiant manner. It is unfortunate that these charges could not have been dealt with at the same time as the substantive trial and had they been dealt with at that time, I am quite sure that concurrent sentences would have been passed.

15.  In respect of each of the defendants, what I propose to do therefore is impose a term of 1 month’s imprisonment on each of you and order that that run concurrent with the sentence which you are now serving.