Hong Kong’s Securities and Upcoming Fee (SFC) is made up of started off a thirty day period-lengthy session1 upon advised amendments towards the Securities and Futures Ordinance (SFO) in the direction of permit the provision of far better supervisory tips towards foreign regulators, on talk to. Created suggestions toward the session are essential in direction of be filed via 16 January 2015.

The SFC’s outlined concentration within creating the encouraged amendments is in direction of align Hong Kong’s provisions upon the supervision of controlled multi-nationwide entities with world requirements. This within flip should really contribute in direction of the moving into into of far more supervisory cooperation preparations in between the SFC and foreign regulators and get to for Hong Kong controlled entities in the direction of these international marketplaces which limit accessibility towards jurisdictions with mutual cooperation preparations inside location.

The extension of the SFC’s powers less than the encouraged amendments is very minimal: Components 180 and 186 of the SFO would be amended in direction of make improvements to the SFC’s material accumulating powers. The amendments would Deliver the SFC the discretion (still not an responsibility) in the direction of health and fitness its supervisory powers beneath Aspect 180 in direction of find information or information against an SFC-qualified firm or its identical enterprise in just relation towards a controlled sport carried upon via the SFC accredited company, inside purchase in direction of aid international regulators inside non-enforcement very similar items.


Despite the fact that the SFO provisions which enable the SFC in the direction of support foreign regulators upon enforcement factors meet up with global criteria, its provisions permitting SFC suggestions upon supervisory issues drop quick of world norms in just one particular slim recognize: they do not allow for the SFC in direction of health and fitness its supervisory powers in the direction of uncover content inside buy towards assistance an international regulator in just relation toward non-enforcement points. The encouraged SFO amendments are designed in the direction of rectify this shortcoming.

The SFC considers it necessary that the SFC need to be capable in the direction of offer aid upon supervisory issues toward foreign regulators simply because this will generate it simpler for Hong Kong in direction of input into supervisory memoranda of knowledge (MOUs) with foreign regulators. In direction of day, Hong Kong includes entered just a handful of industry-unique supervisory MOUs and the SFC issues that the latest limitation upon its powers could possibly adversely have an affect on its electricity in direction of input into further more MOUs. This, inside switch, might negatively affect the SFC’s electrical power in the direction of come across aid against foreign regulators.

The variation amongst supervisory cooperation and cooperation within just the enforcement context is necessary. Inside of relation in the direction of enforcement, cooperation involving regulators contains the investigate of suspected misconduct with the focus of accomplishing proof for employ the service of inside criminal proceedings. Supervisory cooperation, upon the other hand, is essentially preventive inside mother nature and consists of the replace of content which is not built towards be employed in just criminal proceedings. Its focus is toward make improvements to supervision of controlled entities with arrive at in the direction of written content against international regulators.

The SFC expects that the suggested amendments will pay for Hong Kong controlled entities larger achieve toward towns overseas marketplaces for the reason that it must open up up marketplaces toward which reach is constrained towards jurisdictions with worldwide supervisory cooperation preparations.

Latest Composition

The SFC loves supervisory and investigatory powers down below Part 180 and Pieces 182 and 183 of the SFO, respectively.

Aspect 180 SFO

Component 180 entitles the SFC in the direction of examine and deliver enquiries of certified companies with no eating fair lead to towards think that misconduct contains taken destination. On the other hand, the SFC can just health and fitness its powers down below this part towards Estimate regardless of whether a qualified company or its connected entity is inside of compliance with the Hong Kong regulatory provisions specific inside Aspect 180(2) SFO, which include things like any SFO provision, any provision of the SFO’s subsidiary rules and any words and phrases or disorders in the direction of which an SFC licence is make a difference. Even though written content accomplished as a result of the SFC upon health and fitness of its supervisory powers beneath Element 180 is not sought for enforcement needs, the content material could possibly be made use of within its disciplinary proceedings where by applicable.

Pieces 182-183 SFO

People provisions permit the SFC in direction of research exactly where it includes fair lead to in direction of believe that that a individual could incorporate engaged within just defalcation, rip-off, misfeasance or other misconduct within just romantic relationship with working within securities and so on. or that sector misconduct may possibly consist of taken location.

Latest SFO Provisions relating to SFC Aid toward Foreign Regulators

The SFO consists of the soon after provisions within just relation towards delivering suggestions toward international regulators.

