Application of section 378 of the SFO to disclosure of supervisory information by licensed corporations
From time to time, licensed corporations (LCs) will provide assistance to the Intermediaries Supervision Department (ISD) when ISD performs the SFC’s supervisory functions under the Securities and Futures Ordinance (SFO). LCs, being persons assisting the SFC in the performance of its functions, will have an obligation under section 378 of the SFO to preserve secrecy with regard to any matter coming to their knowledge in the course of providing the assistance, not to communicate any such matter to any other person, and not to permit any other person to have access to any record or document that they have in their possession by virtue of the assistance provided.
There are circumstances where a person may disclose information to which the secrecy obligation applies without breaching section 378 of the SFO. The exceptions under section 378 of the SFO include:
The disclosure of information in the performance of a function under, or for the purpose of carrying into effect or doing anything required or authorized under, the SFO or other relevant provisions (the term “relevant provisions” is defined under Part 1 of Schedule 1 to the SFO). This will be permitted under section 378(1);
The other forms of disclosure or communication of information specifically exempted under section 378(2); and
The onward disclosure of information with the SFC’s consent under section 378(7).
These FAQs seek to clarify the application of the secrecy provisions under section 378 of the SFO to the disclosure of supervisory information by LCs to auditors, counsel, solicitors or other professional advisers.
The common types of supervisory information, records or documents that might typically be subject to section 378 of the SFO include:
(i) The fact that on-site reviews will be, are being or have been conducted under section 180 of the SFO and the findings of such reviews;
(ii) The correspondence issued by ISD to LCs, including requests for information and letters of deficiencies; and
(iii) The responses provided by LCs to ISD which, given their nature, would usually reveal information on items (i) and (ii).
(collectively referred to as “supervisory information”).
LCs should note that:
(a) These FAQs focus on the application of section 378 of the SFO in the context of LCs which may be subject to the secrecy provisions by virtue of assisting the SFC in its performance of supervisory functions. The SFC has separately published general information about the application of the secrecy provisions to enforcement related matters1; and
(b) These FAQs are general in nature. They are not exhaustive and do not take into account specific circumstances of LCs. The views expressed by the SFC here are not binding on either the courts or the Department of Justice. These FAQs should not be regarded as a substitute for legal or professional advice. LCs should seek independent legal advice if there is any doubt about how the secrecy provisions apply to them.
LCs should also be mindful of other relevant laws and regulations (such as the Personal Data (Privacy) Ordinance) that may limit the use or disclosure of certain information, and ensure compliance with the relevant requirements when disclosing information.
Is the SFC’s consent required for the disclosure of supervisory information by an LC to an auditor?
The SFC’s consent is not required for disclosure of supervisory information by the LC to an auditor if:
The auditor is appointed by the LC under section 153 of the SFO, or by the SFC under section 159 or 160 of the SFO in specified circumstances; and
The supervisory information is disclosed by the LC to the auditor for the purpose of making relevant reports under the SFO2.
However, the auditor who receives the supervisory information from the LC shall not disclose such information to any other person, unless the SFC consents to such onward disclosure, or any other exception under section 378 of the SFO applies.
Is the SFC’s consent required for the disclosure of supervisory information by an LC to its counsel, solicitor or other professional adviser?
The LC may disclose supervisory information for the purpose of seeking advice from, or giving advice by, counsel, a solicitor or other professional adviser3 acting or proposing to act in a professional capacity in connection with any matter arising under any of the relevant provisions. No consent from the SFC is required for such disclosure.
However, the counsel, solicitor or other professional adviser who receives the supervisory information from the LC shall not disclose such information to any other person, unless the SFC consents to such onward disclosure, or any other exception under section 378 of the SFO applies.
1 For details, please refer to https://www.sfc.hk/web/EN/regulatory-functions/enforcement/secrecy-provision.html. 2 This includes reports made under sections 153, 156, 159, 160 and 161 of the SFO. 3 The SFC takes the view that “other professional adviser” refers to someone who is qualified to advise on the issues relevant to the matter that has arisen under the relevant provisions and who is acting in a professional capacity towards the LC being advised.
Last update: 18 Dec 2018