MOODY’S INVESTORS SERVICE HONG KONG LIMITED v. SECURITIES AND FUTURES COMMISSION

bjbj FACV No. 6 of 2018 [2018] HKCFA 42 IN THE COURT OF FINAL APPEAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION FINAL APPEAL NO. 6 OF 2018 (CIVIL) (ON APPEAL FROM CACV NO. 103 OF 2016) ____________________ BETWEEN MOODY S INVESTORS SERVICE HONG KONG LIMITED Appellant SECURITIES AND FUTURES COMMISSION Respondent ____________________ Before: Mr Justice Ribeiro PJ, Mr Justice Tang PJ, Mr Justice Fok PJ, Mr Justice Bokhary NPJ and Lord Neuberger of Abbotsbury NPJ Date of Hearing and Judgment: 3 September 2018 Date of Reasons for Judgment: 11 October 2018 ___________________________________ REASONS FOR JUDGMENT ___________________________________ Mr Justice Ribeiro PJ: I agree with the judgment of Lord Neuberger of Abbotsbury NPJ. Mr Justice Tang PJ: I agree with the judgment of Lord Neuberger of Abbotsbury NPJ. Mr Justice Fok PJ: I agree with the judgment of Lord Neuberger of Abbotsbury NPJ. Mr Justice Bokhary NPJ: I agree with the judgment of Lord Neuberger of Abbotsbury NPJ. Lord Neuberger of Abbotsbury NPJ: Introductory This is an appeal brought by Moody s Investors Service Hong Kong Limited ( Moody ) against a decision of the Court of Appeal (Hon Lam VP, and Yuen and Kwan JJA) given on 8 June 2017, [2017] 3 HKLRD 565. At the end of the hearing, we indicated that we would dismiss the appeal, and give our reasons later. These are our reasons. By their decision, the Court of Appeal substantially upheld a determination of the Securities and Futures Appeals Tribunal ( the Tribunal , Hon Hartmann NPJ, Chairman, and Dr Billy Mak Sui-choi and Ms Ding Chen, Members), given on 31 March 2016. In that determination, the Tribunal upheld in part a Decision Notice ( the Notice ) issued by Securities and Futures Commission ( the Commission ) dated 3 November 2014. The Notice stated that, pursuant to section 194 of the Securities and Futures Ordinance Cap 571 ( the Ordinance ), Moody s had failed to meet the standards, or to comply with the practices, expected of a corporation licensed under the Ordinance, in its preparation and publication of a report published on 11 July 2011 ( the Report ). After Moody s had made representations as to the appropriate sanction, the Commission went on to decide to impose a public reprimand and a financial penalty of HK$23 million. On Moody s application for a review, the Tribunal upheld some, but not all, of the criticisms in the Notice, and, while maintaining the public reprimand, it reduced the financial penalty to HK$11 million. Although the Court of Appeal disagreed with the Tribunal on one aspect, it made no difference to the outcome, and so Moody s appeal was dismissed. Moody s now appeals to the Court of Final Appeal. The regulatory background Moody s is the Hong Kong arm of the eponymous global credit rating agency network, which trades under the names Moody s Investors Services ( ) and Moody s Analytics. The network s website claims that its services are an essential component of the global capital markets, providing credit ratings, research, tools and analysis that contribute to transparent and integrated financial markets . The website also states that MIS is a leading provider of credit ratings, research, and risk analysis , whose ratings cover the great majority of sovereign nations, and tens of thousands of entities which issue bonds. The influence of credit ratings agencies ( CRAs ), and in particular the largest two or three CRAs (which on any view include MIS), on global capital markets became apparent following the worldwide financial crisis of 2007-2008. In a nutshell, it was thought that a large proportion of investors and traders in government, corporate and other debt and debt-related instruments placed great weight on the ratings issued by the CRAs. As a result, in many jurisdictions where the CRAs were not subject to specific regulatory control, they were brought within the regulatory system. Hong Kong was one such jurisdiction, and CRAs were specifically brought within the ambit of the Ordinance in 2011. The Ordinance in its present form contains provisions for the licensing, regulating and disciplining of any person who wishes to carry on specified regulated activities in financial markets. Part 1 of Schedule 5 currently sets out twelve types of such activities. Type 10 is providing credit rating services . Part 2 of the same Schedule contains two relevant definitions. The first is credit ratings which are defined as: opinions, expressed using a defined ranking system, primarily regarding the creditworthiness of (a) a person other than an individual; (b) debt securities . The second relevant definition is providing credit rating services , which is as follows: (a) preparing credit ratings- (i) for dissemination to the public, whether in Hong Kong or elsewhere; or (b) preparing credit ratings- (i) for distribution by subscription, whether in Hong Kong or elsewhere; but does not include (c) preparing, pursuant to a request made by a person, a credit rating which is exclusively prepared for, and provided to, the person, and that is neither intended for