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30 June 2020 | by Sherman Yan and Dominic Wai of ONC Lawyers

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2020 Quarterly Review and Foresight – Regulatory


This Review will highlight disciplinary actions and cases of the Securities and Futures Commission (“SFC”) and the regulatory regime put forward by the SFC that would be of significant and particular interests to licensed corporations, their responsible officers, investors and the general public, no matter on placing investments into a particular product or safeguarding themselves from any disciplinary actions from the regulatory bodies arising from a breach of laws or regulations.

Last year there were quite a high number of rulings either by the Hong Kong courts or by the SFC in respect of decisions made by the SFC or breach of the Securities and Futures Ordinance (Cap.571) (“SFO”) by licensed corporations. The most discussed enforcement action by the SFC in 2019 was the SFC’s most severe ever disciplinary actions taken against sponsors including a number of investment banks that failed to carry out proper due diligence work in listing applications. UBS, being one of these investment banks, was debarred from acting as a sponsor for listing application on the Stock Exchange of Hong Kong (“SEHK”). Coincidentally, in November 2019, UBS was reprimanded and fined HK$400 million for overcharging clients.

Sometimes, persons sanctioned or investigated by the SFC may initiate a judiciary review application to the Courts on the SFC’s decisions or on the constitutionality of certain clauses in the SFO. In early 2019, the SFC’s power to give investigatory assistance to overseas regulators pursuant to section 186 of the SFO was discussed in the case AA & EA v The Securities and Futures Commission [2019] HKCFI 246. In the first quarter of 2020, there was another important case of judicial review confirming SFC’s power to seize personal digital devices and demanding passwords from persons being investigated in Cheung Ka Ho Cyril v Securities and Futures Commission and another [2020] HKCFI 270. Details of these cases shall be discussed further below.

Apart from judicial cases and disciplinary actions, regulatory bodies do from time to time put forward regulatory regime in view of recent innovation. Lately, enthusiasm about virtual assets such as cryptocurrency and digital tokens seems to have waned without an indication that such market will diminish. In light of this, in November 2019, the SFC issued a position paper on the regulations of virtual asset trading platforms operating in Hong Kong. Other than that, the SFC publishes statements and guidance from time to time in relation to various investment products and its investigative power. We shall also discuss these publications by the SFC in details below.


The SFC’s most severe ever disciplinary actions taken against sponsors

FactsDisciplinary actions were enforced against UBS AG and UBS Securities Hong Kong Limited (collectively, “UBS”) which were mainly related to, among others, the listing applications of China Forestry Holdings Company Limited (“China Forestry”) and Tianhe Chemicals Group Limited (“Tianhe”).

  • China Forestry was listed on the Main Board of SEHK on 3 December 2009 and the trading in its shares was suspended on 26 January 2011, and was subsequently wound up and the listing of its shares was cancelled on 24 February 2017.
  • Tianhe was listed on the Main Board of the SEHK on 20 June 2014 and the trading in its shares was suspended since 26 March 2015.

UBS was one of the joint sponsors of the listing application of China Forestry (“China Forestry Joint Sponsors”) and Tianhe (“Tianhe Joint Sponsors”).

The SFC’s investigation revealed a number of deficiencies in the due diligence work conducted by the China Forestry Joint Sponsors and the Tianhe Joint Sponsors.

For China Foresty which was a plantation forest operator whose main business were the management and sustainable development of forests and the harvesting and sale of logs, the SFC found that none of such professional parties had been instructed to verify the existence of the forestry assets as disclosed in the prospectus. In addition, while the China Forestry Joint Sponsors claimed to have inspected the original certificates, the SFC found that the China Forestry Joint Sponsors did not identify a number of discrepancies, such as mismatch between the name of the forests as disclosed in the prospectus and as stated in the corresponding certificates. Further, the SFC found that the China Forestry Joint Sponsors relied on written confirmations purportedly issued by the relevant forestry bureaus, which were provided by China Forestry, to confirm that the business and logging activities of China Forestry were in compliance with the relevant Mainland Chinese forestry laws. However, there is no evidence that the China Forestry Joint Sponsors had verified whether those written confirmations were issued by the relevant forestry bureaus. Other than that, there were inadequate due diligence on the insurance and the customers of China Forestry.

