On 5 June 2015, the Securities and Futures Commission (SFC) published its consultation conclusions on proposed amendments to the Securities and Futures Ordinance (SFO) for providing assistance to overseas regulators in certain situations.
The proposed amendments will give the SFC discretion to provide supervisory assistance to an overseas regulator, but will not impose an obligation to do so.
For more information on the consultation paper issued on 19 December 2014 (Consultation Paper), please see our previous blog entry.
The purpose of the amendments (which were proposed to be made to Sections 180 and 186 SFO) is to allow the SFC, at its discretion, to broaden and exercise its supervisory powers to obtain information in order to assist overseas regulators in non-enforcement matters. This was done to facilitate supervisory cooperation with overseas regulators and engage in a reciprocal arrangement with them in supervisory information sharing when necessary.
During the consultation period, eight submissions were received from various market participants and professional bodies. The majority agreed with the overall objectives of the proposals, nevertheless several amendments were proposed.
The SFC proposes the following modifications to the original proposals:
- Purposes and scope of supervisory assistance
The SFC proposes to make clear that SFC would only assist an overseas regulator if it could confirm it was not able to fully ascertain the matters in relation to potential risks and impact to the financial stability of its jurisdiction and complying with legal/regulatory requirements in relation to transactions and activities regarding securities[1] in relation to a licensed corporation that is regulated by the SFC and the overseas regulator; and/or a related corporation of a licensed corporation where the related corporation is regulated by the overseas regulator.The SFC will also replace the reference to “financial system” with “financial stability”. - Power to gather Information for supervisory assistance
The SFC revised its wording in its proposal so that SFC should only assist the overseas regulator upon receiving written confirmation that they could not obtain the information itself through reasonable means.SFC also confirmed that the existing positions regarding legal professional privilege and the privilege against self-incrimination will remain valid. It also confirmed that the proposals in relation to personal data privacy and the legality of disclosing personal data were consistent with the Personal Data (Privacy) Ordinance. - Safeguards for providing supervisory assistance
Although a number of respondents expressed concerns in the effectiveness of undertakings by overseas regulators, the SFC was of a view that the current proposal on written undertakings by the overseas regulator is in line with current international practice.Finally, the SFC has recommended the Government to take into account the above modifications when drafting the relevant amended provisions under the SFO.
[1] Including futures contracts, leveraged foreign exchange contracts, collective investment schemes, OTC derivative products or other similar transactions that the overseas regulators regulates