dissemination to the public or distribution by subscription . Part IX of the Ordinance is concerned with Discipline, etc . The first section of this Part, section 193, includes in subsection (1) a definition of misconduct , which has five paragraphs. Paragraphs (a) to (c) cover contraventions of provisions of the Ordinance, of provisions of any relevant licence or registration, or of any other condition. Paragraph (d) section 193(1)(d) - is in these terms: an act or omission relating to the carrying on of any regulated activity for which a person is licensed or registered which, in the opinion of the Commission, is or is likely to be prejudicial to the interest of the investing public or to the public interest . Section 194 is concerned with Disciplinary action [by the Commission] in respect of licensed persons, etc , and it sets out the powers of the Commission when, inter alia, it concludes that a regulated person is, or was at any time, guilty of misconduct . Three other sections of the Ordinance should be mentioned. Section 169(1) empowers the SFC to publish codes of conduct: for the purpose of giving guidance relating to the practices and standards with which intermediaries ... are ordinarily expected to comply in carrying on the regulated activities for which the intermediaries are licensed . Section 217 provides that a person who has been found to be guilty of misconduct by the Commission can apply to the Tribunal for a review, and section 229 enables a person who wishes to challenge a decision of the Tribunal on a point of law to appeal to the Court of Appeal. The relevant substantive facts Prior to 1 June 2011, when the regime regulating CRAs came into force, Moody s operated in Hong Kong, as it was entitled to do, as an unlicensed credit ratings agency. In that capacity, Moody s prepared and circulated a number of reports which were undoubtedly credit ratings, and, of course, it continues to carry out those activities to this day. Then, as now, Moody s reports covered a large number of different types of companies and other institutions. Those companies included a total of 61 high-yield non-financial Chinese companies ( the 61 Companies ). Inevitably, its rating assessment of any of those companies would vary from time to time as the information about a company, and the environment in which it operated, changed and more information came to light. On 1 June 2011, when the regime regulating CRAs came into force, Moody s became licensed under the Ordinance to carry on Type 10 regulated activity. Some six weeks later, Moody s issued the Report, the subject of these proceedings. The Report described itself as a Special Comment Report , and was entitled Red Flags for Emerging-Market Companies: A Focus on China . It ran to 25 pages, and began with a section headed Overview , which explained that: Red flags as a screen. In rapidly developing emerging markets, the use of frameworks to assess elements of credit risk provides consistency in identifying relative strengths and weaknesses across a growing pool of rated issuers. In this report, we look at 20 red flags, grouped into five categories, that highlight issues meriting scrutiny to identify possible governance or accounting risks for non-financial corporate issuers in emerging markets . The five categories of red flags were then identified, and in summary terms they were (i) weakness in corporate governance, (ii) riskier and more opaque business models, (iii) fast-growing businesses strategies, (iv) poor quality of earnings or cash flow, and (v) concerns over auditors and quality of financial statements. The Overview then continued by explaining that in this inaugural report , the framework is applied to 61 rated Chinese entities , viz. the 61 Companies. The Overview then explained that for non-property firms there was a degree of correlation between previously issued ratings and the number of red flags, but that this did not appear so true for property companies. The Overview then stated that [t]hese findings show that screens for governance or accounting risks can help identify areas to investigate but cannot serve as mechanisms to rank order credit risk. The Overview also pointed out that Moody ratings already factor in the inherent challenges of analyzing young, fast-growing Chinese companies , but added that [t]he red flags provide further clarity and detail, but do not represent a change in our rating methodologies . The next section of the Report was headed Red Flags An Interesting Screen , and it began by referring to recent public expressions of concern about Chinese companies financial reporting. The Report then stated that in order [t]o address investors concerns and provide transparency on our approach to ratings, this report identifies warning signs so-called red flags for our rated, high-yield , non-financial Chinese companies The point was then made that [t]he identified issues that we flag do not represent a change to our analytical approach . It was then stated that [o]ur ratings already account for the inherent challenges in assessing Chinese companies . The following section of the Report was headed Framework