Government Investigations in Hong Kong 2025
In the Hong Kong chapter of the 2025 Panoramic guide (formerly Getting the Deal Through), Gwynn Hopkins and Tavish MacLean provide an overview of the local enforcement agencies, requirements and trigger events for investigations, evidence gathering and investigative techniques, cooperation with enforcement agencies and resolution of investigations, potential civil and criminal penalties, and an update on government investigation trends in Hong Kong.
Enforcement agencies and corporate liability
Government agencies
What government agencies are principally responsible for the enforcement of civil and criminal laws and regulations applicable to businesses?
Securities and Futures Commission
The Securities and Futures Commission (SFC) is the independent statutory body charged with regulating and governing the securities and futures markets in Hong Kong.
The SFC is responsible for fostering an orderly securities and futures market to protect investors, and to help promote Hong Kong as an international financial centre and a key financial market in China. Even though it is considered to be a branch of the government, it is run independently under the authorisation of the laws related to securities and futures. Extensive investigative and enforcement powers have been granted to the SFC under the Securities and Futures Ordinance (SFO).
Market misconduct is regulated under Parts XIII and XIV of the SFO, which comprises six offences:
insider dealing;
false trading;
price rigging;
disclosure of information about prohibited transactions;
disclosure of false or misleading information; and
inducing transactions and stock market manipulation.
Parts XIII and XIV contain virtually identical civil and criminal provisions in relation to market misconduct. Part XIV, however, covers three additional criminal offences:
‘offence involving fraudulent or deceptive devices, etc, in transactions in securities, futures contracts or leveraged foreign exchange trading’;
‘offence of disclosure of false or misleading information inducing others to enter into leveraged foreign exchange contracts’; and
‘offence of falsely representing dealings in futures contracts on behalf of others, etc’.
Regulated market actors include publicly traded firms, investment banks, brokers, fund managers and investment advisers.
Other entities
The Commercial Crime Bureau (CCB) investigates serious commercial and financial crimes, and forgery of monetary instruments, identity documents, payment cards, currencies and coins.
Organised crime and syndicated criminal acts, including money laundering, are investigated by the Organised Crime and Triad Bureau (OCTB).
The Independent Commission Against Corruption (ICAC) is given broad legal powers to investigate and prosecute corruption under three specific ordinances: the Independent Commission Against Corruption Ordinance (the ICAC Ordinance), the Prevention of Bribery Ordinance (POBO) and the Elections (Corrupt and Illegal Conduct) Ordinance.
Scope of agency authority
What is the scope of each agency's enforcement authority? Can the agencies pursue actions against corporate employees as well as the company itself? Do they typically do this?
Statutes provide Hong Kong’s law enforcement authorities with the power to investigate and refer for prosecution the crimes set out below.
CCB and OCTB
A wide range of powers are available to CCB and OCTB investigators to investigate major fraud and money laundering, including the ability to hold suspects for up to 48 hours, question witnesses and suspects, search any premise and seize documents, and freeze bank accounts.
The CCB and the OCTB can also issue arrest warrants, place suspects on the stop list at immigration checkpoints and request the extradition of suspects from countries where bilateral treaties on the surrender of fugitives exist between the two for crimes with an international element.
Although both natural persons and legal entities can be subject to the investigative and prosecuting powers of Hong Kong’s law enforcement authorities such as the CCB and the OCTB, they typically investigate and prosecute individual suspects or defendants due to the nature of crimes such as fraud and money laundering, which are most often perpetrated by individuals.
In Hong Kong, the prosecution of these crimes targets a company’s staff members, conspirators, accomplices and other non-corporate individuals. The search of a company’s office and the seizure of documentary evidence are common enforcement actions conducted against businesses.