The Tianhe Joint Sponsors also made similar mistakes in conducting due diligence on customers as in the case of the China Forestry Joint Sponsors described above. Further, the SFC found that the interview questions asked by the Tianhe Joint Sponsors during certain interviews with Tianhe’s customers were unclear, and thus led to unclear answers.

Disciplinary actions

The SFC reprimanded and fined UBS a sum of HK$375 million in relation to its failures in discharging the duties as sponsor for the above listing applications.

In addition, the SFC also (1) partially suspended the licence of UBS to advise on corporate finance for one year, to the extent that UBS shall not act as a sponsor for listing application on the SEHK; and (2) suspended the licence to advise on corporate finance of the then sponsor principal of UBS for two years.

The SFC’s findings illustrated that mere reliance on the documents and representations from the listing applicant without conducting independent verification cannot meet the standard required for sponsors to discharge their responsibility on due diligence. In addition, sponsors are expected to raise further inquiries whenever red flags are raised during the due diligence process. As a result of the substandard due diligence work, not only do the China Forestry Joint Sponsors and the Tianhe Joint Sponsors but also the investors of China Forestry and Tianhe have to pay the price.

According to section 194(2) and section 196(2) of the SFO, the maximum level of fine imposed on licensed persons or registered institutions which are guilty of misconduct is three times the profit gained or loss avoided, whichever is greater. The SFC may also use the number of persons affected by the misconduct as the multiplier in assessing the appropriate level of pecuniary penalty. It has been expressly stated by the SFC that such fine should deter non-compliance with regulatory requirements so as to protect public interest.

For details, please refer to here.

In November 2019, SFC Reprimanded and Fined UBS HK$400 Million for Overcharging Clients

During 2008 to 2015, it was a common practice that UBS AG’s Wealth Management division’s client advisors (“CAs”) and client advisors’ assistants (“CCAs”) increased the spread charged to clients after executing trades in bonds and structured notes. UBS AG (“UBS”) did not disclose the execution price and charges it made to the clients adequately and accurately. Where the actual execution price was better than the limit order price placed by the clients, the CAs and CCAs would increase the spread after executing the trades without disclosure to or seeking agreement with the clients, in order to retain the price improvement for UBS itself. Worse still, on some occasions, the CAs and CCAs even misreported the execution price to the clients and falsified the account statements with misreported spread amount to financial intermediaries in order to conceal the overcharges made by UBS.

In addition, during 2008 to 2017, UBS charged its clients fees or spreads exceeding the rates disclosed to or agreed with the clients. For instance, CAs overcharged the clients allotment fees in excess of the prescribed rate as set out in UBS’s Fees and Commissions Booklet. From time to time, UBS charged a spread on zero fee products and imposed additional charges on flat fee clients without their knowledge or consent.

Disciplinary actions

By increasing the spread after the execution of trades to capture the price improvement unknown to the clients and charging fee exceeding the disclosed or agreed rates, the SFC found that UBS had failed to, amongother things, comply with the following regulatory requirements:

  1. to act honestly, fairly, with due skill, care and diligence, and in the best interest of its clients;
  2. to make adequate disclosure of the monetary benefits received and relevant material information to clients;
  3. to avoid conflicts of interest and ensure fair treatment of clients;
  4. to ensure that any representations made and information provided to clients are accurate and not misleading;
  5. to ensure that the charges and fees charged are fair and reasonable and characterized by good faith;
  6. to execute client orders on the best available terms; and
  7. to ensure provision of adequate information to the clients on services provided, and nature and scope of fees and charges.

The SFC considered the misreporting of execution price and falsification of account statements occasionally done by UBS’s CAs and CCAs to be dishonest means from which UBS took profits from its clients without disclosure to or agreement with them.

