Hong Kong's Financial Services and the Treasury Bureau (FSTB) is planning to submit a bill next year on the introduction of an independent regulator for auditors of listed entities in the territory. Following a consultation exercise, the FSTB found that a majority of respondents agreed with its proposals to tighten the regulatory regime for auditors, and in the process align the regulatory regime of Hong Kong with similar regimes around the world. The FSTB said it was aiming to initiate the process in order to introduce the new regulator next year. As part of the new regime, the Financial Reporting Council (FRC) will independently regulate auditors and be vested with direct inspection, investigation and disciplinary powers with regard to listed entity auditors. Meanwhile, the Hong Kong Institute of Chartered Professional Accountants (HKICPA) will perform the statutory functions of registration, setting continuing professional development requirements and standards on professional ethics, auditing and assurance with respect to listed entity auditors under the new regime, subject to oversight by the FRC.


Hong Kong’s Independent Commission Against Corruption (ICAC) has pressed charges against Yau Shui-tin, the former owner of an engineering company, who allegedly offered about HKD 45m (US$5.8m) in bribes to secure consultancy and renovation contracts for two residential estates in Sha Tin and a residential building in To Kwa Wan through tender rigging, according to an ICAC media release.  It was alleged that Yau offered kickbacks from project revenues to property managers to obtain information related to the bidding process.  ICAC specified that by doing so, Yau's activity violated that Section 9(2) (a) of the Prevention of Bribery Ordinance and Section 159A of the Crimes Ordinance.


Hong Kong police charged a prominent figure in Macau's casino junket industry, Cheung Chi-tai, with laundering 1.8 billion Hong Kong dollars ($231 million) through bank accounts in the southern Chinese city. Cheung was a major investor in publicly traded Macau junket operator Neptune Group. Junkets are middlemen that arrange for wealthy mainland Chinese gamblers to travel to Macau, lend them money to gamble and then collect any debts when they return home. However, because casino debts are unenforceable on the mainland, there are suspicions that some junket operators work with organized crime groups in order to collect debts.

In a 2013 Hong Kong money laundering trial involving Cheung's former business associate Carson Yeung, Cheung was named as one of the main shareholders of Neptune Group. Yeung, the former owner of Birmingham City Football Club, said Cheung invited him to invest in the company and its associated VIP gambling rooms.


Documents subject to legal advice privilege are not generally required to be disclosed to Hong Kong's regulatory authorities. However, since the English Court of Appeal decision in Three Rivers District Council v Bank of England [2003] EWCA Civ 474, a narrow interpretation of "client" for the purposes of legal advice privilege has applied.  On 29 June, the Hong Kong Court of Appeal delivered its long-awaited judgment in Citic Pacific Limited v Secretary for Justice and Commissioner of Police, where it rejected the narrow view applied by the Court of First Instance. The Court of Appeal held that the "client" is simply the organisation, and the question is which employees should be regarded as being authorised to act for it in the process of obtaining legal advice.  In addition, the Court of Appeal adopted a "dominant purpose" test, which means that legal advice privilege is no longer restricted to communications between a lawyer and a client, but includes internal confidential documents of the client organisation which are produced for the dominant purpose of obtaining legal advice.  This decision should reduce the need for corporate clients to jump through formalistic hoops to obtain the protection of privilege in investigations and proceedings in Hong Kong. Our briefing contains further details on this case. 

In a second case, handed down on 3 July (Super Worth & Ors v Commissioner of the ICAC and Secretary for Justice), the Court of First Instance reconfirmed the fraud exception to legal advice privilege.  The case involved certain documents seized by the Independent Commission Against Corruption (ICAC) pursuant to a search warrant over which the plaintiffs claimed legal advice privilege.  The CFI held that all of the documents were required to be disclosed – some of the documents were not privileged, while others were, but privilege had been lost due to fraud. The court held that to establish the fraud exception, there must be a clear prima facie case that the offence existed and that the documents concerned came into existence as part of the offence.  In the case, the underlying criminal charge was conspiracy to defraud.  The court found in the prosecution's case a very clear case of fraud and that the activities taken for which legal advice was sought (incorporating companies, appointment/resignation of directors, changing shareholdings –all such actions being taken to move funds) were subject to the fraud exception. The court ruled irrelevant the time delay between the fraud itself (falsification of accounts) and the documents for which privilege was sought since the advice was nevertheless given in furtherance of dealing with the proceeds of crime.


On 12 June 2015, the Securities and Futures (Amendment) Bill 2015(Bill) was tabled before the Legislative Council. The Bill proposes, among other things, amendments to the Securities and Futures Ordinance to enable the Securities and Futures Commission (SFC) to provide supervisory assistance to overseas regulators. Subject to satisfying certain requirements and safeguards, the new supervisory powers will enable the SFC to provide greater assistance to overseas regulators beyond the realm of enforcement by:

  • obtaining records and documents from a licensed corporation or a related corporation of a licensed corporation that are otherwise not available to the overseas regulator; and 
  • making enquiries about such records and documents and related transactions and activities.

Regulated entities which operate in multiple jurisdictions will likely be subject to more scrutiny and information requests in Hong Kong and overseas and may need to put in place new protocols to handle requests in view of the SFC's proposed new supervisory powers. Our ebulletin contains more information on the Bill and its implications. The SFC's 2014/15 annual report has also recently been published, summarising its work during the year ending 31 March 2015. This includes further information on the Bill and details of the SFC's key enforcement actions in the past year. 


On 17 July, the SFC issued a circular containing anti-terrorism and sanctions updates including the United Nations Security Council (UNSC)'s designated terrorists/terrorist associates and relevant UN sanctions regulations (covering Yemen, Cote-d'Ivoire and Libya). This circular requires licensed corporations and associated entities to comply with the anti-terrorism and sanctions provisions imposed. The Hong Kong Monetary Authority (HKMA) published a notification regarding this on the same day requiring authorised institutions to comply.