ICAC
Aside from the ICAC’s enforcement powers provided under the ICAC Ordinance being virtually identical to those of the CCB and the OCTB (powers of arrest, search, seizure, detention and granting bail, which are fundamental to any law enforcement agency), the ICAC has specific powers under the POBO to combat corruption. The ICAC is able to compel suspects to divulge information about their assets, income and spending; it can also request that the court seize a suspect’s passport and property before criminal charges are brought against them.
However, it is possible for the scope of an ICAC investigation to be extended to other non-corruption-related crimes – such as conspiracy to deceive, to steal or to pervert the course of a public justice investigation – if further criminal behaviour is revealed during corruption-related investigations. The ICAC cannot decide to prosecute, or impose any sanctions or sentences, by itself.
SFC
The SFC initiates an investigation if it has reasonable cause to believe that market misconduct has occurred. If necessary, the SFC will serve witnesses and suspects with a request for an interview, as well as a request for documents and records related to the suspected market misbehaviour.
Additionally, the SFC can also apply to the Hong Kong courts for searches and seizures of evidence in more serious situations.
The SFC is more inclined to investigate and prosecute individual workers for individualistic offences such as insider trading and price manipulation. The SFC has been known to send requests for production of documents and interview notices to corporations to compel the production of documents and face-to-face interviews with the company’s authorised officials.
Companies are also frequently investigated and disciplined by the SFC for regulatory offences that are committed in a corporate capacity (eg, deceptive advertisements, exposing price-sensitive information or performing unauthorised financial transactions).
Simultaneous investigations
Can multiple government entities simultaneously investigate the same target business? Must they coordinate their investigations? May they share information obtained from the target and on what terms?
In cases when the same target business has committed suspicious activities or multiple instances of misconduct (or both) that might lead to criminal prosecutions using different legal remedies, rules and regulations, the law enforcement agencies (CCB, ICAC) and government authorities (SFC, law enforcement) may investigate the same target business in simultaneous investigations and bring different charges.
In practice, enforcement agencies are well aware of their distinctive powers and will collaborate with each other to avoid duplication of inquiries and investigation efforts. Law enforcement agencies may exchange information in respect of their investigations upon receipt of a request from other authorities.
The government authorities may also refer a matter to the law enforcement agencies for investigation. For instance, the SFC refers cases to the CCB where market misconduct (eg, market manipulation as defined in Parts XIII and XIV of the SFO) may also contain fraud elements. There are no clearly defined rules or regulations governing the coordination of investigations or exchanging of information; such coordinated efforts are managed in accordance with the internal policies of different government authorities.
Civil forums
In what forums can civil charges be brought? In what forums can criminal charges be brought?
CCB, OCTB and ICAC cases can be prosecuted at different levels of the criminal courts, depending on the magnitude and seriousness of the offences, and the degree of punishment. For example, magistrates’ courts can sentence a maximum of two years’ imprisonment for a single charge and three years’ imprisonment for multiple charges.
The CCB, the OCTB and the ICAC can prosecute more serious offences at the District Court, which can impose a term of imprisonment of up to seven years. They can also pursue prosecution at the High Court, which can impose a maximum sentence of life imprisonment (subject to the maximum penalty permitted by law for the applicable offence).
High Court trials can be heard before a jury, whereas magistrates’ courts and the District Court do not have trials before a jury.
The SFC can decide whether to bring a civil action against any respondent before the Market Misconduct Tribunal or a criminal prosecution against any defendant in the criminal courts.
Subject to consultation with and legal advice from the Department of Justice (DOJ), the SFC can either:
initiate a summary procedure in magistrates’ courts for minor market misconduct;
prosecute offenders at the District Court or the High Court for serious market misconduct; or
bring civil actions against the respondents before the Market Misconduct Tribunal.
The SFC can discipline licensed individuals or companies for regulatory matters without consultation with the DOJ. Disciplinary actions include licence revocation or suspension, application bans, fines and reprimands.
Corporate criminal liability
Is there a legal concept of corporate criminal liability? How does the government prove that a corporation is criminally liable for the acts of its officers, directors or employees?