Further, the SFC considered that UBS’s failure to prevent or detect the overcharging malpractice was due to a number of serious systematic internal control problems as set out below:

  1. inadequate policies and procedures governing pricing and disclosure, spread charged and best execution;
  2. inadequate system controls allowing CAs and CCAs to unilaterally amend the spread charged after trade execution and failing to prevent and detect improper activities in trading for clients;
  3. lack of effective supervision for Desk Heads to identify conduct issues and poor ethical decision making by CAs;
  4. lack of staff training and guidance to front-line staff on regulatory requirements and their primary obligations to execute client orders on the best available terms and treat clients fairly; and
  5. failure of the first and second lines of defence function (the Location Risk Unit and Compliance) in addressing conflicts of interest between CAs or CCAs and their clients, and identifying risks with pricing and disclosure practices.

The internal control deficiency has indicated breaches of Code of Conduct and Internal Control Guidelines on the part of UBS, which was one of the factors taken into account by the SFC in deciding the disciplinary sanctions.

In addition to the findings of the SFC as illustrated above, the SFC also found that UBS had failed to properly disclose its trading capacity to its clients and delayed in reporting to the SFC in relation to the overcharging practice, and finally decided to reprimand and fine UBS HK$400 million for its overcharging malpractice.

The disciplinary action reminds the registered institutions under the SFO to exercise care in charging clients. They shall ensure that the client-facing staff are aware of their duties to act honestly, fairly and in the best interest of their clients when trading for the clients, and not to charge spreads or fees in excess of the rates disclosed to or agreed with the clients.

For details, please refer to here.

AA & EA v The Securities and Futures Commission [2019] HKCFI 246: SFC’s power to give investigatory assistance to overseas regulators pursuant to section 186 of the SFO

The 1st Applicant (“AA”) was an SFC-licensed investment manager of a hedge fund and the 2nd Applicant (“EA”) was the majority shareholder and a responsible officer of AA. AA was suspected to have manipulated the share price of Nitto Denko Corporation, a Japanese company listed on the Tokyo Stock Exchange, after Nitto Denko Corporation announced in September 2013 that it would become a consistent stock of the Nikkei Index of Japan. During the course of the investigation, the SFC issued a notice to AA, care of the attention of the responsible officers of AA (including EA), to seek and obtain various materials from AA and EA pursuant to section 181 of the SFO. The SFC subsequently informed
the Japanese regulators, namely the Financial Services Authority and the Securities and Exchange Surveillance Commission (“SESC”) of the suspicious transaction report submitted by the licensed corporation concerning the Fund. The Japanese Regulators then requested the SFC’s assistance in investigating the suspected misconduct of AA. They also further stated that they would use and maintain the confidentiality of any information provided by the SFC. In response to the request, the SFC disclosed the trading information provided by AA to the Japanese Regulators.

On 5 December 2014, the SESC announced that it had recommended the issuance of an administrative monetary penalty against AA to the Japanese Prime Minister and a Japanese regulator in light of findings that AA was involved in market manipulation arising out of its share trading activities in Nitto Denko Corporation. The Japanese regulator subsequently imposed an administrative monetary penalty order in the sum of ¥684,240,000 on AA on 11 June 2018.

AA and EA commenced judicial review proceedings against the SFC to challenge the lawfulness of the SFC’s provision of compelled materials to the Japanese Regulators.

Section 186(6) of the SFO and the right to privilege against self-incrimination prevent the compelled information from being used in a criminal proceedings against the disclosing party. In the present case, whether the transmission of the compelled material to the Japanese Regulators was lawful depends on whether the action taken by the Japanese Regulators against AA was criminal in nature. Such nature depends on the classification of the offence under domestic law, the nature of the offence and the nature and severity of the sanction.

It was agreed by AA and EA that the Japanese proceedings were classified as administrative under Japanese domestic law. The Court also found that the Japanese proceeding was civil in nature for a preventative purpose rather than a punitive or deterrent purpose by imposing administrative monetary penalty order seeking to disgorge illicit profits made by AA. It was therefore held that the provision of the compelled materials by the SFC to the Japanese Regulators for the administrative proceedings in Japan was lawful.