Focuses on Five Key Categories , namely those very briefly summarised in [17] above. After discussing the numbers in very general terms, the Report set out in Figure 1 the three rating categor[ies] Ba, B, and Caa, of 49 of the 61 Companies ( the 49 Companies ), broken down into Chinese property and Chinese non-property companies. Figure 2 set out the No. of red flags tripped by rating category , and showed the average no. of red flags tripped against each rating categories of Investment Grade , Ba, B, and Caa. After some further discussion, the Report stated that a company tripping of many red flags does not represent an immediate rating concern . The Report then turned to discuss six of the 49 Companies individually. In Appendix 1 to the Report each of the five categories of warning signs was discussed, and, in relation to each category, a Figure was included showing the red flag scores for each category of company - ie listed by reference to their respective credit ratings. Appendix 2 described certain adjustments which are irrelevant for present purposes. Appendix 3 set out in two Figures (one for property companies the other for non-property companies) against the names of each of the 49 Companies, its current credit rating, the number of red flags tripped, and the nature of the company s business. Appendix 4 set out against each of the 49 Companies, its current credit rating and, in greater detail than Appendix 3, a breakdown of the red flags for each company. In an Announcement which accompanied the publication of the Report ( the Announcement ), Moody s stated that the framework disclosed by the Report adds consistency in approach to challenging and often non-transparent situations that are part of the credit decision-making process in new markets . The Announcement also described the framework as supplemental to Moody s methodological approach to rating non-financial corporates in the emerging markets . As the Tribunal recorded, the Report was issued at a time when there was considerable concern as to the accounting and corporate governance standards of mainland Chinese companies. Accordingly, not unsurprisingly , the Report received extensive local and international media attention , and it had a material impact on the market . The prices of shares in many of the 49 Companies, particularly those with a large number of tripped red flags, fell substantially (well over 10% in some cases) on the date of the Report s publication. While acknowledging that many factors can affect share prices, the Tribunal was satisfied that these falls were principally occasioned by the contents of the Report , and that Moody must have appreciated that in all probability the Report would have a material impact on the market . The procedural history The Commission formed the view that, in preparing and subsequently circulating the Report, Moody s had not lived up to the standards to be expected of a licensed CRA. In particular, the Commission considered that Moody s had failed to have the required procedural safeguards in place to ensure the integrity of the Report and that the Report itself was in a number of material respects misleading, confusing and inaccurate to the extent that the publication was, or was likely to be, prejudicial to the interests of the investing public, including Moody s own clients, and prejudicial also to the integrity of the market to quote the Tribunal broad description of the Commission s views. More particularly, the Commission was of the view that the Report (i) had caused confusion in the market because its nature and purpose were unclear; (ii) failed to disclose justifications for the red flags; (iii) awarded a number of inappropriate red flags; (iv) identified six companies as negative outliers since they attracted the most flags, even though Moody's acknowledged that the number of flags did not correlate with a higher credit risk; (v) contained 12 factual errors; and (vi) was published without adequate internal control procedures. The Commission concluded that, as a result, Moody's had failed to comply with three provisions of the Code of Conduct for Persons Licensed by or Registered with the Commission ( the Code of Conduct ), which had been issued pursuant to section 169 of the Ordinance. In summary terms, those failures were as follows: a. Three breaches of General Principle 1 ( ), which requires licensed persons to conduct their business honestly, fairly and in the best interests of their clients and the integrity of the market ; b. A breach of General Principle 2 ( ), which requires licensed person conducting their business to act with due skill, care and diligence, in the best interests of their clients and the integrity of the market ; c. A breach of paragraph 4.3 ( para 4.3 ), which requires licensed persons to have appropriate internal control procedures and operational capabilities . Accordingly, the Commission issued a Notice of Proposed Disciplinary Action against Moody s on 14 February 2013, in answer to which Moody s made representations, which did not persuade the Commission to change its view. Accordingly, as mentioned above, the Commission issued