Court rules on SFC obtaining information for use by Japanese regulators

On 11 February 2019 Hong Kong’s Court of First Instance held that the power of the Securities and Futures Commission (SFC) to obtain trading records from intermediaries under s. 181 of the Securities and Futures Ordinance (SFO) does not violate the privilege against self-incrimination. 

The Court dismissed a judicial review application brought by a SFC-licensed corporation and its responsible officer (applicants) against the SFC in connection with an investigation of a suspected market manipulation in the shares of a Japan-listed company.

During the investigation by the SFC and certain Japanese regulators (with whom the SFC has entered into international cooperation and mutual assistance arrangements), the SFC used its statutory powers to compel the applicants to provide information and materials (compelled materials) under the SFO.

The compelled materials were then provided to and used by the Japanese regulators in proceedings in Japan. 

The Court found that: 

• the proceedings commenced by the Japanese regulators against the applicants in Japan were civil in nature, i.e. non-criminal in character; 

• the compelled materials were lawfully obtained by the SFC pursuant to its powers under the SFO and the materials were lawfully provided to the Japanese regulators; and

• the privilege against self-incrimination is not violated by section 181 of the SFO. The section is no more than reasonably necessary for accomplishing the legitimate aim of ensuring that the financial markets of Hong Kong operate fairly and honestly, and a reasonable balance has been struck between the societal benefits of the section and any inroads that there may be into the privilege against self-incrimination.