Ernst & Young in court over secrets kept from the SFC
Watchdog and Big Four accountancy firm argue in court over whether mainland state secrets law meant papers could not be handed over
The legal battle between the Securities and Futures Commission and Ernst & Young kicked off yesterday, with lawyers debating whether state secrets were an excuse for not handing a listing candidate's audit working papers to the regulator.
The landmark case will determine if the regulator can require accounting firms to provide documents for investigations.
E&Y helped the mainland water treatment firm Standard Water apply for a listing in Hong Kong in 2009, but resigned as its auditor in 2010 after finding inconsistencies in documents. Standard Water subsequently withdrew its listing application.
The SFC issued nine notices from April 2010 to October 2011 to E&Y asking for accounting records to check on Standard Water, but E&Y refused to oblige.
The Court of First Instance saw the courtroom packed yesterday with media, accountants and SFC staff, including executive director Mark Steward.
Benjamin Yu SC, representing E&Y, a "Big Four" accounting firm, said the mainland's state secret law clearly prohibited E&Y from handing working papers to any overseas regulators.