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Moody’s Granted Case to HK Final Court of Appeal for SFC HK$11 Million Fine for Unfair Reporting

Hong Kong Court of Final Appeal has granted leave to Moody’s Investors Service HK (Moody’s) to take it’s disciplinary case to the Court of Final Appeal.  Moody’s is facing an HK$11 million fine (US$1.41 million) for unfair reporting in its report titled “Red Flags for Emerging-Market Companies: A Focus on China” published on 11th July 2011.

” Moody’s Granted Appeal for HK$11 Million Fine “

Moody’s report caused more than half of the covered HK-listed companies to drop between 5% to 16.8% the following day.  The credit rating agencies listed red flags (negative) assigned to 6 companies in the report, providing leading actions (red flags ~ triggering sell decisions), despite assessment by Moody’s analysts showing no significant correlations between the red flags and companies’ credit risk.

The date for the hearing has yet to be fixed.  The Court of Final Appeal will determine if the publication of the report (content & comments), constitutes “misconduct” against section 193 of section 193 of the Securities and Futures Ordinance (SFO).


  • In March 2016, the Securities and Futures Appeals Tribunal (SFAT) had affirmed the Securities and Futures Commission’s (SFC) decision to reprimand and fine Moody’s for breaching the Code of Conduct in its preparation and publication of the Report.
  • In April 2016, the SFAT reduced the fine from HK$23 million to HK$11 million (US$2.94 million to US$1.41 million).
  • In the Court of Appeal June 2017 ruling,  it agreed that misconduct on the part of Moody’s can be established on the basis that the preparation and publication of the Report formed part and parcel of the carrying on of the business of credit ratings by Moody’s.
  • In October 2017, the Court of Appeal had dismissed Moody’s application for leave to appeal to the Court of Final Appeal.
  • In February 2018, Moody’s successfully granted leave to the the case to the HK Final Court of Appeal

Source: Securities and Futures Commission

 



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