Corporations, being separate legal entities, can be held criminally accountable for most offences unless imprisonment is the only penalty for such offences, or such offences (eg, assault, murder) can only be committed by a natural person. However, establishing intent (specifically, the mental element of a person’s intention to commit a crime) in any criminal prosecution (especially beyond reasonable doubt) can be quite challenging, which is a factor in the authorities determining whether to bring criminal charges against corporates. The authorities can decide to bring charges against a corporation if:
the law has imposed an absolute responsibility on the corporation for certain offences (ie, strict liability offences, which require the prosecutor to establish merely that an unlawful act has occurred). In this case, when an act was committed by an employee without the consent, authorisation or agreement of the corporation, the corporation can still be held criminally liable, and prosecutors are not required to prove the intent and the state of mind of the employee who committed the act of wrongdoing. This is also the reason why charges brought against corporations are usually in relation to the strict liability offences; or
the offences involved fault elements and are proven to be committed by a natural person who, at the relevant time, was the ‘directing mind and will’ of the corporation or was acting as ‘an embodiment of the corporation’ (the identification principle under Hong Kong’s Common Law).
Bringing charges
Must the government evaluate any particular factors in deciding whether to bring criminal charges against a corporation?
In determining whether any prosecution should be brought against the offenders, the DOJ must consider the sufficiency of the admissible evidence and the interest of the general public, and form an opinion that the evidence presented could sustain trials and that it is in the interest of the public to prosecute the offenders.
With reference to the Prosecution Code, the DOJ may also consider the following non-exhaustive list of ancillary factors in evaluating whether to prosecute:
the nature and circumstances of the offence, including any aggravating or extenuating circumstances;
the seriousness of the offence: more serious offences, including those where a victim has suffered significant harm or loss, or where there have been multiple victims, are more likely to be prosecuted in the public interest;
the effect of a prosecution on Hong Kong law enforcement priorities;
any delay in proceeding with a prosecution and its causes;
whether or not the offence is trivial, technical in nature, obsolete or obscure;
special circumstances that would affect the fairness of any proceedings; and
the availability and efficacy of alternatives to prosecution, such as a caution, warning or other acceptable form of diversion.
Initiation of an investigation
Investigation requirements
What requirements must be met before a government entity can commence a civil or criminal investigation?
Government authorities can begin either civil or criminal investigations upon receipt of formal complaints or information produced by credible informers and forming an opinion that they have reason to believe that illegal activities or market misconduct may have taken place.
Triggering events
What events commonly trigger a government investigation? Do different enforcement entities have different triggering events?
The Securities and Futures Commission (SFC) has its own system to monitor the stock market based on real-time market transactional data to identify irregular market activities and trading patterns. It has mechanisms in place to trigger the trading suspension if needed, which is followed up by investigations into the causes of the irregularities. The SFC could also commence an investigation upon receipt of formal complaints by market participants or information from credible sources and research reports.
Investigations conducted by agencies such as the Commercial Crime Bureau (CCB), the Organised Crime and Triad Bureau (OCTB), the Independent Commission Against Corruption (ICAC) and the SFC are typically triggered by the receipt of formal complaints filed by victims or aggrieved parties.
Although rare, the ICAC can also determine to commence an investigation based on anonymous crime reports or media publications.
Whistle-blowers
What protections are whistle-blowers entitled to?
There is a witness protection programme in place to protect the whistle-blowers when they become the witnesses for the government authorities or criminal prosecutions, or both. The witness protection programme is covered under the Witness Protection Ordinance in Hong Kong to safeguard witnesses who may be in danger of harm because of their roles in any criminal investigation.
Whistle-blowers are usually required to file formal complaints or to give witness statements regarding any illegal activities to the law enforcement agencies, so there are also measures in place to ensure the confidentiality of reports to law enforcement agencies (eg, the police and the ICAC) to protect the anonymity and personal safety of informers, and to prevent them from being treated unfairly. Subject to certain limited exceptions, section 30A of the Prevention of Bribery Ordinance provides a legal framework to protect the names and addresses of informers from being disclosed in any civil or criminal proceedings.