the Notice in November 2014 fining Moody s and declaring it unfit. On Moody s application for review, the Tribunal: a. Upheld two of the three breaches the Commission had found of GP1, but overturned one finding of breach; b. Upheld the breach the Commission had found of GP2; c. Overturned the Commission s finding of a breach of para 4.3. Accordingly, the Tribunal reduced the financial penalty, but maintained the declaration, and ordered Moody s to pay 60% of the Commission s costs. More centrally for present purposes, the Tribunal rejected Moody s argument that the Commission (and therefore the Tribunal) had no jurisdiction to discipline Moody s under Part IX of the Ordinance because the publication of the Report could not constitute misconduct because it did not relat[e] to the carrying on of any regulated activity . In that connection, the Tribunal primarily held that the publication of the Report amounted to the carrying on of a regulated activity , because, in the light of its contents, the Report constituted the provision of credit rating services, and therefore it fell within the ambit of the section. As the Tribunal put it, the red flag framework constituted a well-defined system or mechanism for judging levels of credit risk and, as such, constituted a credit rating and was therefore a regulated activity . Alternatively, the Tribunal held that, if that was wrong, then in the light of Moody s existing activities, which undoubtedly involved the provision of credit rating services, the publication of the Report amounted to an act or omission relating to the carrying on of [a] regulated activity within the ambit of section 193(1)(d). As the Tribunal expressed it, the Report was intended to be read as amplifying and supplementing Moody s ratings, as being so intimately attendant upon them that it constituted more than mere comment and became part and parcel of Moody s ratings themselves . On Moody s appeal, the Court of Appeal upheld the decision of the Tribunal. However, while the Court of Appeal did not differ from the Tribunal in so far as the criticisms of Moody s were concerned, they took a narrower view than the Tribunal on the jurisdiction issue, namely as to how the preparation and publication of the Report fell within the ambit of section 193(1)(d). In particular, the Court of Appeal rejected the view that the Report constituted an exercise of credit rating. They decided that, since it addressed only two elements bearing on credit risk, namely corporate governance and accounting risks, the Report did not come within the definition of credit rating , because it could not be regarded as expressing an opinion primarily on creditworthiness of the companies concerned. However, the Court of Appeal agreed with the Tribunal on its alternative ground for accepting that the Commission had jurisdiction. In that connection, the Court said at [31] that: [E]ven though the red flag framework was not part of the methodology in arriving at Moody s credit ratings of a classic kind (a point which the Tribunal fully acknowledged ), the Report did constitute additions and clarifications which were meant to be read together with such classic ratings and as such the publication of the Report was an activity relating to the ratings within the meaning of section 193. It is against that conclusion that, with leave from the Appeal Committee, Moody s appeals to this Court. The meaning and effect of the phrase relating to On behalf of Moody s, Mr Paul Shieh SC argued that, in the context of section 193(1)(d), the preparation and publication of a document such as the Report, which did not itself involve the provision of credit rating services, could only be said to relat[e] to the provision of such services if it had been (or was understood, or would reasonably have been understood to have been) involved in the preparation of credit ratings. Unless such a clear and limited meaning is given to the phrase, he contended, the law would be uncertain, which is particularly inappropriate in the context of Part IX of the Ordinance, given that it creates an offence and involves curtailing freedom of expression. This interpretation of the section involves giving the phrase relating to an inappropriately narrow and specific effect. At any rate as a general proposition, it is a phrase with a wide and broad import. Like the words in respect of , the phrase could be said to be colourless and to have the widest possible meaning of any expression intended to convey some connection between the two subject-matters to which the words refer - see the authorities cited by Fok PJ in Securities and Futures Commission v Pacific Sun Advisors Ltd (2015) 18 HKCFAR 138, at [23]. And it is worth noting that in Mariner International Hotels Ltd v Atlas Ltd (2007) 10 HKCFAR 1 at [51], after observing that the word involving was one of the broadest words of association known to the English language , Bokhary PJ said that [p]erhaps only phrases like in relation to relating to and with respect to are wider . Mr Shieh referred to a decision of the High Court of Australia, Tooheys Ltd v Commissioner of Stamp Duties (1961) 105 CLR 602, and