Part 186 SFO

Element 186 makes it possible for the SFC toward conditioning its investigatory powers less than Components 182 and 183 SFO, if it will get an enforcement-very similar talk to in opposition to an international regulator for advice inside researching suspected contraventions of absolutely sure criminal or regulatory criteria, available that sure ailments are satisfied. In direction of health its powers, the SFC ought to be content that:

i.It is beautiful or expedient that the help ought to be delivered within just the awareness of the paying out community or within the general public attention, or that the help will allow or support the foreign regulator towards do the job its attributes and it is not opposite in direction of the consideration of the spending general public or in direction of the general public awareness;2 and

ii.The international regulatory system operates a comparable get the job done in direction of that carried out via the SFC or the Hong Kong Registrar of Services, and is make a difference towards ample secrecy provisions.3

More safety measures are learned within just Component 186(6) of the SFO which gives that promises for which the producer consists of said the privilege versus self-incrimination are unable to be employed via an international authority inside felony proceedings.

Component 378(3)(g)(i) SFO

Component 378(3)(g)(i) of the SFO will allow the SFC toward divulge non-general public content in direction of foreign regulators for enforcement or supervisory reasons furnished that positive disorders (as fastened out inside of part 378(5), 378(6)(a) and (b) SFO), which are fundamentally the similar as the health conditions in direction of which the SFC’s fitness of its powers down below Part 186 are issue, are achieved.

Recent Powers in direction of Offer you Content material in the direction of Foreign Regulators

Appropriately, the SFC is previously entitled towards supply non-community content material toward foreign regulators inside 2 scenarios:

i.For Enforcement Applications

The SFC can find articles down below Part 186 SFO through training its enforcement powers (e.g. towards analysis below Parts 182 and 183), and divulge these written content in direction of an international regulator below Aspect 378(3)(g)(i); and

ii.For Enforcement or Non-enforcement Reasons

In which the content purchased is currently in just the ownership of the SFC at the season of the foreign regulator’s inquire, the SFC can divulge it towards an foreign regulator below Part 378(3)(g)(i).

Even so, Element 186 does not give for the SFC towards fitness its supervisory powers underneath Portion 180 inside of invest in in the direction of offer you suggestions toward an foreign regulator. For that reason, When Element 180 will allow the SFC in the direction of discover articles for its particular supervisory needs, the SFO at present features no convey provision letting the SFC in direction of fitness its supervisory powers towards locate content material for the applications of encouraging international regulators within non-enforcement equivalent points.

Recommended Modifications

The recommended amendments would Deliver simply just a slim style of supervisory cooperation within buy in direction of hit a stability in between facilitating cross-border content switch and defending in opposition to extreme disclosure.

Mother nature of Support

Down below the recommended amendments, the SFC may simply just offer you information in just relation in direction of:

i.an SFC certified firm that is far too controlled as a result of the international regulator; and/or

ii.a very similar firm of an SFC-certified business exactly where the identical enterprise is controlled as a result of the foreign regulator.

The phrase “comparable business” is described within the SFO4 toward include things like:

閳ヮ晣 preserving business enterprise;

閳ヮ晣 subsidiary;

閳ヮ晣nother subsidiary of the similar trying to keep small business; and

閳ヮ暁wo or even more providers where by the identical patient: (i) controls the framework of the board of administrators of each and every small business; (ii) controls excess than 50 percent the voting electric power at all round conferences of every business enterprise; or (iii) retains further than 50 % of the issued percentage money of just about every organization.

The variety of guidance would be minimal toward acquiring data and files versus the certified company (or comparable business) which are in different ways not offered in direction of the foreign regulator and producing enquiries pertaining to this kind of and similar transactions and functions. The material in direction of be realized would additionally contain in direction of relate in the direction of a controlled recreation carried upon via the qualified company, or a transaction or recreation which was carried out inside the class of, or which could possibly have an affect on, a controlled match executed via the accredited company. The SFC might not consequently supply suggestions in just relation in the direction of content relating in direction of an unregulated recreation performed as a result of a certified enterprise (e.g. bullion buying and selling).

Continue to, the SFC would incorporate no electric power underneath the amended provisions in direction of input a firm’s premises upon behalf of an foreign regulator or toward come across written content against get-togethers other than accredited firms and their similar firms.

Needs of Selection

The SFC would basically be ready present suggestions exactly where its cause is toward let an foreign regulator in direction of Calculate:

閳ヮ暁he hazards in chemical reactions direction of and the have an impact on upon the balance of the economical procedure within just its jurisdiction; or

閳ヮ晧ompliance with prison or regulatory wants (excluding tax) administered through the foreign regulator within relation towards transactions and routines relating towards securities, futures contracts, leveraged international replace contracts, collective expense techniques, OTC derivative goods or other comparable transactions that it regulates.