Besides, section 378(6)(b) of the SFO provides that disclosure to an overseas regulator should be subject to adequate secrecy provisions. To comply with this provision, the SFC should have reasonable expectation and should take all reasonable steps to ensure that the overseas regulators would comply with its obligations of confidentiality. The Court found that neither media inquiries nor the public announcement in Japan regarding the monetary penalty contravened the statutory secrecy provisions under the SFO and that the Applicants had, in any event, already sought an alternative remedy by bringing proceedings in Japan against the Government of Japan. Further, the Court held that the SFC had
taken all reasonable steps and fulfilled its obligations by following international standard practice to ensure the confidentiality of information and documents provided to the Japanese Regulators.

The Hong Kong Court of First Instance dismissed the judicial review application on, amongst the others, the ground that it was lawful for the SFC to provide the Japanese regulators with the materials obtained through its compulsory powers submitted by AA and EA.

For details, please refer to here.

SFC’s position paper on the regulations of virtual asset trading platforms operating in Hong Kong

In November 2019, the SFC published a position paper on the regulatory regime that virtual asset trading platforms operating in Hong Kong can opt into. If such platform has at least one virtual assets traded on it which falls within the definition of “securities” under the SFO, such platform can choose to take part in the regime.

The position paper emphasises that the SFC will only grant licences to platform operators which are capable of meeting robust regulatory standards. These standards are comparable to those which apply to licensed securities brokers and automated trading venues but also incorporate additional requirements to address specific risks associated with virtual assets. For example, the SFC will impose licensing conditions requiring that platform operators offer their services exclusively to professional investors, only service clients who have sufficient knowledge of virtual assets and maintain stringent criteria for the inclusion of virtual assets on their platforms. In addition, licensed platforms will be placed in the SFC Regulatory Sandbox for a period of close and intensive supervision. Such regulatory framework is aligned with the recommendations of international standard setting bodies and helps investors identify trading platforms which agree to be regulated or supervised.

Key requirements

Below are some key requirements under the regulatory framework:

  1. Due diligence: A platform operator is required to carry out reasonable due diligence on virtual assets before including them on its platform for trading. Such due diligence shall cover, for example, the background of the management or development team of the issuer of a virtual asset, the regulatory status of a virtual asset and the supply, demand, maturity and liquidity of a virtual asset.
  2. Custody of assets: It is expected that any virtual asset trading platform can offer client protection which is equivalent to traditional financial institutions in the securities sector. In particular, the SFC will require a platform operator to ensure that an insurance policy covering the risks associated with the custody of virtual assets of full coverage and a substantial coverage, (e.g. 95%) is in effect at all times.
  3. Financial resources: A platform operator should maintain in Hong Kong at all times own assets that are sufficiently liquid, for example, cash, deposits, treasury bills and certificates of deposit (but not virtual assets), equivalent to at least 12 months of its actual operating expenses calculated on a rolling basis.
  4. Prevention of market manipulative and abusive activities: It is expected that a platform operator to establish and implement written policies and controls for the proper surveillance of activities on its platform in order to identify, prevent and report any market manipulative or abusive trading activities. As an additional safeguard, the platform operator should adopt an effective market surveillance system provided by a reputable and independent provider to identify, monitor, detect and prevent any market manipulative or abusive activities on its platform, and provide access to this system for the SFC to perform its own surveillance functions when required.
  5. Know-Your-Client: A platform operator should comply with the KYC requirements applicable to a licensed corporation. The platform operation should take all reasonable steps to establish the true and full identity of its clients and their financial situation, investment experience and investment objectives etc. A platform operator has to ensure that the client has sufficient knowledge of virtual assets, including knowledge of the relevant risks associated with virtual assets, before providing any services to the client.

For details, please refer to here.

SFC and the ICAC signed MoU to enhance collaboration in combating financial crime

On 19 August 2019, the SFC and the ICAC entered into a Memorandum of Understanding (“MoU”) to formalize and strengthen their cooperation in investigating financial crime. The MoU aims at allowing the SFC to perform its statutory duties with great efficiency and effectiveness in combating financial crime and maintaining the securities and futures market of Hong Kong.


