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The Securities and Futures Commission (SFC) today issued an updated guidance note (Note 1) highlighting the benefits of cooperating with the SFC in its investigations and enforcement proceedings (Note 2).
The guidance note also introduces new measures to encourage the types of cooperation which help the SFC investigate more serious legal or regulatory breaches and achieve timely and desirable enforcement outcomes.
"For cooperation to be recognised, parties must go above and beyond their statutory and regulatory obligations," said Mr Thomas Atkinson, the SFC’s Executive Director of Enforcement. "Those who take proactive steps to resolve our regulatory concerns in a timely manner will benefit the most from cooperation, which could result in significant savings of time and resources."
Prompt cooperation which facilitates desirable enforcement outcomes may result in the SFC’s proceedings being resolved at an earlier stage (Note 3). In recognition of cooperation, sanctions may be reduced by an amount which varies according to when a case is resolved (Note 4).
To encourage parties to provide timely, high-quality and substantial assistance, the guidance note outlines the factors the SFC takes into account when assessing cooperation. For firms and individuals, cooperation includes compensating affected investors fully and promptly, and for firms it includes taking appropriate remedial measures and commissioning third-party reviews to identify failings.
The guidance note will not apply to criminal cases as the Department of Justice has unfettered discretion over criminal prosecutions.
The SFC also issued frequently asked questions to help the industry and the public understand the guidance note.
Notes:
- The Guidance Note on Cooperation with the SFCreplaces the previous version issued in March 2006.
- These include disciplinary proceedings under Part IX of the Securities and Futures Ordinance (SFO), civil proceedings initiated by the SFC in civil court under section 213 or section 214 of the SFO and Market Misconduct Tribunal proceedings initiated by the SFC under Parts XIII or XIVA of the SFO. The guidance note will not cover disciplinary hearings before the Takeovers and Mergers Panel in relation to the Codes on Takeovers and Mergers and Share Buy-Backs.
- The SFC may enter into an agreement with parties pursuant to section 201 of the SFO to resolve disciplinary proceedings at an early stage if the SFC considers it appropriate to do so in the interest of the investing public or in the public interest.
- The SFC has divided its disciplinary process into three stages and set maximum sanction reductions which may be considered when a case is resolved at each stage.
