SFC Investigations & Prosecution

Overview

We have market leading expertise representing clients in SFC investigations, prosecutions and other enforcement action. Our SFC Investigations and Prosecutions practice is part of our Financial Services Regulatory offering, for which we have been consistently recognized as an outstanding, leading and recommended practice by independent editorial publications, including the International Financial Law Review 1000 (ILFR1000), the Legal 500, Chambers and Partners and Asialaw Profiles, and for which our lawyers have been consistently recognized as “leading”, “highly regarded”, “well regarded” and “market-leading” lawyers.

We routinely advise clients who are the persons of interest in SFC actions, including SFC licensed corporations, licensed representatives, responsible officers (“ROs”), managers-in charge (“MICs”) and executives of SFC licensed firms who are themselves not licensed by the SFC. We have acted for a wide range of clients, including hedge fund managers, private equity sponsors, managers of units trusts and mutual funds, brokerage firms, wealth managers, independent financial advisers, banks and corporate finance sponsors and advisers.

Matters which we have handled include:

  • SFC investigations under section 179 of the Securities and Futures Ordinance (“SFO”) in relation to listed companies

  • SFC investigations under section 182 of the SFO in relation to SFC licensed corporations, registered institutions, licensed representatives, responsible officers and relevant individuals registered with the Hong Kong Monetary Authority (“HKMA”)

  • SFC disciplinary proceedings under sections 194 and 196 of the SFO, proceedings before the Market Misconduct Tribunal (“MMT”), criminal prosecutions before the magistrate courts, as well as appeal proceedings from SFC enforcement action to the courts and to the Securities and Futures Appeals Tribunal ("SFAT"

Our work includes:

  • representing clients who are under threat of an SFC investigation, who have been identified as “a person under investigation” or “a person assisting investigation” in an SFC investigation notice, or who have received a notice of proposed disciplinary action or a summons

  • advising clients on how to handle an SFC investigation, including helping clients understand their rights and the SFC investigation process

  • assisting clients in preparing for an SFC interview and responding to an SFC investigation notice, including a notice to produce documents and answer written questions

  • helping clients understand the regulatory concerns underlying specific SFC enquiries or requests for information, and preparing responses to pre-empt or mitigate any risk of SFC prosecution or the institution of MMT proceedings

  • working with clients (including their compliance officers and in-house counsel) to identify potential regulatory compliance breaches, including non-compliance with the Securities and Futures Ordinance (“SFO”) and subsidiary legislation, the SFC’s codes, guidelines and circulars, including the Code of Conduct for Persons Licensed by or Registered with the SFC (“SFC Code of Conduct”), the Fund Manager Code of Conduct (“FMCC”), the Corporate Finance Adviser Code of Conduct (“CFA Code”), the Management, Supervision and Internal Control Guidelines (“Internal Control Guidelines”) and the Guideline on Anti-money Laundering and Counter-Financing of Terrorism (For Licensed Corporations) (“AML Guideline”)

  • advising clients on current SFC enforcement trends and disciplinary actions

  • attending SFC interviews with clients and preparing written responses to SFC’s enquiries or requests to produce documents and answer written questions

Our experience covers a broad spectrum of issues, including alleged or suspected breaches of:

  • the “fit and proper” requirements triggering SFC disciplinary action under sections 194 and 196 of the SFO

  • market misconduct under sections 270, 274 to 278 and 291, 295 to 299 of the SFO, including insider dealing, false trading, price rigging, disclosure of information about prohibited transactions, disclosure of false or misleading information inducing transactions and stock market manipulation

  • anti-fraud provisions under section 300 of the SFO which criminalises the act of employing fraudulent or deceptive devices or engaging in fraudulent or deceptive practices in transactions involving securities, futures contracts or leveraged foreign exchange trading

  • the statutory duty to disclose inside information under Part 14A of the SFO

  • disclosure of interests requirements under Part 15 of the SFO, whether director disclosures or substantial shareholder disclosures

  • short position reporting requirements and documentary assurance requirements

  • unlicensed regulated activities

  • unauthorized investment offers

  • the naked short selling prohibition

  • mis-selling

  • breaches of the Hong Kong Stock Exchange ("HKSE") monopoly

  • breaches of statutory recognition requirements for futures markets

  • breaches of the requirements set out in the SFC Code of Conduct and other codes and guidelines, including deficiencies or inadequacies in internal controls or risk management

We have a strong track record of devising innovative solutions to difficult situations and leverage our substantial understanding of the commercial context and the regulatory framework to identify important evidence and lines of enquiry to create defensive lines.

Q&A

To find out more about how we can assist during an SFC investigation, we set out below a list of common enquiries we receive from clients and our approach to addressing these enquiries as follows.

SFC investigation notices are issued by the SFC under section 183 or section 179 of the SFO. These sections give SFC investigators certain powers. A notice issued under s. 183 may, for example, require you to attend an SFC interview and answer questions, to produce documents and answer written questions or to provide all reasonable assistance to SFC investigators.

We have extensive experience advising clients on the scope of the SFC’s investigation powers. We can advise you on whether the SFC’s requests are within their jurisdiction, how to manage the timeline for an SFC investigation and how to manage the flow of information to the SFC. We can help you identify whether there is any risk that your answers to the SFC’s questions may incriminate you and how to exercise you privilege against self-incrimination.

Each investigation notice is subject to statutory secrecy obligations under the section 378 of the SFO. This section prohibits you from disclosing to anyone anything about the investigation. However, you may consult a lawyer about the investigation without breaching these secrecy obligations.

In cases where your firm is under investigation, we can advise on how to handle the disclosure of information between members of the firm to comply with statutory secrecy requirements and how to protect information and communications with affiliates and staff from being disclosed, such as by maintaining legal professional privilege and common interest privilege.

In cases where you are personally under investigation, such as when you have received a section 183 notice under a section 182 investigation, we can advise on the persons to whom you can disclose information about the investigation and on what information you can disclose.

We have extensive experience dealing with indemnity coverage issues in the context of an SFC investigation. We can assist with understanding whether you may be entitled to indemnity insurance, whether under a D&O Insurance policy or a professional indemnity insurance (also known as professional liability insurance or professional services insurance) policy. We can assist with taking steps necessary to claim entitlement under applicable insurance coverage. We can advise you on complying with statutory secrecy obligations in making a claim for insurance coverage and negotiate terms of coverage with the insurer.

Awards

Chambers and Partners

Financial Services Regulatory

Leading Practice

Chambers and Partners

Financial Services Regulatory

Leading Individual

Chambers and Partners

Financial Services Regulatory

Leading Lawyer

Chambers and Partners

Financial Services Regulatory

Well Regarded Lawyer

IFLR 1000

Financial Services Regulatory

"Positively Ranked"

IFLR 1000

Financial Services Regulatory

Highly Regarded Lawyer

Legal 500

Financial Services Regulatory

Leading Individual

Legal 500

Financial Services Regulatory

“Recommended Practice”

Asialaw Profiles

Financial Services Regulatory

Leading Practice

Asialaw Profiles

Financial Services Regulatory

Outstanding Practice

Asialaw Profiles

Financial Services Regulatory

Market Leading Lawyer

Asialaw Profiles

Financial Services Regulatory

Leading Lawyer