This section aims to clarify the application of the secrecy provisions under the Securities and Futures Ordinance (SFO) and to provide guidance from the SFC’s perspective on certain practical aspects of the secrecy obligation.
Please note, however, that the information is general in nature; it is also not exhaustive and does not take into account your specific circumstances. The views expressed by the SFC in here are not binding on either the courts or the Department of Justice. The information should not be regarded as a substitute for professional advice. You should seek independent legal advice if you have any doubt about how section 378 of the SFO applies to you.
It should be noted that in relation to events that occurred and regulatory processes (such as investigations and disciplinary proceedings) that began before 1 April 2003 (when the SFO came into effect), the secrecy provisions set out in section 59 of the repealed Securities and Futures Commission Ordinance still apply.
Application of the secrecy provisions is clarified in the sub-sections below.
Secrecy provisions and obligation
The secrecy provisions, which are set out in section 378 of the SFO, create the secrecy obligation, the exceptions to it and the consequences for breaching it.
The secrecy obligation, which is contained in section 378(1) of the SFO, is the legal requirement that – except in the performance of a function under the SFO or for the purpose of carrying into effect or doing anything authorized under any of the provisions of the SFO - a “specified person” (see "Persons to whom the secrecy provision applies") must –
- not disclose (i.e. preserve and aid in preserving secrecy) any matter coming to his knowledge –
- by virtue of his appointment under the SFO;
- in performing any function or exercising any power under the SFO;
- in carrying into effect or doing anything required or authorized under any of the provisions of the SFO; or
- in the course of assisting a person who falls within (b) or (c);
- not communicate any such matter referred to in (i) to any other person; and
- not suffer or permit any person to have access to any –
- record of information, however compiled or stored; or
- any document, which is in his possession by virtue of (i)(a), (b) or (c).
In addition, where information is disclosed under (i)(b) or (c) to any person –
- that person; and
- anyone who receives such information directly or indirectly from him, is also bound by the secrecy obligation (see, section 378(7)).
Examples of information that might typically be disclosed under relevant provisions of the SFO
Examples of such information include the fact (if it has not been made public) –
- that the SFC is exercising any of its powers under the SFO – this would be disclosed, eg, to a person who receives a direction under section 179; a requirement under section 180; a request under section 181 or an investigator’s notice under section 183;
- that the SFC has a regulatory interest in information being sought in the performance of the SFC’s functions – this would be disclosed, eg, to a person who receives an informal request for information relating to transactions in securities; and
- that the SFC is taking disciplinary action against a regulated person – this would be disclosed, eg, to a person who receives a Notice of Proposed Disciplinary Action or a Decision Notice under section 198.
Persons to whom the secrecy obligation applies
In addition to applying to the persons described in (iv) and (v) of "Secrecy provision and obligation," the secrecy obligation applies to any “specified person”, namely –
- the SFC (including executive and non-executive directors);
- any person who performs work for the SFC (e.g. any of its employees or consultants);
- a person appointed under any of the provisions of the SFO (eg, a member of the Takeovers and Mergers Panel or the Market Misconduct Tribunal or an auditor appointed under section 159);
- a person performing a function under or carrying into effect any of the provisions of the SFO (eg, a person who conducts an inspection of an intermediary under section 180 or who carries out an investigation under sections 182 and 183); or
- a person assisting a person referred to in (iv) (by e.g. providing a record or document required under section 179, providing information required under section 181 or providing information and/or attending an interview with an investigator under section 183).
Exceptions to the secrecy obligation
The first, contained in section 378(1), excludes the disclosure of information by a person (e.g. a person authorized by the SFC under section 179 or 182) in the course of performing a function under the SFO or for the purpose of carrying into effect or doing anything authorized under any of the provisions of the SFO. For example, an investigator does not breach the secrecy obligation by disclosing to a witness during - and for the purposes of - an interview, information such as the details of trades in securities that are suspected to be related to an offence which is under investigation. However, the person receiving such information (in this example, the witness) is bound by the secrecy obligation (see (iv) of "Secrecy provision and obligation" and "Examples of information that might typically be disclosed under relevant provisions of the SFO").