  1. Referral of cases: Either side may refer a matter to the other side for the evaluation of potential action if it considers that the suspected misconduct falls outside its function or if the other side would be in a better position to deal with the case. In respect of the functions of the parties, the MoU stresses that the ICAC’s function is to combat corruption while the SFC’s responsibilities are mainly to maintain integrity of the market, protect public investors and regulate and minimise market misconduct.
  2. Joint investigation: The ICAC and the SFC may agree to commence a joint investigation by setting up a joint task force. The parties will decide on tis membership. The joint investigation task force will convene an initial coordination meeting to determine responsibilities and coordinate collection of evidence. Regular meetings will also be held to review the progress of the joint investigation.
  3. Exchange and use of information: The parties will exchange information which may assist the other party in discharging its functions. The information provided will be treated as confidential and only be used in accordance with applicable laws and the MoU.
  4. Mutual provision of investigative assistance: If the ICAC reasonably believes that it is necessary to have the opinion of a market expert during the conduct of its investigation, it may requires the SFC to assist. Each party may also consider request from the other party for investigative assistance on a case-by-case basis.
  5. Capacity building: The parties will coordinate their training initiatives and organize joint training opportunities to improve capacity and effectiveness of their staff members in perforce their roles and functions.

For details, please refer to here.

SFC’s requires listed issues to disclosure actual controllers or beneficial owners of counterparties to a transaction

The SFC published a statement on 21 November 2019 to express concern over the disclosure of actual controllers of beneficial owners of transaction counterparties. In particular, the SFC is concerned about companies listed on the Hong Kong Stock Exchange (“HKEx”) publishing materially false and misleading information regarding their counterparties in corporate transactions. Indeed, the identities of the actual controllers of the counterparties are important information for shareholders in making an informed assessment and investment. The SFC noted that, in some cases, circular definitions of the counterparties were used. For instance, borrowers were defined as “the borrower under the loan agreement” or “the customer of the lender”, which are meaningless definition and do not help investors’ assessment.

The SFC has set out some examples of circumstances where the identities of the actual controllers or beneficial owners of a counterparty to a transaction may be required:

  1. Acquisition, disposals, capital injections and formation of joint venture: the identities of the actual controllers or beneficial owners of the counterparties can be important information to enable investors to make an informed assessment of the issuer’s activities. For instance, investors shall be informed of the background, experience, resources or strategy of the parties with whom the issuer is entering into a long term business arrangement.
  2. Money lending: noting an increase in the number of listed issuers engaged in money lending as part of their business, the SFC is of the view that it is necessary for the investing public to understand the background and financial standing of the controllers or beneficial owners of the borrower to make an informed assessment of the issuers’ activities.
  3. Issuance of shares, convertible bonds and options: The HKEx Listing Rules may require the disclosure of the identities of persons acquiring the securities of the HKEx listed companies in certain circumstances. The companies are also required to publish announcement(s) regarding the grant of stock options as soon as possible. In some cases, the investors are not able to make an informed assessment of the investment because the announcements published by the listed companies may sometimes state that the stock options are granted to unnamed ‘eligible participants’ which is given a broad definition.

Listed issuers are reminded that they should not employ private fund structures, discretionary accounts or complex arrangements with a view to obfuscating the nature of the transaction and its risk, avoiding or to contravening law, rules and regulations.

For details, please refer to here.

SFC’s reminder on legal and regulatory requirements applicable to parties engaging in security token offerings

In March 2019, the SFC issued a statement to remind parties engaging in security token offerings (“STOs”) about the legal and regulatory requirements applicable to STOs. In Hong Kong, security tokens are likely to be “securities” under the SFO and so subject to the securities laws of Hong Kong. Therefore, any person who markets and distributes security tokens is required to be licensed or registered for Type 1 regulated activity (dealing in securities) under the SFO. Intermediaries which market and distribute security tokens are also required to ensure compliance with all existing legal and regulatory requirements.

The relevant requirements are

  1. Selling restrictions: license for Type 1 regulated activity (dealing in securities) must be obtained by an intermediary markets or distributes security tokens and the security tokens should only be offered to professional investors.
  2. Due diligence: proper due diligence should be conducted in order to develop an in-depth understanding of the STOs, including the background and financial soundness of the management, development team and issuer as well as the existence of and rights attached to the assets backing the security tokens.
  3. Information for clients: intermediaries should provide the information in relation to STOs in a clear and easily comprehensible manner to allow the clients to make informed investment decisions.