Before being admitted to the witness protection programme, each witness’s personal situation, the seriousness of the criminal activities being reported and the importance of the information being provided would all be taken into consideration by the law enforcement agencies. Witnesses would also need to sign an agreement that outlines the terms and conditions for participation in the programme. Upon admittance to the programme, the law enforcement agencies will take all necessary and reasonable actions to ensure the safety of witnesses, including through ensuring anonymity for the witnesses to testify before the courts and offering new identities to the witnesses.
The ICAC’s Witness Protection and Firearms Section (R4) and the police’s Witness Protection Review Board both have specialised guidelines for witness protection.
The SFC also offers a reduction in penalties for non-criminal violations to encourage self-reporting and cooperation for any investigation. In the Guidance Note on Cooperation with the SFC updated on 1 June 2023, the SFC explains the need for ‘timely and substantial cooperation’ with regard to investigations, which not only may result in a prompt resolution of the matter, but can also be cost-effective. Penalties may be reduced by up to 30 per cent, depending on which stage cooperation is secured from, the earliest stage being the detection of the misconduct or regulatory failings up to the issuance of a Notice of Proposed Disciplinary Action. Criminal cases, by contrast, are excluded because the Department of Justice has ‘unfettered discretion’ over criminal charges.
Investigation publicity
At what stage will a government entity typically publicly acknowledge an investigation? How may a business under investigation seek anonymity or otherwise protect its reputation?
The government authorities usually will not make public any investigation details before completing interviews of the suspects and the evidence collation process. More often than not, the authorities will only publicise details such as identities of the defendants when formal charges have been brought against them or after their arrest.
During the initial stage of the investigation, it is unlikely for the government authorities to publicly acknowledge or disclose details of any investigation to avoid alerting suspects that may, in turn, jeopardise the investigation by diminishing the chances of obtaining further evidence, recruiting credible witnesses and even locating the suspects.
In recent years, the authorities have tended to make good use of internet technology and choose to publish relevant enforcement news on their websites. The SFC’s enforcement news page names the relevant entities and licence holders, as well as details of its findings and enforcement actions taken. The ICAC’s enforcement news page also provides information on subjects who have been charged or convicted.
Evidence gathering and investigative techniques
Covert phase
Is there a covert phase of the investigation, before the target business is approached by the government? Approximately how long does that phase last?
In practice, there is usually a covert phase of an investigation before the government authorities approach the target business, as it is important to first confirm the credibility of the informers and the authenticity of the information provided. This is particularly necessary for matters involving serious fraud, money laundering, corruption or market misconduct spanning long periods of time and where the number of victims is potentially high. Typically, the authorities gather evidence during the covert phase by interviewing witnesses, undertaking surveillance of suspects and collating relevant documentation from various sources.
The length of the covert phase depends on:
the seriousness of the crime;
the complexity of the investigations;
the volume of documents under scrutiny;
the number, identity and location of parties involved; and
the difficulty of collating sufficient and appropriate evidence.
What investigative techniques are used during the covert phase?
The typical investigation tactics employed by the law enforcement agencies during the covert phase include undercover operations, surveillance of telephone and internet and internet traffic, and controlled delivery (allowing suspicious shipments or cargo to leave, pass through or enter a jurisdiction with the knowledge and supervision of authorities) to penetrate criminal organisations to gather direct and contemporaneous evidence on suspects and illegal activities.
The law enforcement agencies can also apply to the court to obtain:
search warrants under the Prevention of Bribery Ordinance (POBO) and the Police Force Ordinance to search the premises where important evidence may be collated or the illegal activities had taken place, or both;
production orders under the Organised and Serious Crimes Ordinance (OSCO) to force the production of certain documents and data; and
restraint orders under the OSCO to freeze bank accounts associated with questionable transactions.