In addition, section 378(2) lists seven forms of disclosure of information that do not attract secrecy at all. These pertain to disclosure of information -
- which has already been made available to the public;
- (with a view to the institution of, or otherwise for the purposes of, any criminal proceedings or any investigation carried out in Hong Kong under its laws;
- for the purpose of seeking professional advice from or giving advice by a counsel or solicitor, or other professional adviser acting or proposing to act in a professional capacity in relation to any matter arising under the SFO;
- in connection with any judicial or other proceedings to which the person making disclosure is a party;
- in accordance with a court order or other legal requirement;
- to the Hong Kong Deposit Protection Board for the purpose of enabling or assisting it to perform its statutory functions; and
- by the auditors of a listed corporation to the SFC, the Hong Kong Monetary Authority or the Insurance Authority under section 381.
There are other gateways through which confidential information may be disclosed pursuant to section 378(3), but these only apply to the SFC.
Person regarded as “other professional adviser”
The SFC’s view is that the sort of person envisaged as falling within the category of “other professional adviser” is someone who is qualified to advise on the issues relevant to the matter that has arisen under the SFO (eg, a forensic accountant, a trading specialist or a listing agent) and who is acting in a professional capacity towards the person being advised.
The only circumstance under which a person may disclose information to which the secrecy obligation applies without breaching that obligation is with the SFC’s consent for onward disclosure under section 378(7). Application for such consent should be made in writing, stating the full extent of the information sought to be disclosed, the persons to whom it is proposed to be disclosed and the reasons for the proposed disclosure. Where the SFC grants consent, it does so in writing, setting out the information to which the consent relates, the persons to whom disclosure may be made and any conditions to which the consent is subject.
Unless the person (whether an individual, a firm or a corporation) has been asked by the SFC to keep the matter completely secret (or, secret from an individual, corporation, partnership or organisation, etc, named by the SFC), the SFC’s consent to the following notifications (and only these) can be assumed without the need to make a formal application:
- the fact that he (or it, in the case of a firm, etc) is bound by the secrecy obligation
- the general nature of the matter (but without revealing anything specific about it), which has given rise to the secrecy obligation;
- the means by which he or it came to be bound by the secrecy obligation (e.g. upon receiving an investigator’s notice under section183);
- the date, time and place at which he or it is required to provide information or documents to the SFC or attend an interview by an investigator, if disclosed to the following persons only -
- in the case of an individual bound by the secrecy obligation, to his employer, spouse or partner and, where the individual is a regulated person, his firm’s responsible officer or executive officer, compliance officer or in-house lawyer;
- in the case of a corporation bound by the secrecy obligation, to its board of directors, its holding company or indemnity insurers.
Penalty for breach
A person who breaches the secrecy obligation is liable to prosecution and upon conviction on indictment to a maximum fine of $1 million and imprisonment for up to two years or upon summary conviction, to a maximum fine of $100,000 and imprisonment for up to six months. A regulated person may, in addition, be disciplined.
Importance of maintaining secrecy by relevant persons
In the SFC’s view, it is because the secrecy obligation exists as a safeguard –
- of the public interest that the SFC should not be compromised in its operations and the pursuit of its regulatory objectives by the leakage of confidential information;
- of the right of all persons, whether individuals or corporations, to be presumed innocent until proven guilty;
- of the reputation of individuals and the goodwill of firms investigated by the SFC or undergoing disciplinary proceedings;
- of commercially sensitive information that intermediaries, and others cooperating with the SFC, would be unwilling to disclose to the SFC if there were danger that the information would be misused;
- of the integrity of the market, for example by keeping price-sensitive information secret pending its release (eg, in an announcement by a listed corporation) to the market; and
- of the status of Hong Kong as an international financial centre, by ensuring that the SFC complies with international standards of confidentiality comparable to those observed by its counterpart regulators in all major markets internationally.