On 28 April 2020, the Hong Kong Competition Commission (HKCC) and the Securities and Futures Commission (SFC) announced that they had signed a memorandum of understanding (MoU) to enhance collaboration and exchange of information, particularly in respect of competition issues in the securities and futures industry.
The existence of this MoU means that, where a business is subject to scrutiny by the SFC, this may also lead to scrutiny by the HKCC, and vice versa. It also means that, when addressing compliance issues, it is now more important than ever for a financial institution or listed company to consider conduct from a broad perspective which takes into account both competition law and financial regulatory requirements, as well as the best approach to engagement with the authorities.
This MoU is a reflection of the increasing prominence the HKCC has within the Hong Kong regulatory space and is a result of the HKCC adopting a more joined up approach with other authorities in order to fulfil its statutory duties. Financial institutions and listed companies (as well as listing applicants) should take note that the risk of an investigation by the HKCC is real and that competition law compliance is as important as other forms of compliance.
The MoU contains specific provisions relating to information exchange, notification and consultation, and consent for certain entities to inform the SFC about being subject to an investigation by the HKCC.
These activities are subject to certain limitations, for example, the SFC or the HKCC may decline to provide information to each other where the disclosure of such information is not permitted by law or would undermine the performance of their functions. Non-public information that is disclosed under the MoU is required to be kept confidential.
Nature and scope of MoU
This MoU is not intended to have any legal effect or to modify or supersede any law, regulation, or guideline or policy issued by the SFC or the HKCC.
As part of the arrangements envisaged by the MoU, the SFC and the HKCC agree to notify and consult each other, share information and exchange views in a range of circumstances (subject to certain provisos and safeguards), including where relevant to performing their functions or carrying out their objectives vis-à-vis:
- persons carrying on a regulated activity or are licensed by or registered with the SFC;
- entities authorised or approved by the SFC (including authorised automated trading services providers);
- applicants for listing or issuers listed on the Stock Exchange of Hong Kong;
- companies or trusts subject to the SFC’s Codes on Takeovers and Mergers and Share Buy-backs;
- collective investment schemes authorised by the SFC; and
- where applicable, recognised exchange controllers, exchange companies and clearing houses in Hong Kong
When taking steps under the MoU, the SFC and the HKCC will endeavour to achieve a complementary and consistent approach so far as it is compatible with their independent roles.
Information sharing is specifically provided for when appropriate and necessary regarding issues arising in investigations, proceedings and processes relating to the regulated persons mentioned above (or their officers and employees). While information exchange between the HKCC and the SFC has always been possible in some form, the extent of information exchange formalised by the MoU means that there is a real likelihood that, where a business is investigated by the SFC and the arrangements in question involve potentially anti-competitive conduct, the HKCC may also find out about this conduct (and vice versa).
Other information sharing provisions relate to (among others) information regarding issues which one party considers relevant to the performance of functions or carrying out of objectives by the other party, policy issues, revised regulatory requirements, HKCC decisions, block exemption orders, infringement and warning notices, and SFC consultation papers and conclusions.
In addition, the MoU sets out a process under which the SFC and the HKCC may make formal requests for information to each other.
Notification and consultation
The SFC and the HKCC have agreed to notify each other on issues which they consider may have a significant impact on the other party, such as where any of the SFC’s proposed policies or guidelines are likely to have a significant impact on competition issues, or where any of the HKCC’s proposed policies or guidelines are likely to have a significant impact on the securities and futures industry or investors.
The authorities will consult each other and take into account each other’s opinion following a notification.
The two authorities have agreed to meet annually (or at intervals to be agreed) and hold ad hoc meetings (where necessary) to discuss matters including the implementation of the MoU, issues to which the notification or consultation arrangements apply, any further opportunity for collaboration, and any proposed legislative changes or policy approaches and changes that may affect the performance of their respective functions or objectives, as well as other matters of mutual interest.
The SFC and the HKCC will also notify each other of relevant training courses to enable the staff of the other party to attend, and consider arranging temporary secondments of staff to one another.
First MoU between HKCC and a financial regulator
The HKCC has also entered into MoUs with the Communications Authority and the Canadian Competition Bureau – this is the first such agreement between the HKCC and a financial regulator.
It is not uncommon for a competition authority to enter into an MoU with a financial regulator. For example, a similar MoU exists in the UK between the Competition and Markets Authority and the Financial Conduct Authority (FCA). It sets out the working arrangements between the authorities in relation to their concurrent competition powers, covering issues such as case allocation, information sharing, pooling resources and other mutual support. However, unlike the FCA, the SFC does not have concurrent competition law powers and so the nature of the MoU with the HKCC does not cover activities such as case allocation and pooling resources.