Hong Kong Independent Commission Against Corruption and Securities & Futures Commission Issue Memorandum of Understanding

On August 19, the Hong Kong Independent Commission Against Corruption (ICAC) and the Hong Kong Securities & Futures Commission (SFC) issued a Memorandum of Understanding (MOU) that “sets out the framework for cooperation and collaboration” between the two agencies “in the performance of their respective regulatory and/or enforcement functions.”

The MOU contains the following key provisions:

• Purpose – “The parties have a mutual interest and respective duties in combating corruption, crimes and/or illicit activities relating to the securities and futures industry in Hong Kong and they recognize the need for the fullest cooperation and collaboration in order to perform their Functions effectively.:
• Overriding Principles – The MOU lists six principles:
  • “the parties will use their best endeavours to meet the terms of this MoU;
  • “this MoU does not modify or supersede any laws or regulations;
  • “this MoU does not amount to a delegation of any of the powers, duties or obligations of the parties;
  • “this MoU does not create, directly or indirectly, any legal rights, obligations or liabilities, enforceable by the parties or any other person;
  • “if a matter is not dealt with explicitly in this MoU, the parties agree to work together to resolve it quickly in accordance with the principles of cooperation and collaboration; and
  • “this MoU does not affect any arrangements under any other MoU that the parties have entered into or may enter into with any other person.”
• Referral of Cases – The MOU specifies the circumstances in which each agency may refer a matter involving suspected criminality or misconduct to the other, conduct a referral evaluation, and advise the other agency about the results of such an evaluation.
• Joint Investigations – The MOU provides that if a case falls within both agencies’ functions, the agencies “may agree to commence a joint investigation in order to minimize the duplication of effort, and enhance the efficient use of their respective resources as well as the effectiveness of the investigation.” It also address the establishment and operation of a joint task force involving both agencies.
• Early Involvement of the Department of Justice – The MOU states that when there is a joint or parallel investigation on the same subject matter, “the parties will consider whether to consult the Department of Justice at an early stage about whether only one party should continue with the criminal investigation or each party should focus on particular suspected offences.”
• Exchange and Use of Information – The MOU contains broad provisions for interagency exchange of information, as well as for use and treatment of information exchanged.
• Investigative Assistance – The MOU states that when the ICAC “reasonably believes that it is necessary to have the opinion of a market expert during the conduct of its investigation, it may request the SFC to assist.” For other categories of investigative assistance, it provides that either agency “will consider requests from the other party for investigative assistance.”

The MOU also contains provisions addressing communications and media strategy, capacity-building, and designation of agency contacts.

Note:  While the ICAC and the SFC have shown their willingness to conduct joint investigations in significant cases – most recently in last year’s Operation “Cold Mountain,” directed at several employees of Hong Kong Exchanges & Clearing Limited – this MOU represents a significant step forward for both agencies in operationalizing their commitment to closer collaboration and cooperation.  The fact that the agencies took prompt steps to make the MOU public also indicates that the agencies are sending a strong signal to Hong Kong businesspeople and government officials about the strength of that commitment.