Intermediaries are also required to discuss with the SFC before engaging in any activities relating to STOs and should implement adequate systems and controls to ensure compliance with the requirements.

For details, please refer to here.


Cheung Ka Ho Cyril v Securities and Futures Commission and another [2020] HKCFI 270: SFC’s power to seize personal digital devices and demanding passwords from persons being investigated

The Court of First Instance held that the SFC is entitled to seize and retain digital devices during search operations and investigations into suspected breaches of the SFO.


The case is the decision for the combined hearing of five judicial review applications. Since 2017, the SFC has been investigating on the listing and bond placements of various listed companies. It later transpired that the Applicants were related to the dealings of such listed companies and hence should also be subject to investigations. Upon having obtained the search warrants by the SFC, an operation was conducted on 5 July 2018 to, among others, seize digital devices and require the provision of login names and passwords to such devices or email accounts by the Applicants.

The Applicants argued that the SFC’s seizures and continued retention of the digital devices and the notices issued by the SFC for the production of emails and passwords were unlawful, beyond the power of the SFC and interfered with the Applicants’ right to privacy under the Basic Law (“BL”) and the Hong Kong Bill of Rights (“BOR”). The Applicants also sought to challenge the search warrants issued by two Magistrates on the basis that they were unlawful or invalid for want of specificity. The SFC has power, under the SFO, to require production of documents and information, to apply for search warrants and to issue notices to compel a person to attend an interview and to answer questions (with the right
to silence abrogated).


The Court held that it would be out of touch with reality to read the SFO as excluding digital devices. The words “document” and “record” in the SFO should not be narrowly construed, having regard to the manner in which information and data are nowadays being created and stored by digital devices. When the SFC has reasonable cause to believe that the digital devices contained information relevant to the investigation, the search warrants plainly authorised digital devices to be seized by the SFC.

While the Applicants further argued that the seizure of digital devices was unlawful or unconstitutional as it disproportionately interfered with one’s right to privacy under BL and/or BOR, the Court held that the SFC‘s decision to seize digital devices was lawful and constitutional. In particular, the element of “fair balance” is also satisfied since the pursuit of societal interests (i.e. the SFC’s proper investigation of possible breaches of the SFO and maintenance of market integrity) has not resulted in an unacceptably harsh burden on the Applicants. This is because the SFC has all along made it clear that it is amenable to using keyword searches to identify relevant materials contained in the digital devices. Also, the contents contained in the digital devices are viewed together with the Applicants so as to minimize the chance of other information which is irrelevant to the SFC’s investigations being viewed by the SFC officers.

Other than that, the Court opined that the SFC is empowered, under section 183(1) of the SFO, to require the Applicants to provide means of access to email accounts and digital devices even if the email accounts and digital devices would likely also contain other personal materials not relevant to the SFC’s investigations. This is driven by the practical reality that information are nowadays mostly kept in digital forms and stored in email accounts and digital devices which are often also protected by specific login names and passwords.

The Court in these judicial review applications reinforced the investigative powers of the SFC and clarified the frequently contested rights of many. The Court’s decision means that the SFC is justified to seize, retain and request for access to digital devices during search operations. Whilst there are considerable concerns relating to one’s privacy under his digital devices, the Court reminds us that the right to privacy is not absolute.

For details, please refer to here.

Enhancements to the Investor Compensation Regime Effective 1 January 2020

In October 2019, the SFC published its consultation conclusion on the proposed enhancements to the investor compensation regime to, among the others, raise the compensation limit from HK$150,000 to HK$500,000 per investor per default. The Government and the SFC published the Securities and Futures (Investor Compensation – Levy) (Amendment) Rules 2019, the Securities and Futures (Investor Compensation – Compensation Limits) (Amendment) Rules 2019 and the Securities and Futures (Investor Compensation – Claims) (Amendment) Rules 2019 (together, the IC Amendment Rules) in the Gazette following the publication of the consultation conclusion in October 2019.