in particular observations in the judgment of Taylor J at pp 620-621 about the meaning of the expression relating to in an Australian taxing statute. He said that the expression relating to is extremely wide but it is also vague and indefinite . And he went on to say that the expression predicates the existence of some kind of relationship but it leaves unspecified the plane upon which the relationship is to be sought and identified . Those observations appear to be entirely consistent with the passages cited in [35] above and to be of general application. While the phrase relating to has a naturally wide meaning, like any word or set of words it must, in any particular case, take its meaning from its context. Accordingly, a particular context can justify giving a narrower meaning to a term with a generally wide meaning. However, a court should be cautious before holding that, where the legislature has used an expression with a naturally wide meaning, it is nonetheless appropriate to give it a limited effect. To depart from the naturally wide meaning of an expression in a statute requires cogent grounds, because otherwise one may be subverting the expressed aims of the legislature. For the same reason, when the legislature has used words which are very general in their natural ambit, such as relating to it is inappropriate, in the absence of a cogent reason, to attribute a relatively specific meaning to those words. Yet that is what Mr Shieh is arguing for in this case. In order to support his case in this connection, Mr Shieh relied on two propositions. The first was the principle that legislation, especially if it creates an offence, should be clear, and in cases of real doubt should be construed beneficially to alleged offenders. Secondly, Mr Shieh argued that legislation which cuts down freedom of expression should be given a narrow effect. The proposition raised in the first point in [39] above will rarely justify, on its own, giving an artificially narrow meaning to a term in a statute. It is more usually invoked to justify not giving a provision an unusually wide meaning, or favouring a narrower meaning when the provision is equally capable of bearing a wider meaning. Further, when one considers the purpose of section 193(1)(d), it appears, if anything, to point away from giving its provisions a narrow meaning. The section is in a Part of the Ordinance which is concerned with regulating and sanctioning regulated activity in financial markets, by licensed persons. It therefore should be interpreted bearing in mind that it was enacted as a part of a scheme introduced to protect members of the public and financial markets against inappropriate or substandard behaviour, and which is directed to sophisticated people, expert and experienced in financial markets, who will, as Mr Shieh acknowledged, be in a privileged position as a result of being licensed, and who will often have ready access to legal advice, and some of whom will be (in many cases perfectly properly) keen to find ways of avoiding or minimising any control over their activities. As to the second point made in [39] above, an Ordinance which is aimed at encouraging high standards, and which penalises substandard work, when carrying out activities which can affect financial markets and investors, is clearly in the public interest. And, in order to be effective, such legislation has to include provisions for disciplining and penalising those who do not live up to the requisite standards. It is hard in those circumstances to see much mileage for Moody s argument based on freedom of expression. The correct viewpoint for interpreting the Report In the present context, we are concerned with the publication of a report which is said to relate to the provision of credit rating services. It is clear both from the nature of those services and from the statutory definition of providing credit rating services that such services involve communication of information to potential investors and dealers in debt and debt-related instruments, either to the market generally or to subscribers. The Report itself was published to the market generally. Indeed, its publication was essential to the complaint against Moody s: if the Report had not been published, there would have been no Notice, and publication to the market is an inherent feature in paragraphs (a), (b), and (c) of the statutory definition of providing credit rating services . It follows that the question whether the Report can be said to have been relating to the provision of credit rating services must, at least primarily, be assessed by reference to how it was, or could reasonably have been expected to be, understood by the people to whom it was addressed viz. investors and traders in the market for debt and debt-related instruments. That is of some significance not merely of itself, but also because Mr Shieh relied quite heavily on the fact that Moody s did not regard the Report as part of, or connected with, its credit rating service. He contended that Moody s personnel regarded the Report as something of a pilot or new experiment. Although such evidence could conceivably