During the covert phase of investigations by the Securities and Futures Commission (SFC) or the Independent Commission Against Corruption (ICAC), witnesses are subject to a strict obligation to keep confidential all information relating to the investigation and are prohibited from discussing the investigations with any third parties, breaches of which not only may constitute statutory offences under the Securities and Futures Ordinance (SFO) and the POBO, but also lead to charges of perverting the course of justice under Hong Kong’s Common Law.
Investigation notification
After a target business becomes aware of the government’s investigation, what steps should it take to develop its own understanding of the facts?
After a target business becomes aware of the government’s investigation, it should engage legal counsel at the earliest opportunity and endeavour to undertake its own comprehensive investigation by interviewing staff members and collating relevant information and documents to assess the merits of the allegations as well as the business’s obligations under law. In some circumstances, other professionals such as forensic accountants or independent financial advisers may also be engaged to provide opinions on specific transactions or on matters such as the sufficiency of internal control policies.
In normal circumstances, internal interviews with staff members are often conducted parallel to those by the authorities. Internal interviews should not interfere with in-progress government investigations. In any event, it is recommended that staff interviews be conducted in the presence of legal counsel, who may advise staff members on their rights and obligations.
Evidence and materials
Must the target business preserve documents, recorded communications and any other materials in connection with a government investigation? At what stage of the investigation does that duty arise?
With regard to document preservation, a target business is only subject to the statutory retention periods required by law. For instance, section 51C of the Inland Revenue Ordinance requires every person carrying on a trade, profession or business in Hong Kong to keep sufficient records in the English or Chinese language relating to income and expenditure for a period of not less than seven years to enable the assessable profits to be readily ascertained. In the absence of a court order requiring document retention, a target business is not required to retain recorded communications or any other materials in connection with a government investigation beyond those document retention requirements.
However, if a target business is made aware of an investigation, it is in its own best interest to prevent document destruction from taking place under routine document retention policies and consult with external legal counsel before taking any further steps to avoid the risk of being charged with perverting the course of justice under Hong Kong’s Common Law.
Providing evidence
During the course of an investigation, what materials – for example, documents, records, recorded communications – can the government entity require the target business to provide? What limitations do data protection and privacy laws impose and how are those limitations addressed?
Subject to the scope of search warrants and production orders, law enforcement agencies can request a target business to produce all information relating to their investigation in the form of physical documents, electronic data stored in computers, mobile phones, hard discs, and audio and video tapes, among others. Search warrants or production orders generally set out exhaustive information and documentary requirements to avoid anticipated information gaps. Data protection and privacy laws would be set aside in the presence of search warrants and court orders requiring their production. Any non-compliance with court orders may amount to contempt of court, which is a serious offence that is subject to imprisonment. By failing to comply, the target business may also risk being charged under the SFO and the POBO.
In a recent judicial review (Cheung Ka Ho Cyril v Securities and Futures Commission and Another [2020] HKCFI 270), the Court of First Instance ruled, for the first time, that the SFC has the power to seize digital devices such as mobile phones, computers and tablets when executing search warrants and retain them subsequently, and issue notices pursuant to section 183 of the SFO to require the provision of login details to email accounts and digital devices. The ruling sends a clear message that the Court of First Instance will honour the power of the authorities in substance and in line with technological developments.
On what legal grounds can the target business oppose the government’s demand for materials? Can corporate documents be privileged? Can advice from an in-house attorney be privileged?
The target business can refuse the government’s demand for materials on the grounds of legal professional privilege (LPP).
The two main types of LPP are legal advice privilege and litigation privilege. In general, legal advice privilege applies to communications between clients and their lawyers in relation to seeking and receiving legal advice. In Hong Kong, legal advice privilege extends to communications to or from in-house lawyers within a corporate entity, provided that the communications over which privilege is claimed are for the dominant purpose of giving or receiving legal advice, as opposed to commercial or business advice in general. Litigation privilege applies to communications between lawyers (and in some cases their clients, if not already covered under LPP) and third parties regarding legal opinions and discoveries in relation to an ongoing or planned lawsuit. Litigation privilege may also arise if it is in the public interest that certain material should not be disclosed to government authorities.
