UPDATE 2-HK regulator thwarted in attempt to ban Tiger Asia

(Adds SFC regulator reaction)

By Rachel Armstrong

HONG KONG, June 21 (Reuters) - A Hong Kong court ruled it does not have the jurisdiction to determine whether New York-based hedge fund Tiger Asia engaged in insider dealing, thwarting the market regulator's attempt to ban the fund from trading securities or derivatives listed in the city.

In a ruling handed down on Tuesday by Hong Kong's Court of First Instance, Justice Jonathan Harris said the court did not have the power to rule whether the fund had breached rules on insider dealing.

The Securities and Futures Commission (SFC) regulator, which had been making its first attempt to exclude an entity from trading in Hong Kong, said in a statement it disagreed with the judge's ruling and intended to appeal against it.

The judge said it was for the criminal courts or Market Misconduct Tribunal (MMT) to determine whether the wrongdoing had occurred, rather than the High Court.

However the SFC said it was unable to bring a criminal prosecution as all the defendants are in the United States.

"The Tiger Asia parties are not within the jurisdiction of Hong Kong's criminal courts nor, in the SFC's view, should they be entitled to receive immunity from prosecution which would be the result if proceedings were commenced before the MMT," it said in a statement.

The SFC first applied for the order in April 2010 following allegations that the fund and three executives -- founder Bill Hwang, head of trading Raymond Park and trading support officer William Tomita -- had engaged in insider dealing in China Construction Bank Corp (CCB) and Bank of China Ltd in 2008 and 2009.

The allegations involve claims Tiger Asia was given advance notice by third parties of forthcoming share placements by Bank Of China and CCB and shorted shares in the stocks ahead of the placements being publicly announced.

Tiger Asia made a notional profit of HK$29.2 million (3.7 million) from the alleged insider dealing in CCB and HK$8.6 million in the dealing with Bank of China, according to the SFC, which had also applied to freeze assets equivalent to that amount.

The SFC had argued that the ban and freeze on assets were particularly important for this case, since they were unable to proceed with a criminal prosecution against the fund and its employees given their location.

The judge added in his written ruling that the SFC had asked the court to rule on what type of order it was able to impose in these circumstances. He said the case will now be relisted so he can hear submissions on how it should be handled from here. (Additional reporting by Alison Leung; Editing by Chris Lewis and David Holmes) ($1 = 7.791 Hong Kong Dollars)