It can be a very disconcerting experience to receive a Notice to Attend an Interview from the Securities and Futures Commission (the “SFC”) requiring you to attend an interview with them. In this newsletter we shall briefly explain how you should respond to the notice.

Introduction

Pursuant to section 182 of the Securities and Futures Ordinance (Cap 571) (the “SFO”), the SFC may investigate any matter relating to:-

1.        any offence committed under the SFO;

2.        any person having engaged in fraudulent conduct in dealing in or managing investment in any securities, futures or leveraged foreign exchange;

3.        any market misconduct having taken place;

4.        any breach of disclosure requirement under the SFO; or

5.        any dealing in investment in any securities, futures or leveraged foreign exchange which is not in the public interest.

The SFC may also direct an investigation be conducted to assist regulators outside Hong Kong.

The Section 183 Notice

Under section 183 of the SFO, in connection with an investigation under section 182, the SFC may, by way of a written notice, require the person under investigation, or any person believed to have any relevant record or document or information to attend an interview at a time and place specified by the investigator to answer any question relating to the matters under investigation (“Section 183 Notice”).

From the point of view of the recipient, the Section 183 Notice signifies the start of the investigation process.  Once the Notice is received, the legal duty to attend the interview as specified arises.  Failure to comply with the Section 183 Notice without a reasonable excuse is a criminal offence.  The maximum penalty is a fine of $200,000 and 1 year imprisonment.

If the Notice was never brought to the attention of the intended recipient because, for example, of a wrong address, failure to comply should constitute a “reasonable excuse” in such circumstances.

Upon receiving the Notice, the recipient should first and foremost ascertain whether he is a person “under investigation” or “assisting investigation”.  If he is “under investigation”, that means he is “subject to” investigation due to his possible involvement in some suspected wrongdoings. 

The Notice will also summarise the suspected wrongdoings occurring within a specified period.  Before attending the interview, the person under or assisting investigation should carefully study the alleged wrongdoings and identify his role, if any, in respect of the alleged wrongdoings.  As the recipient of the Notice is prohibited from discussing the matter with any others (see below), he can only turn to his lawyer for advice regarding his rights and obligations.  His lawyer will also assess the potential liability of the person under investigation.

It is particularly noteworthy that reliance on erroneous legal advice is not a reasonable excuse for failing to attend a Section 183 Interview. In 2010, two persons failed to attend SFC interviews upon erroneous legal advice. They were both convicted and sentenced to one month imprisonment. Thus it is essential for you to engage a competent lawyer familiar with this area of law to properly advise you in responding to a SFC Notice.

SFC Interview vs. Police Interview

An Interview before the SFC is fundamentally different from an interview before other law enforcement agencies such as the police or the ICAC in that the constitutional right to silence is taken away in the interview with the SFC.  The interviewee is under a strict duty to answer all the questions raised by the SFC.  Failure to answer or giving an untrue or misleading answer is by itself a criminal offence.

Further, a recipient of a Section 183 Notice is under a duty of confidentiality to preserve the secrecy of the investigation and must refrain from communicating the information relating to the investigation to any other person except his lawyer for the purpose of obtaining legal advice. The breach of this secrecy provision is a criminal offence punishable by a fine of $1,000,000 and 2 years imprisonment. Despite the draconian nature of the investigative power under the Section 183 Notice, the SFO, as a balancing exercise, provides a procedural safeguard to those who are compelled to answer questions during the interview.

During the course of the Section 183 Interview, if the interviewee considers that his answer to a particular question might tend to incriminate him, he may make a “claim” before providing the answer.  Once the claim is made, any answer covered by that claim shall not be admitted as evidence in criminal proceedings against him save for a number of limited exceptions. The effect of such claims, however, cannot be extended to disciplinary or civil and administrative proceedings.

A person attending a Section 183 Interview is strongly advised to be accompanied by a lawyer. The lawyer will help to ensure that “claims” are appropriately made in respect of potentially incriminating answers.  Further, as the interviewee is required to answer all the questions right at the spot, it may be necessary for him to obtain instant legal advice before providing the answer.

Conclusion

The removal of the right to silence in an interview with the SFC could become a trap for the unwary.  An interviewee could find himself exposed to unexpected criminal liabilities.  For this reason, it is essential that a recipient of the Section 183 Notice engages a lawyer at an early stage and ideally should have his lawyer accompanying him to the interview.