If a target business believes that certain material should not be disclosed to the authorities and be subject to LPP, they may apply to the courts for directions or non-disclosure orders, or both. All material would be sealed and refrained from being used by the authorities in their investigations before the court ruling.
Employee testimony
May the government compel testimony of employees of the target business? What rights against incrimination, if any, do employees have? If testimony cannot be compelled, what other means does the government typically use to obtain information from corporate employees?
The government may compel employees to testify before the courts by issuing a writ of summons. Ignoring or refusing such summonses may lead to contempt of court charges. Practically speaking, even if an employee is summoned, they may hesitate to testify against their employer or supervisors especially if they wish to continue working for the employers and so the testimony may not be particularly helpful. As such, it is a balancing act to which prosecutors give careful consideration before compelling employees to testify before the courts.
Employees may refuse to provide certain information or testify before the courts, or both, if the information and testimony they gave can in fact incriminate themselves in criminal proceedings. Their rights against self-incrimination are protected by, where applicable, the Evidence Ordinance or the SFO, or both. To claim privilege against self-incrimination, the threat of self-incrimination has to be real and substantial, and cannot be one’s mere belief.
Absent testimonies, the government can still rely on other means such as reference to documentary records, witness statements from other employees of the target company or circumstantial evidence in pleading its cases.
The government may also rely on other ordinances, such as the SFO, to compel the disclosure of information. Sections 183 and 184 of the SFO set out the power of investigators to demand disclosure of information as well as fines and imprisonment for non-compliance without grounds and explanations. Should the information demanded by investigators be subject to the privilege against self-incrimination, investigation targets may refer to section 187 of the SFO, which provides that such information or statements, or both, ‘shall not be admissible in evidence against the person in criminal proceedings in a court of law’.
Under what circumstances should employees obtain their own legal counsel? Under what circumstances can they be represented by counsel for the target business?
Employees are urged to obtain their own independent legal counsel when a conflict of interest arises between them and their employer or the target business. This is particularly important when employees have been summoned to testify against their employers.
When interests are aligned between the parties, employees can choose to be represented by the counsel of their employers or target businesses.
Sharing information
Where the government is investigating multiple target businesses, may the targets share information to assist in their defence? Can shared materials remain privileged? What are the potential negative consequences of sharing information?
Targets are permitted to share information to assist their respective defences and to the extent that doing so does not create the perception of perverting the course of public justice.
Targets may claim LPP or common interest privilege for material shared between parties. Common interest privilege covers the shared materials that service the common interests of the parties to litigation.
By sharing information, targets may inadvertently disclose their respective defence strategies, which could be used by other targets to seek plea bargains or immunity from the government and provide evidence that could undermine the defence strategies of other targets.
Any coordination with co-targets of an investigation should be done only after careful consideration and consultation with legal counsel, who should remain fully involved throughout the process.
Investor notification
At what stage must the target notify investors about the investigation? What should be considered in developing the content of those disclosures?
When the investigation is no longer concealed by the authorities, targets that are companies listed on the Hong Kong Stock Exchange are generally required to make an announcement notifying investors of any investigation against them or their key management, or both, because this is considered to be price-sensitive information that concerns the market. For private enterprises, it is a commercial decision as to when and how the investigation should be communicated to investors.
Apart from making sure that all information to be disclosed is true and precise, the target, before making an announcement, should obtain written consent on the announcement and the information being disclosed to the public from the relevant authorities by sending them a draft announcement for approval. The targets can also refer to the official enforcement news issued by the ICAC and press releases from the SFC for the content of the announcements for each of these authorities’ investigations.
