Two important judgments were published on Friday 2 November 2007. In the first, the court refused to quash an SFC notice requiring attendance at an interview on the basis that it breached the "right to silence" enshrined in the Bill of Rights. In the second, the court affirmed the SFC's right to audio-record interviews. This e-bulletin discusses the implications of these two important developments.
Right to silence
Koon Wing Yee v The Securities and Futures Commission 1 arose out of a Securities and Futures Commission ("SFC") investigation into possible market misconduct. In the investigation, Mr Koon Wing Yee received a notice requiring him to attend an SFC interview, pursuant to section 183 Securities and Futures Ordinance (Cap. 571) (SFO). Mr Koon sought to quash that notice by bringing judicial review proceedings on the basis that the notice took away the safeguards enshrined in the Bill of Rights Ordinance (Cap. 383), which state that, in the determination of any criminal charge, a person shall:
1. not be compelled to testify against himself or confess guilt (Article 11(ii)(g)); and
2. be entitled to a fair and public hearing (Article 10).
The trigger for these safeguards is a "criminal charge". Mr Koon sought a declaration that proceedings before the Market Misconduct Tribunal (MMT) are criminal in nature, thereby triggering the above protections. It was contended that section 187 SFO which abrogates the right to silence, in that an SFC interviewee must answer relevant questions, even if the answers may incriminate him (but, if he claims privilege against self-incrimination before answering, neither the question nor the answer will be admissible against him in subsequent criminal proceedings except in limited circumstances), is disproportionate. Further, that it is lawful for a person subject to an investigation to refuse to answer questions on the grounds that the answers may incriminate him.
The High Court dismissed Mr Koon's application on the basis that the proceedings were premature. At the time Mr Koon was to be interviewed, he had not been charged with any criminal offence in relation to matters on which he was to be interviewed. Therefore, the protections in the Bill of Rights had not been invoked. The court held that if Mr Koon was subsequently to face criminal proceedings, he would be entitled to the protection in section 187(2) SFO, which if invoked, would operate to render his compelled answers generally inadmissible against him in subsequent criminal proceedings.
This decision confirms that where an individual is required to attend an SFC interview and, at that time, has not been charged with a criminal offence, the SFO can compel the individual to give self-incriminating evidence at that interview.
Readers will be aware that earlier this year, Mr Koon succeeded in overturning an adverse finding against him by the Insider Dealing Tribunal (the "Tribunal"), on the basis that the Tribunal's reliance on self-incriminating evidence obtained by the SFC was contrary to the protections outlined above (Koon Wing Yee v Insider Dealing Tribunal 2 ). That case succeeded on the basis that the Tribunal's Inquiry was, in effect, tantamount to criminal proceedings, in particular because the Tribunal's power to impose a financial penalty of up to three times the amount of any profit gained or loss avoided as a result of insider dealing, was akin to a power to impose a criminal fine. For further information see our e-bulletin dated 8 June 2007.
It is interesting to note that the Financial Secretary has appealed this decision to the Court of Final Appeal. If the Court of Final Appeal upholds the Court of Appeal's decision, it may spur many of those who have previously been found responsible for insider dealing to have their cases reviewed on appeal.
It is also interesting to note that at least one such person has already been prompted to seek an appeal. In Lau Luen Hung v Insider Dealing Tribunal 3 , the court granted an extension of time to appeal the Tribunal's decision, 157 days after the decision was sealed by the court. The court stated that whilst a change in law by a subsequent decision will not by itself justify an extension of time to appeal, "when the change in law is so fundamental as a change in the standard of proof and the compellability of an implicated person to testify against himself, the applicant clearly should be given the chance to pursue his appeal and rely on this new development of law". The Financial Secretary's argument that the "flood-gates" would be opened was rejected on the basis that each case would be dealt with individually.
In a related development, on 27 October 2007 the implicated parties in the first case before the MMT were granted permission to bring judicial review proceedings "in respect of issues going to the jurisdiction of the [MMT] and the nature of that jurisdiction". Whilst the precise grounds for that judicial review are not yet known (the judgment has not yet been released) they may well concern whether MMT proceedings are criminal in nature and, accordingly, whether it can rely on self-incriminating evidence. The proceedings before the MMT have been stayed pending the outcome of this judicial review.
SFC's right to audio-record interviews
The High Court has confirmed that the SFC has an implied power to audio-record compulsory interviews under section 183 SFO, and can insist on this approach. Whilst the court left open the question of whether the SFC has an implied power to video-record interviews, it expressed doubt that video-recorded interviews should be treated differently
In A v The Securities and Futures Commission 4 the SFC sought to audio-record an interview with a person subject to an insider dealing investigation. The individual objected to this and brought judicial review proceedings seeking a declaration to confirm that the SFC has no power to audio-record interviews. The court concluded that the SFC's power to record an interview by audio means is implied in the SFO, in that it is reasonably incidental (and necessary) to the SFC's power to compel a person under investigation to attend an interview and answer questions. Accordingly, the SFC's insistence upon an audio-recording of an interview was lawful. Mr Justice Reyes commented that "an audio-recording strikes me as the minimum reasonably necessary to ensure a degree of integrity to the interviewing process. An audio-recording provides a touchstone against which the accuracy of any contemporaneous or later transcript of an interview may be evaluated".
The applicant sought to argue, amongst other things, that an audio-recording was "invasive" and contrary to the right of privacy guaranteed by Article 30 of the Basic Law, Article 14 of the Bill of Rights and Article 17 of the International Covenant on Civil and Political Rights. The court rejected this argument stating that as a matter of common sense, an audio-recording cannot constitute unwarranted interference with privacy. Further, the court expressed "deep scepticism" that video-taping would give rise to significant unfair prejudice, but however refrained from expressing final views given that the issue was not put before the court in the application.