The encouraged amendments do not want towards go over registered establishments mainly because the Hong Kong Financial Authority is currently accepted towards Deliver information towards foreign regulators beneath the Banking Ordinance.

Safety measures

Present Precautions

Tips in the direction of foreign regulators would simply be made available make a difference in the direction of the current safety measures (as pointed out in excess of) which include things like the necessity that the SFC really should be joyful that its assist toward the foreign regulator is available in just the “general public consideration”. Inside identifying regardless of whether offering aid would be within just the “general public focus”, 1 of the components the SFC should just take into account is no matter if the foreign regulator developing the ask is ready and prepared towards offer you reciprocal information inside of respond to in direction of a question for aid towards Hong Kong5. Further more, a personal against whom the SFC requests a assertion within just the physical fitness of its investigatory powers beneath Part 179 or 183 could claim privilege from self-incrimination below Component 186(6) SFO. Within just this kind of a circumstance, the SFC can’t give the self-incriminating assertion towards an foreign regulator for retain the services of within prison proceedings within just its jurisdiction.

Excess Precautions

Foreign regulators would furthermore be essential towards supply composed undertakings toward the SFC that they will:

閳ヮ晻nly retain the services of content achieved versus the SFC for the functions of pinpointing: (i) the threats towards and the have an affect on upon the harmony of the economic course of action inside their jurisdiction; or (ii) compliance with prison or regulatory expectations (excluding tax) administered through the foreign regulator;

閳ヮ晹ot hire the articles within any proceedings until the authority or regulatory organisation is made up of sought, and the SFC includes agreed in the direction of offer you these kinds of content material inside accordance with Part 186(1) SFO;

閳ヮ暁reat content material available toward them as private and will not divulge it in direction of any other individual without having the SFC’s acceptance;

閳ヮ晱nform the SFC as quickly as rather practicable if they are necessary toward divulge any of the material beneath a lawfully enforceable have to have, and just take all suitable actions towards retain the confidentiality of the written content; and

閳ヮ晧ooperate with the SFC inside of any things to do or proceedings trying to get in the direction of keep the confidentiality of the content material acquired.

It need to be reported that the suggested amendments would not impose an accountability upon the SFC in direction of offer you help in the direction of an foreign regulator requesting suggestions: it would simply just Deliver the SFC a discretion in the direction of supply tips just after a inquire.

Foreign Comparison

Appendix A towards the session paper sets out a desk displaying the extent of advice permitted in direction of be offered through regulators inside of Australia, Singapore and the United Kingdom and the scope of the prepared undertakings essential of the requesting foreign regulator as a situation toward provision of these types of tips.

The Session Concerns

The session seeks suggestions in direction of the after 4 queries:

Ponder 1: Do your self contain any selection guidelines in the direction of the proposals within this Session Paper which may possibly much too complete the similar trumpet sheet music ambitions that the advised amendments in direction of elements 180 and 186 intend in the direction of accomplish?

Surprise 2: Do your self incorporate any opinions upon the proposal that the reasons of supervisory tips really should be constrained towards individuals spelled out within paragraph 25(b) of the Session Paper?

Marvel 3: Do yourself contain any feedback upon the proposal that the energy toward obtain material for supervisory suggestions applications ought to be minimal in the direction of all those explained within paragraphs 25(a) and (c) of the Session Paper?

Ponder 4: Do by yourself concur that there is a want towards consist of the prison pre-requisite of acquiring created undertakings against the foreign regulators? Do on your own incorporate any feed-back upon the scope of the undertakings defined inside paragraph 25(d) of the Session Paper?

Answer Submission

Fascinated get-togethers really should publish suggestions upon the proposals within producing upon or ahead of 16th January 2015:

i.as a result of upon-line submission as a result of the SFC world-wide-web

ii.through electronic mail toward:

iii.as a result of write-up in the direction of:
Intermediaries Supervision Office
Intermediaries Section Securities and Futures Fee
35/F, Cheung Kong Heart
2 Queen’s Street Central
Hong Kong

iv.as a result of fax towards: +852 2284 4660


1.The SFC’s “Session Paper upon Advised Amendments in direction of the Securities and Futures Ordinance for Selling Information towards International Regulators inside of Positive Conditions” of 19 December 2014

2.Part 186(3) SFO.閳?br />
3.Aspect 186(5) SFO.閳?br />
4.Element 3 of Section 1 of Program 1 towards the SFO.閳?br />
5.Element 186(4)(a)(ii) of the SFO.閳?/p>

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