The insider trading case against hedge fund Segantii Capital Management Ltd. And its founder Simon Sadler is moving to a higher Hong Kong court that can hand out longer sentences for convictions, according to people familiar with the matter.
Hong Kong authorities plan to transfer the criminal proceedings to the District Court from a Magistrates’ Court that’s currently handling the case, the people said. The District Court can impose sentences of up to seven years in prison for convictions, compared with two to three years at the lower court. The plan is still subject to change, the people said, asking not to be identified discussing private matters.
In one of the city’s highest-profile insider dealing cases, authorities this month charged Segantii, along with Sadler and former trader Daniel La Rocca with insider dealing tied to a block trade in 2017. Sadler and La Rocca appeared in the city’s Eastern Magistrates’ Court on May 2 without making a plea. The case was adjourned to June 12.
The case was expected to be moved to one of Hong Kong’s higher courts following the first hearing in a Magistrates’ Court, where all criminal proceedings in the city commence. In Hong Kong, there is no specialized court for financial crime cases. Different courts can put the cases on trial depending on the severity of the offense and the sentencing sought by the prosecutors.
Prosecutors opted against sending the Segantii case to the High Court, which can impose even longer sentences than at the district level, the people said. It’s not clear why they chose the District Court. There is no general limit on the length of imprisonment that the High Court may impose, meaning it can mete out the maximum penalty set out in legislation tied to the crime. Insider trading convictions carry a maximum 10 years imprisonment in Hong Kong.
The District Court also differs in that it typically hears cases with a judge alone, whereas the High Court generally includes a judge and jury, according to a legal overview from the Legal and Technology Centre at the University of Hong Kong.
Hong Kong’s Securities and Futures Commission, the Department of Justice and Segantii declined to comment.
The allegations mark the latest regulatory trouble for Segantii, a star hedge fund firm in Asia often credited with helping banks pull off challenging deals, including large block trades. In December, South Korean regulators fined Segantii 1.48 billion won ($1.08 million) for “certain hedging trades.”
Sadler, a former trader at Dresdner Kleinwort Wasserstein and Deutsche Bank AG, founded the firm in Hong Kong in 2007 with $26.5 million. He built Segantii into a regional giant with offices in London, New York and Dubai, trading globally with a focus on Asia-Pacific stocks and equity-linked securities. The firm had $4.77 billion in assets under management at the end of April, according to an update sent to investors.
A company spokesperson said earlier this month that “Segantii intends to defend itself vigorously against the charge.”