be relevant when it comes to assessing the culpability of Moody s conduct, it is inadmissible on the issue we have to resolve, in the same way that a party s subjective understanding or assumption as to the effect or meaning of a contract is inadmissible on the issue of its meaning or effect (it is also by no means clear that, if this evidence was admissible, it would help Moody s case, but it is unnecessary to address that point further). Strictly speaking, it is unnecessary to decide whether the issue in this case should be determined by reference to how the market actually treated the Report, or how the market could reasonably have been anticipated to treat the Report. That is because the Tribunal concluded that Moody s ought reasonably to have anticipated that the market would react to the publication of the Report in the way that it actually did react. However, it is right to say that the correct approach is the latter formulation, namely how the market would reasonably have been anticipated to treat the Report. That is because one is ultimately judging the actions of Moody s in preparing and publishing the Report, and the market reaction occurred after publication. However, that does not mean a tribunal deciding the issue cannot take into account the way the market actually reacted when determining what someone (perhaps particularly someone with considerable experience of the market) should have expected of the market. This is scarcely a surprising conclusion. We are here concerned with a document which was intended to be read by people in the debt and debt-related instrument market. Accordingly, the question whether it related to other services provided to people in that market by the compiler of the document, ought, on normal principles of interpretation of documents, to be determined by how it would have been understood by a reasonable person in the position of the people to whom it was addressed, and not by reference to the private intentions of its compiler. And that involves considering the document by reference to what it says, reading it in a practical and realistic way in its commercial context. Did the Report relate to Moody s credit rating services? Having indicated the correct approach to the meaning of relating to and to the interpretation of the Report, it is now appropriate to turn to consider the contents of the Report coupled with Moody s relevant prior activities. Once one does so, it appears to be an inescapable conclusion that, even accepting that it did not itself involve the provision of credit rating services, the Report related to the provision of such services by Moody Moody s is renowned for providing credit rating services, and indeed that is the only one of the twelve Types of regulated activity for which it is licensed under the Ordinance. Even in the absence of any of the other factors mentioned in [48] to [54] below, there must at least be a substantial risk that many people in the market will assume that any report emanating from Moody s, especially if it is concerned with the soundness of the accounting and governance processes and the quality of earnings of specific companies, is in some way related to its credit rating service. Of course, a fair reading of such a report might satisfy a reader that it is not in fact so related. However, when one examines the Report, far from negativing such an assumption, it is possible to identify a number of significant features which would have served to confirm it. Thus, the Report covered 61 Chinese high yielding non-financial companies, all of which were the subject of Moody s existing published credit ratings. Indeed, they were the only Chinese high yielding non-financial companies for which Moody s provided credit ratings. This fact on its own seems to tie in the Report with Moody s previous credit rating reports on those companies. A clear and convincing disclaimer might have discharged that view, but there was none. Additionally, in the text of the Report, there were frequent references to the credit ratings of the 49 Companies, albeit mostly in general terms. More specifically, in the introductory Overview, Moody s stated that the red flag results, with which the Report is concerned, are shown by rating category , which strongly suggests a connection. Quite apart from these points, reflecting what was said in the Overview, in all of the eight Figures, and in three of the four Appendices of the Report, the tripped red flags in relation to companies, or categories of companies, were compared with the credit rating of the companies or categories respectively. It is true that the Report emphasised that the red flag system which it introduced did not represent or justify a departure from the previous ratings accorded by Moody s to any of the 61 companies in its previous credit rating reports. But the obvious message to any remotely acute trader or investor was that the red flags attributed to a particular company in the Report should at least be borne in mind when considering that company s existing credit rating. Revealingly, the Report stated that a large number of red flags does not represent an immediate