The Securities and Futures Commission of Hong Kong has been been vindicated during a judicial review of its right to hand over "compelled documents" to a foreign power. Privilege against self-incrimination applies to such documents, at least up to a point.

The connection between Hong Kong and Japan came in 2013 when a Hong Kong corporation traded in the shares of a Japanese company listed on the Nikkei Index. Stories of wrongdoing reached the ears of the SFC, which investigated and handed some of the "compelled materials" that it extracted from the firm over to the Japanese, who subsequently slapped an administrative penalty on the trading firm for market manipulation in their own country.

The trading firm and its main shareholder (both of them anonymised in the court documents) then submitted the matter for judicial review in Hong Kong. The case, heard at the Court of First Instance, was AA & EA v the Securities and Futures Commission [2019] HKCFI 246.

The SFC acquired the materials by means of Section 181 Securities and Futures Ordinance, which says that an authorised person (in this case a regulator) may, for the purpose of helping the SFC to perform its duties, require various people who deal in securities to furnish him with information about the particulars of whoever holds securities and how much he or somebody else paid for them. The penalty for not providing the information can go up to a fine of HK$200,000 and a year in prison. The penalty for providing false information is far higher.

The court held that section 181 did nothing to stop people about whom the regulators gathered information from using their normal immunity from self-incrimination and to protect that information by way of privilege guaranteed in s186(6). This says that if a person is required to make a statement or hand over evidence that might tend to incriminate him and he claims this before he does it, then the authorised person ought not to provide the evidence to a regulator outside Hong Kong for use in criminal proceedings.

The Japanese Financial Services Authority, however, promised to use the information for administrative or regulatory purposes only.

The plaintiffs argued that the SFC broke the law when transmitting the information to the Japanese to be used in criminal proceedings. They argued, furthermore, that the Japanese regulatory proceedings were criminal rather than administrative. The court, however, thought that the regulators were taking civil action because they were only trying to force the firm to disgorge its ill-gotten profits. Moreover, when the regulators interviewed the trading firm it did not claim privilege against self-incrimination; that happened later, when they interviewed the majority shareholder. The Japanese attended that interview and evidence from the first interview was read out. The decision strongly suggests that privilege can only be invoked at the moment when the firm under investigation first has to respond to notices sent to it in accordance with section 181.

The plaintiffs, more importantly, called into question the constitutional propriety of s181, which they said was designed to remove Hong Kong people's right to privilege against self-incrimination, which is part of their right to a fair trial as guaranteed in Article 10 of the Bill of Rights.

The court's reply was reportedly opaque. It thought that any curtailment of this privilege by s181 would not be 'disproportionate.' It also thought it important that anyone who loses his constitutional privilege in this way need not complain because he has chosen to take part in commercial activity governed by s181. It also thought it important that the type of information to be provided was 'limited,' before finishing off with a rousing declaration that s181 is a reasonably necessary way of keeping the markets clean.