I write in response to John Brewer's Weekender column of July 31 and Monitor column of August 6, which comment on the Securities and Futures Commission's investigative and disciplinary powers.
In his first article, Mr Brewer draws a misleading comparison between the powers of the Independent Commission Against Corruption and the SFC's. The powers of the SFC are not more draconian than the ICAC's: the SFC cannot detain, arrest, remove passports and its officers never carry firearms. Also, the SFC issues invitations for interviews during office hours and with seven days warning so that preparations can be made and counsel engaged.
The SFC's powers are similar to those given to regulators in current or former Commonwealth jurisdictions including Britain, Canada, Singapore, Malaysia, Australia, New Zealand and South Africa. One of the hallmarks of all these regulatory regimes is that the legislatures in each country have decided to remove the right to silence in the investigation of financial market misconduct. This is because market abuse or wrongdoing is notoriously difficult to prove in the absence of oral testimony. As a result, regulators the world over have been given the power to compel answers to questions. However, this comes with important safeguards which Mr Brewer has chosen to ignore in his articles.
Self-incriminating statements made by a person under SFC investigation cannot be used against the individual concerned in criminal proceedings if he claims privilege against self-incrimination at the time he answers the SFC's questions. Second, those who are found to have committed wrongdoing on the strength of compelled evidence can be subject only to disciplinary and administrative sanctions of a non-criminal nature. The comparison with the ICAC simply does not stand up to analysis. And Mr Brewer is wrong to suggest that the right to silence was removed by the Securities and Futures Ordinance last year. It wasn't. This has been a feature of Hong Kong's law since 1989.
Mr Brewer sees shortcomings in the conduct of the Securities and Futures Appeal Tribunal as an effective appeal body. According to him, the tribunal does not review the SFC's decisions, merely the process by which the decision was reached. This is incorrect.
The tribunal reviews both the substance and the procedure of the SFC's decision. In its first decision, the tribunal stated: 'An appellate/reviewing tribunal is in principle reluctant to interfere with a decision handed down by a regulator statutorily charged with overseeing the operation of a particular market unless it can be demonstrated that good and cogent reason exists for doing so.' This is the common legal stance of appellate bodies.
In two recent decisions, the tribunal varied the SFC's original decisions by reducing penalties. These outcomes show that the tribunal examines the substance of SFC decisions and acts as an effective check and balance when the circumstances suggest the SFC got it wrong. In four other decisions, the tribunal upheld SFC decisions and in another it refused a late appeal. By and large, the tribunal seems to think that the SFC has got most of the disciplinary decisions about right.