rating concern , which was a pretty clear hint that the rating in question may very well change negatively in the future. It is also true that the Report largely concentrated on corporate governance and accounting risks which are but two of the many factors which a credit rating takes into account. While this represents a powerful reason for concluding (as the Court of Appeal did) that the Report did not constitute a credit rating service, this point goes nowhere in the context of the present issue. Apart from anything else, those two factors play an important part in assessing credit risk, and it cannot seriously be suggested that a document cannot relate to credit rating reports unless it covers every factor which is taken into account when arriving at such a rating. Another significant factor which tells against Moody s arguments is the Announcement accompanying the Report, which described the contents of the Report as being supplemental to Moody s methodological approach to rating non-financial corporates in the emerging markets . If a document is supplemental to something, one would have thought that, while it ultimately depends on the context, it would also relate to that thing. And, while it is true that Moody s methodological approach to rating is not the same as its actual rating reports, it is little more than playing with words to invoke the difference in the present context. Of course, Moody s own description of the Report cannot be determinative of the nature or character of the Report as a matter of law, but, especially when it is a contemporaneous published description, it is a telling feature. In addition to these points, there is the external factor of the market reaction to the Report, a reaction which should, according to the Tribunal, have been foreseen by Moody s. Given the importance accorded by the market to the ratings attributed to companies or to company debt by the two or three main rating agencies, the only sensible interpretation of the market reaction to the Report is that it was indeed seen as providing a negative sort of qualification to the existing ratings of the 61 Companies, or at any rate at least the great majority of the 49 Companies. Conclusion For these reasons, Moody s appeal must be dismissed. The Commission argued in its written submissions that we should reverse the conclusion of the Court of Appeal overturning the Commission s primary reason for holding that section 193(1)(d) applied, namely that the production and publication of the Report constituted the carrying on of [a] regulated activity , namely the preparing [of a] credit rating for dissemination to the public . After we had indicated that we would be dismissing Moody s appeal, the Commission did not press us to decide the point, and we saw no benefit in considering or determining it in the context of the facts of this case. Finally, we invited submissions on costs at the end of the hearing and Mr Shieh realistically conceded that he could not oppose the Commissioner s application for the costs of this appeal, which we accordingly grant. (R A V Ribeiro) Permanent Judge (Robert Tang) Permanent Judge (Joseph Fok) Permanent Judge (Kemal Bokhary) Non-Permanent Judge (Lord Neuberger of Abbotsbury) Non-Permanent Judge Mr Paul Shieh SC and Ms Zabrina Lau, instructed by Linklaters, for the appellant Mr Benjamin Yu SC and Mr Laurence Li, instructed by Securities and Futures Commission, the respondent - PAGE - PAGE p}\}N< gd kH gd kH gdXM> yrnj^TF zslzh`YO h#e4 gd kH yt kH gd kH yt kH yt kH gd kH i[M>i hXM> gd84 gdCH h*Ip h*Ip gd&F gd&F gd&F gd&F gd&F gd&F gd&F gd&F gd&F gd&F hE]8 h*Ip gd&F &`#$ yt kH yt kH yt kH [Content_Types].xml _rels/.rels theme/theme/themeManager.xml K Y, sQ}# theme/theme/theme1.xml $O}) Xp90 +PHI| PP yu 9xu5 fs+W VF7H q=. 8}d- qyI@ j!Q_ jyV` |PZ+ T ""p < 4V O&x$ A8>v ;EUC n 8r *~P(5 .}x E /,EE\} theme/theme/_rels/themeManager.xml.rels 5 6?$Q K(M&$R(.1 [Content_Types].xmlPK _rels/.relsPK theme/theme/themeManager.xmlPK theme/theme/theme1.xmlPK theme/theme/_rels/themeManager.xml.relsPK <?xml version="1.0" encoding="UTF-8" standalone="yes"?> <a:clrMap xmlns:a="http://schemas.openxmlformats.org/drawingml/2006/main" bg1="lt1" tx1="dk1" bg2="lt2" tx2="dk2" accent1="accent1" accent2="accent2" accent3="accent3" accent4="accent4" accent5="accent5" accent6="accent6" hlink="hlink" folHlink="folHlink"/> 0B($ *Rmh 0B($ FAMC No ella wy wong FAMC.dot Ingrid YK Lam Microsoft Office Word Judiciary Hong Kong SAR FAMC No Title <?xml version="1.0" encoding="UTF-8" standalone="no"?><b:Sources SelectedStyle="\APA.XSL" StyleName="APA" xmlns:b="http://schemas.openxmlformats.org/officeDocument/2006/bibliography" xmlns="http://schemas.openxmlformats.org/officeDocument/2006/bibliography"></b:Sources> <?xml version="1.0" encoding="UTF-8" standalone="no"?> <ds:datastoreItem ds:itemID="{5CB1CE7A-127F-47BB-9759-2A71BFBFFEA9}" xmlns:ds="http://schemas.openxmlformats.org/officeDocument/2006/customXml"><ds:schemaRefs><ds:schemaRef ds:uri="http://schemas.openxmlformats.org/officeDocument/2006/bibliography"/></ds:schemaRefs></ds:datastoreItem> Microsoft Word 97-2003 Document MSWordDoc Word.Document.8