On 13 November 2015, the Securities and Futures (Amendment) Ordinance 2015 (Ord. No. 19 of 2015) (the “Amendment Ordinance”) came into force to amend the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “SFO”). Among the others, the secrecy provision – section 378 of the SFO – has been modified to give Hong Kong Stock Exchange (the “HKEx”) power to consent to further disclosure of confidential information disclosed by the HKEx.

Before Amendment

Section 378 of the SFO governs the secrecy and confidentiality of information in relation to the SFO and its application. The section basically catches all persons and entities subject to the Hong Kong securities regulatory regime, including companies which are listed on the HKEx and subject to the Listing Rules. Section 378(7) also makes the secrecy obligation apply to any person who obtains or receives the confidential information.

Before the Amendment Ordinance came into effect, the HKEx has already had the power to disclose confidential information under section 378(1) when it performs a function under the SFO. However, there is no explicit provision allowing the HKEx to permit the person to whom it has disclosed confidential information, who is caught under section 378(7), to further disclose such information to another person.

The only body which may give consent to such onward disclosure before the amendment was the Securities and Futures Commission (the “SFC”). Section 378(9) further gives power to the SFC to impose conditions it considers appropriate when giving consent to an onward disclosure.

The Amendment

The Amendment Ordinance amends the SFO to the effect that the HKEx is given power to permit or consent to onward disclosure under section 378(7) to an extent similar to that of the SFC.

Section 378(7)(ia) is added to explicitly provide for the power of a “recognized exchange company”, which includes the HKEx, to consent to onward disclosure if the first disclosure was made by that recognized exchange company. Section 378(9A) is added to give a recognized exchange company the power to impose conditions on onward disclosure similar to that of the SFC.

It should nonetheless be noted that the power of the HKEx as regards onward disclosure is narrower than that of the SFC. While the SFC may permit onward disclosure by any person receiving confidential information which is subject to section 378 of the SFO regardless of who disclosed the information to that person in the first place, the HKEx may only permit onward disclosure by the person to whom the HKEx disclosed the information.

Reason for the Amendment

According to the Legislative Council Brief submitted by the Financial Services and the Treasury Bureau to the Legislative Council, the amendment of section 378 of the SFO is to raise administrative efficiency of the securities regulatory regime. Before the amendment, when listed companies requested onward disclosure of information to their insurers or auditors that they were under investigation by the HKEx, the HKEx had to approach the SFC for the latter’s consent on such onward disclosure since the HKEx did not have the power to give such a consent; this was the case even when there was no regulatory need for the SFC otherwise to be involved in the process. The amendment thus relieves the SFC from this kind of purely administrative involvement by allowing the HKEx to give consent on onward disclosure of confidential information during the performance of its regulatory role.

Appendix: Amendment of Section 378 of SFO

Section 378(7)

Where information is disclosed by a specified person pursuant to subsection (1), or in any of the circumstances described in subsection (2), (3) or (4) (other than subsections (2)(a), (3)(a), (g)(i) and (k) and (4)(b))-

(a)   the person to whom that information is so disclosed; or

(b)   any other person obtaining or receiving the information, whether directly or indirectly, from the person referred to in paragraph (a),

shall not disclose the information, or any part thereof, to any other person, unless-

(i)    the Commission consents to the disclosure;

(ia) if the specified person is a recognized exchange company, the Commission or the recognized exchange company consents to the disclosure;

(ii)   the information or the part thereof (as the case may be) has already been made available to the public;

(iii)   the disclosure is for the purpose of seeking advice from, or giving advice by, counsel or a solicitor or other professional adviser acting or proposing to act in a professional capacity in connection with any matter arising under any of the relevant provisions;

(iv)   the disclosure is in connection with any judicial or other proceedings to which the person or the other person referred to in paragraph (a) or (b) (as the case may be) is a party; or

(v)   the disclosure is in accordance with an order of a court, or in accordance with a law or a requirement made under a law.

Sections 378(9) and (newly added) 378(9A)

(9)   The Commission, in disclosing any information in any of the circumstances described in subsection (3) or in granting any consent pursuant to subsection (7)(i) or (ia) or (8)(ii), may impose such conditions as it considers appropriate.

(9A) A recognized exchange company, in granting a consent pursuant to subsection(7)(ia), may imposed any condition that it considers appropriate.