Cooperation
Notification before investigation
Is there a mechanism by which a target business can cooperate with the investigation? Can a target notify the government of potential wrongdoing before a government investigation has started?
Apart from available communication channels, there is no other specific mechanism in place by which a target business can cooperate with an investigation. Targets are at liberty to decide the format, timing and degree of cooperation, including self-reporting of potential wrongdoing with the authorities.
Assisting in an investigation and willingly surrendering to the authorities may be a significant mitigating element if the target is ultimately charged and convicted or may be a positive factor in the prosecuting authorities’ judgement on whether the target should be given immunity.
Voluntary disclosure programmes
Do the principal government enforcement entities have formal voluntary disclosure programmes that can qualify a business for amnesty or reduced sanctions?
The principal government enforcement entities do not have any established voluntary disclosure programmes that may offer targets clemency or reduced penalties.
Nonetheless, the prosecuting authorities are likely to take into consideration any target’s cooperation and assistance in investigations when deciding whether any immunity will be given.
Timing of cooperation
Can a target business commence cooperation at any stage of the investigation?
Yes. The Hong Kong Monetary Authority, for example, has issued specific guidance notes on cooperation with investigations, what amounts to cooperation, how to cooperate and the benefits of cooperation. Examples of cooperation prior to and during an investigation include:
early and voluntary reporting of any suspected breach or misconduct;
early identification and preservation of relevant evidence;
making full and frank disclosure of all relevant information;
making timely arrangements to provide evidence and information;
providing useful intelligence;
taking a proactive approach to assist with an investigation;
accepting responsibility; and
proactively making settlement or compensation arrangements.
Cooperation requirements
What is a target business generally required to do to fulfil its obligation to cooperate?
Full and frank disclosure (ie, disclosure that is timely, substantive, reliable and of high quality) is the standard protocol for a target to fulfil its commitment to cooperate. The format of disclosure can take various forms but commonly includes answering questions during interviews and submitting written witness statements to the authorities.
Employee requirements
When a target business is cooperating, what can it require of its employees? Can it pay attorneys’ fees for its employees? Can the government entity consider whether a business is paying employees’ (or former employees’) attorneys’ fees in evaluating a target’s cooperation?
When a target business is cooperating, it can make sure that employees who are able and wish to assist the authorities are at liberty to do so. Targets can decide freely whether to pay attorneys’ fees for their employees, provided that they do not try to influence the employees in giving evidence or try to alter the employees’ decisions.
The payment of attorneys’ fees (alone) is not treated as a relevant factor when evaluating a target’s degree of cooperation.
Why cooperate?
What considerations are relevant to an individual employee’s decision whether to cooperate with a government investigation in this context? What legal protections, if any, does an employee have?
When considering whether to cooperate with a government investigation, an individual employee is likely to consider:
the legal consequences (ie, offences and fines) of not cooperating;
the employer’s attitude towards the employee’s cooperation or non-cooperation; and
the employee’s own moral standards and obligations.
Employees can refuse to cooperate or to give evidence if there is a real or perceived threat of self-incrimination based on legal advice. In the circumstances, an employer may not penalise the employees for their non-cooperation and any wrongful dismissal can hold the employer liable for paying damages.
Privileged communications
How does cooperation affect the target business’s ability to assert that certain documents and communications are privileged in other contexts, such as related civil litigation?
Materials provided by the targets voluntarily during an investigation can be used as evidence in criminal prosecutions in open court; once used in open court, the evidence can no longer be subject to privilege and can be admissible in related civil proceedings. Any material that is not addressed in open court can still be privileged and cannot be used in civil cases without leave of the courts.
Resolution
Resolution mechanisms
What mechanisms are available to resolve a government investigation?
A government investigation may be resolved if the target submits a guilty plea or enters into a plea bargain (eg, by becoming a prosecution witness). Should the target plead not guilty, matters are resolved in a trial.
Hong Kong does not have deferred prosecution or non-prosecution agreements.
