The Securities and Futures Commission (SFC), the regulator of the securities industry, has very wide statutory powers under Securities and Futures Ordinance (Cap 571) (SFO). One important power is the power to search premises.
This article addresses the following issues :
- What is a search warrant?
- What can the SFC seize during a search?
- The limitations of the SFC’s powers under the SFO
- What does the SFC usually do during a search (apart from searching)?
What is a search warrant?
A search warrant is a document issued by the court authorizing the search warrant holder to search the premises stated in the search warrant for documents (usually very widely) specified in it.
In the case of an SFC search warrant, it is issued under s.191 of the SFO.
What can the SFC seize during a search?
Under s.191 of the SFO, if a magistrate is satisfied, based on an oath laid by an SFC officer, that there are reasonable grounds to suspect that there is or is likely to be inside a certain premises any record or document which is required to be produced under Part VIII of the SFO, the magistrate may issue a warrant authorizing SFC officers to search the premises for those records and documents.
The records and documents which may be seized under such a warrant include not only all paper documents but also any document containing any information which is recorded otherwise than in a legible form but is capable of being reproduced in a legible form.
In Cheung Ka Ho Cyril v SFC [2020] 1 HKLRD 859, the Court of First Instance held that records and documents under s.191 of the SFO include anything contained inside digital devices. In other words, mobile phones and computers may be seized by SFC officers as long as they contain information which are (in the view of SFC officers) relevant to the investigations stated in the search warrant.
The limitations of the SFC’s powers under the SFO
There are, however, some very important limitations to the powers of the SFC which laymen may not be aware of.
First, in the case of residential premises, while an occupier must not obstruct any SFC officer in carrying out their duties during their search, there is no legal obligation for the occupier (or anyone inside the premises) to provide any form of assistance to the SFC officers during the search.
Second, subject to one qualification (which will be discussed further below), there is also no legal obligation for an occupier of residential premises to answer any question posed by an SFC officer during a search, and this is so no matter how seemingly trivial or unimportant a question may be (e.g. what is the identity of the occupier and the other persons present in the premises). As one never knows whether and how an answer may, together with other evidence, form part of any possible (either criminal or civil) case against him at a later stage, it is usually wise not to provide any verbal or written answer at the spot without the benefit of proper and considered legal advice.
Third, the power of the SFC in a search is only limited to searching the premises. Unlike the police, the ICAC and other government law enforcement departments, the SFC does not have any power to arrest or detain any person (whether inside the premises or anywhere else). The SFC has no power to insist that anyone stay inside the premises during the search. The occupier may call his lawyer or even leave the premises if he so wishes (though he may also wish to stay in the premises or ask someone to stay in it to ensure that the SFC officers do not seize anything which are not covered under the search warrant).
What does the SFC usually do during a search (apart from searching)?
It is customary for SFC officers to prepare pro-forma documents under s.183 of the SFO under which the SFC may, at the spot, require a person, among other things, to answer questions. For example, in the Cheung Ka Ho Cyril case mentioned above, while executing searches at various premises, SFC officers also issued s.183 notices to various suspects inside the searched premises requiring them to provide login names and / or passwords to various email accounts, mobile phones and computers.
Section 183(1) of the SFO provides :
“The person under investigation or a person whom the investigator has reasonable cause to believe has in his possession any record or document which contains, or which is likely to contain, information relevant to an investigation under section 182, or whom the investigator has reasonable cause to believe otherwise has such information in his possession, shall –
(a) produce to the investigator, within the time and at the place the investigator reasonably requires in writing, any record or document specified by the investigator which is, or may be, relevant to the investigation and which is in his possession;
(d) give the investigator all assistance in connection with the investigation which he is reasonably able to give, including responding to any written question raised by the investigator.”
A requirement under s.183 is mandatory. The ambit under s.183 is wide-ranging and includes production of documents specified by the SFC and giving to SFC assistance which a person is reasonably able to give. There are criminal consequences for non-compliance. However, just like s.191 providing the power to search premises, s.183 also has its limitations.
For example, s.183 is subject to reasonable notice in writing being given under s.183(1)(a), and the type of assistance under s183(1)(d) must be something a person is reasonably able to give. What is or is not reasonable under s.183(1) is always case-sensitive and cannot be exhaustively discussed in this article. However, as a starting point, it seems to be perfectly reasonable for someone served with a s.183 notice at a premises to consult a lawyer first before answering any question or providing any assistance.
This article intends to address some threshold questions concerning the powers of the SFC to search. It is beyond the scope of this brief article to go into various ways one can strategically arrange his affairs to minimize the impact of an SFC search or to preempt such a search. Anyone interested in knowing more on this topic or any other topics concerning the SFC’s powers is welcome to contact us for a confidential discussion.