The enhancements were:

  1. To raise the compensation limit from HK$150,000 to HK$500,00 per investor per default, and , consequential to this, to raise the trigger levels for suspending and reinstating the investor compensation fund (“ICF”) levies from HK$1.4 billion and HK$1 billion, to HK$3 billion and HK$2 billion respectively;
  2. To expand the coverage of the ICF Regime so that it covers northbound trading under Mainland China-Hong Kong Stock Connect; and
  3. To empower the SFC to make interim compensation payments out of the ICF in exceptional circumstances so as to allow urgent payouts to manage potential systemic risks in the securities and futures industry.

The above enhancements came into force on 1 January 2020. For details, please refer to here.


Cases and disciplinary actions taken and the regulatory regime put forward by the SFC in 2019 and the first quarter of 2020 provide licensed corporations, responsible officers, investors and general public an insight into a wide range of legal and regulatory issues ranging from disclosure obligations on investigated persons, duties of sponsors and licensed corporations, the SFC’s power to transmit information obtained to overseas regulators to trading of virtual assets. We have also seen SFC’s active involvement in protection of Hong Kong’s securities and futures market by its continued and persistent front-loaded regulatory approach. Moving forward, we expect the SFC to continue with and may even enhance its front-loaded regulatory approach, and a greater involvement of the SFC on regulations on virtual assets especially in respect of futures contracts or over-the-counter derivative instruments, as well as on other new technology such as blockchain technology and artificial intelligence.

This document is available on Lexis Advance® Hong Kong Practical Guidance.

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Sherman Yan

Managing Partner, Head of Litigation & Dispute Resolution, ONC Lawyers


Sherman frequently acts for listed companies, the shareholders, directors and securities investors in dealing with inquiries and investigations by regulatory bodies such as the Hong Kong Monetary Authority, the Hong Kong Exchanges and Clearing Limited, and the Securities and Futures Commission of Hong Kong. Besides, Sherman is a member of the Civil Litigation Committee of the Law Society of Hong Kong with extensive experience in handling and reviewing new laws and regulations relating to litigation.


Over the years, Sherman has been giving seminars for various professional bodies, such as the Hong Kong Institute of Certified Public Accountants, the Hong Kong Institute of Chartered Secretaries, the Chamber of Hong Kong Listed Companies, the Hong Kong Society of Chinese Auditors and Accountants, and the Hong Kong Securities & Futures Industry Staff Union. Topics of seminar include “Shareholder disputes for listed companies”, “Insider dealing and SFC investigations”, “Disclosure and insider dealing”, “Regulation of licensed / registered intermediaries” and “Market irregularities and SFC investigations”, etc.


Sherman is also an arbitrator of the South China International Economic and Trade Arbitration Commission (Shenzhen Court of International Arbitration) (SCIA) and is eligible to act for clients in arbitrations concerning disputes relating to international trade.

Dominic Wai

Partner, ONC Lawyers


Dominic’s practice focuses on advising clients on matters relating to cybersecurity, data security and privacy law issues, anti-corruption, white-collar crime, law enforcement, regulatory and compliance matters in Hong Kong, including advice on anti-money laundering. Dominic has extensive experience in dealing with the ICAC (the Independent Commission Against Corruption), Police/CCB (Commercial Crime Bureau), SFC (Securities and Futures Commission), the HKMA (Hong Kong Monetary Authority) and EAA (Estate Agents Authority).


Dominic has assisted clients with urgent asset freezing applications in relation to Business Email Compromise and Scam (BEC and BES) cases and helped clients to recover substantial funds that have been scammed and transferred to bank accounts in Hong Kong. Dominic has also assisted clients in various Import and Export issues relating to import/ export of strategic commodities and other restricted items (e.g. pharmaceutical products) in dealing with the Customs and Excise Department and the Department of Justice on criminal matters. Dominic also handles shareholders’ disputes and insolvency matters, joint venture disputes, juridical review applications, defamation cases, international and domestic arbitrations, trade secrets litigation, PRC claims, eDiscovery and forensic investigation issues as well as property and tenancy (distraint of rent) litigation.


Dominic has given presentations on the new PRC Cybersecurity law and has written an article on “China’s New Cybersecurity Law and its impact on doing business in China” in the Fall 2017 edition of “Paradigm”, a magazine of the International Society of Primerus Law Firms.

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