When charged with disciplinary matters, individuals or entities may present a settlement proposal to the Securities and Futures Commission (SFC), which may accept the proposal if it is in the public interest to do so.
Admission of wrongdoing
Is an admission of wrongdoing by the target business required? Can that admission be used against the target in other contexts, such as related civil litigation?
The target business is not required to admit the wrongdoing in criminal proceedings unless it pleads guilty.
If the target business pleads guilty in the criminal proceedings, it will serve as admission of wrongdoing, which can be used against it in subsequent or concurrent civil actions.
Civil penalties
What civil penalties can be imposed on businesses?
Fines, disqualification as a director or manager of a listed company, cold-shoulder orders (ie, prohibition from trading in the market for a specified period), disgorgement of profits, revocation and suspension of licences, reprimand, and payment of the SFC’s investigation costs are all common civil penalties imposed by the SFC for market misconduct.
Criminal penalties
What criminal penalties can be imposed on businesses?
The only criminal penalty that can be imposed on businesses is monetary punishment because, unlike natural persons, the authorities cannot send the businesses to jail or order them to do community service.
Sentencing regime
What is the applicable sentencing regime for businesses?
Hong Kong has no special punishment or standards applicable specifically to companies.
The seriousness and duration of the offences, the monetary damage caused to and numbers of victims, any history of past convictions, and whether the firms cooperate during the investigation and plead guilty are all elements that the court usually considers when establishing the proper sentencing.
Future participation
What does an admission of wrongdoing mean for the business’s future participation in particular ventures or industries?
Any admission of misconduct likely jeopardises a company’s reputation and public image, and causes a loss of trust from the government, business partners and stakeholders, especially in the areas of corporate governance and sound management. It may also have a negative impact on the company’s future business opportunities, particularly those that require licences or government clearance.
Update and trends
Key developments of the past year
Are there any emerging trends or hot topics that may affect government investigations in your jurisdiction in the foreseeable future?
At the time of writing, cryptocurrencies, stablecoins, related virtual assets and associated trading platforms ranked among the most topical issues for investors and businesses globally, as well as across Hong Kong’s regulatory and financial landscape.
In January 2023, the Hong Kong Monetary Authority (HKMA) circulated the Conclusion of Discussion Paper on Crypto-assets and Stablecoins (January 2023) – following the earlier Discussion Paper on Crypto-assets and Stablecoins (January 2022) – setting out the feedback received following the consultation over the previous year, its response and the proposed way forward together with key parameters that would apply in implementing the proposed regulatory regime. Licensing requirements to support financial stability and to mitigate money laundering and terrorist financing risks were of principal interest.
The HKMA is of the view that imposing a local incorporation requirement is highly conducive to enabling the HKMA to effectively supervise licensed entities and enforce regulatory requirements. This will serve at least one major goal to ensure that company assets and liabilities will be appropriately segregated from the rest of a company’s group and to facilitate the seizure of assets where necessary for the purpose of user protection if the business fails.
Stablecoins in particular may have the potential to develop into a widely acceptable means of payment, are under immediate regulatory scrutiny and will be subject to a mandatory licensing regime.
The HKMA is of the opinion that entities that conduct a regulated activity in Hong Kong, actively market a regulated activity to the public of Hong Kong or conduct a regulated activity that concerns a stablecoin that purports to refer to the value of the Hong Kong dollar should be so regulated, having regard to matters of significant public interest.
In the past year, the HKMA has notified the public of misrepresentation by crypto firms purporting to be 'banks' or describing their products as 'deposits'. The HKMA has warned the public that crypto firms are not banks and that funds placed with them are not protected by the Hong Kong Deposit Protection Scheme.
Those in the virtual asset space should carefully review the current HKMA discussion publications, be alert to further consultation considerations and responses from the HKMA, and prepare to meet the tabled regulatory requirements.
This guide was authored by Gwynn Hopkins and Tavish MacLean and originally published by Lexology. Download the PDF here.