Court of Appeal upholds SFAT's ruling on SFC's disciplinary action against Moody’s over Red Flags Report

8 Jun 2017

The Court of Appeal has dismissed an appeal by Moody’s Investors Service Hong Kong Limited (Moody’s) against the Securities and Futures Appeals Tribunal’s (SFAT) decision to uphold the Securities and Futures Commission’s (SFC) disciplinary action in relation to a special comment report published by Moody’s in 2011 (Notes 1, 2 & 3).  

The SFAT had affirmed the SFC’s decision to reprimand and fine Moody’s for breaching the Code of Conduct in its preparation and publication of the report entitled “Red Flags for Emerging-Market Companies: A Focus on China” (the Report) (Notes 4 & 5). 

The SFAT, which had determined that the fine should be $11 million, ruled that Moody’s was carrying on its regulated activity of providing credit rating services on the basis that the preparation and publication of the Report formed part and parcel of the credit rating services provided by Moody’s.

In dismissing the appeal, the Court of Appeal upheld the decision of the SFAT that misconduct on the part of Moody’s can be established on the basis that the preparation and publication of the Report was part and parcel of the carrying on of the business of credit ratings by Moody’s, and hence reaffirmed the SFC’s jurisdiction over Moody’s in this matter. 

The SFC’s Chief Executive Officer, Mr Ashley Alder, said: "The SFC considers that responsible research, including that issued by credit rating agencies and research houses, can all contribute to the overall market quality and price discovery process and has no intention to suppress legitimate commentaries on listed companies, whether positive or negative."

"The Moody’s case is about substandard work by a licensed person who is required to comply with the provisions set out in the Code of Conduct and uphold high standards of competence.  The recent ruling by the Market Misconduct Tribunal (MMT) concerning Citron Research also makes it clear that any person, whether licensed or not, who makes serious allegations about listed companies should be reasonably prudent in making them," Mr Alder added (Note 6).



  1. Moody’s is licensed to carry on business in Type 10 regulated activity (providing credit rating services) since 1 June 2011.
  2. The Court of Appeal’s judgment (Civil Appeal No. 103 of 2016) will be available on the Judiciary’s website at
  3. The hearing on Moody’s appeal at the Court of Appeal was held on 11 January 2017. 
  4. Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct).
  5. Please see SFC’s press release dated 5 April 2016 for details of the SFC’s disciplinary action and the SFAT’s decision.  The SFAT’s determination (SFAT No. 4 of 2014) is available on the SFAT’s website at
  6. For more information about the Citron Research case, please see the SFC’s press releases dated 22 December 2014, 19 March 2015, 2 November 2015, 26 August 2016, 20 October 2016 and 13 January 2017.  The MMT’s report is available on its website at

Page last updated : 8 Jun 2017