Insider Dealing For Hedge Fund And Private Equity Managers

The Hong Kong Securities and Futures Ordinance ("SFO") restricts insider dealing. Whilst the objectives of insider dealing restrictions are widely accepted and the conceptual framework is clear, the statutory prohibitions under the SFO on insider dealing can raise practical problems for hedge fund and private equity managers in their day-to-day activities. In this article, we summarize the relevant law governing insider dealing in Hong Kong and set out examples of common problems encountered in applying this law.

Although the objectives of laws governing insider dealing are clear in theory, namely to prohibit profiteering from access to material non-public price sensitive information ("MNPI"), in practice, these laws are surprisingly difficult to apply. Take for example a hedge fund trader who receives a call from a broker. The broker wishes to gauge interest in a proposed but not yet announced share transaction concerning a company listed on the Hong Kong