Securities and Futures Commission v. Ooo Securities (HK) Group Ltd (Formerly Known As Orientiert Xyz Securities Ltd and Amtd Global Markets Ltd) and Others

HCMP 2027/2023

[2025] HKCFI 4584

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2027 OF 2023

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J U D G M E N T

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A.  INTRODUCTION

1.This is the substantive hearing of the application by the Securities and Futures Commission (“SFC”) by the Amended Originating Summons (“the Amended OS”) herein under s.185 of the Securities and Futures Ordinance (Cap.571) (“SFO”) for a statutory order against the 1^st Defendant (“D1”). The basis of the application is alleged failure by D1 to comply with notices issued by the SFC under s.183. Unless otherwise indicated, the statutory sections referred to in this judgment are the sections in the SFO.

2.These proceedings were commenced by the SFC on 3 November 2023 against D1 and 4 individual defendants (“D2” to “D5”), who are the former directors and/or licensed representatives of D1. The proceedings against those individual defendants have been resolved in the way as shown below:

(1)  D2 attended an interview with the Financial Conduct Authority in the UK on 10 September 2024 and the proceedings were discontinued against him by consent on 3 December 2024.

(2)  D3 attended an interview with the SFC on 22 January 2025 and the proceedings were discontinued against him by consent on 14 May 2025.

(3)  D4 attended an interview with the SFC on 20 June 2024 and the proceedings were discontinued against him by a consent order dated 12 August 2024 with no order as to costs. Thereafter, D4 has made an affirmation on behalf of the SFC (“D4’s Affirmation”) in reply to D1’s evidence.

(4)  As to D5, the SFC has not been able to effect service on him at his last known addresses in Chinese Mainland. However, D5 attended an interview with the SFC on 13 March 2025. The SFC does not seek to proceed against him.

3.Accordingly, the only remaining live issues in these proceedings only concern D1. In this hearing, Mr Stewart KM Wong SC, leading Ms Bonnie YK Cheng and Mr Jonathan Fung, represent the SFC. Mr Benjamin Yu SC, leading Mr Byron Chiu, represent D1.

4.The SFC is seeking an order against D1 under s.185(1)(a) and (b). There is no dispute that since D1 is a corporation, if an order under s.185(1)(b) is made, the penalty imposed on D1 could only be a fine.

5.At the beginning of the hearing before me, I directed that whether D1’s liability under s.185(1)(a) and/or s.185(1)(b) is established would be determined in this hearing.[1] If D1’s liability under s.185(1)(b) is established, as to the quantum of fine, I would direct the parties to file evidence and to fix a further hearing[2] for the purpose of determining the quantum.

B.  BACKGROUND

6.D1 is a corporation licensed under the SFO for types 1, 4, and 9 regulated activities. Between 2018 and 2020, it was involved in the initial public offerings (“IPOs”) of several companies (“the Relevant Companies”, including a company called “Company C”) on the Stock Exchange of Hong Kong. D1 was the securities broker to the Relevant Companies, and was also the investment manager to some of the Relevant Companies.

7.Between July 2020 and February 2023, the SFC commenced investigations in respect of the IPOs. The SFC’s investigations concern suspected connections between (a) D1, (b) the Relevant Companies, (c) certain supposedly independent placees in the IPOs, and (d) the issuers/guarantors of investment products subscribed for by the Relevant Companies using the IPO proceeds.

8.D1 was named as a person under investigation in each of the investigations. As part of its investigations, the SFC issued four notices under s.183 requiring the production of records and documents and answers to written questions on 22 July 2021 (“Jul 2021 Notice”), 31 August 2021 (“Aug 2021 Notice”), 2 June 2022 (“Jun 2022 Notice”), and 30 January 2023 (“Jan 2023 Notice”) respectively (collectively, “Relevant Notices”).

9.Receipt of the Jul 2021, Aug 2021 and Jun 2022 Notices (“the 2021/22 Notices”) was acknowledged by D1’s then solicitors, Messrs Justin Chow & Co (“JCC”), who sought and were granted time extensions for the deadlines set by the SFC for compliance. D1 subsequently provided responses to the 2021/22 Notices. According to the SFC, the responses provided by D1 are incomplete.

10.On 16 September 2022, the SFC decided not to pursue the investigation concerning one of the Relevant Companies (ie Company C) further. On 13 October 2022, the SFC informed D1 of this decision by a letter (“the 13.10.2022 Letter”).

11.As to the Jan 2023 Notice:

(1)  On 27 January 2023, the SFC issued and delivered a s.183 notice by hand to D1’s registered office at 23/F-25/F Nexxus Building in Central (“Nexxus Building Office”), but D1’s receptionist refused to accept the same for the reason that it was not addressed to a specific recipient. The SFC does not seek any order against D1 based upon this notice.

(2)  On 30 January 2023, the SFC issued the Jan 2023 Notice and delivered the same by hand to the Nexxus Building Office and by email to William Fung (who was one of D1’s responsible officers and one of D1’s directors at that time)’s email at [email protected] (“WF’s Email Address”). D1’s receptionist at the Nexxus Building Office refused to accept delivery of the hard copy of the Jan 2023 Notice on the basis that William Fung was not in the office and it could not receive letters on his behalf. The copy delivered to William Fung by email did not bounce back.

(3)  According to the SFC, on 6 July 2023, the SFC attempted to give a copy of the Jan 2023 Notice by sending it with a covering letter to D1’s new registered office (“the 6.7.2023 Letter”).

12.The deadlines for compliance with the Relevant Notices are as follows:

(1)  For the Jul 2021 Notice and Aug 2021 Notice, after time extensions given by the SFC, the deadline is 22 April 2022.

(2)  For the Jun 2022 Notice, after time extensions given by the SFC, the deadline is 10 August 2022.

(3)  For the Jan 2023 Notice, the deadline as stated in the notice is 6 February 2023. In the 6.7.2023 Letter, the SFC required D1 to give written answers to the questions raised in the Jan 2023 Notice immediately. There has not been any reply to this notice from D1 before the commencement of these proceedings.

13.The SFC is of the view that D1 has failed to comply with the Relevant Notices, and hence commenced these proceedings by the Originating Summons herein on 3 November 2023. The Originating Summons was amended on 24 April 2024.

14.On 29 October 2024, the SFC conducted searches on D1’s premises and seized (“the Seizure Incident”) various books and records (“the Seized Documents”).

15.After the commencement of these proceedings, D1 (through its solicitors, Messrs Gibson, Dunn & Crutcher (“GDC”)) has provided further answers to the SFC on 11 June and 14 June 2025 (“the June 2025 Responses”).

16.Among the Seized Documents, in respect of the items which are not subject to any LPP claim, hard copies of the same (around 23,000 pages) were released by the SFC to GDC on 10 July 2025. Documents in some electronic devices were returned by the SFC to GDC on 23 or 24 July 2025. For ease of reference, the documents returned by the SFC to D1 (both hard copies and soft copies) are referred to as the “Returned Documents” in the below.

C.  THE LAW

17.S.183(1) provides:

“(1) 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;

(b) if required by the investigator, give the investigator an explanation or further particulars in respect of any record or document produced under paragraph (a);

……

(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.”

18.S.185(1) provides:

“(1) If a person fails to do anything upon being required to do so by an authorized person under ss. 179, 180 or 181, or to do anything upon being required to do so by an investigator under s.183(1), (2) or (3), the Commission may, by originating summons or originating motion, make an application to the Court of First Instance in respect of the failure, and the Court may inquire into the case and

(a) if the Court is satisfied that there is no reasonable excuse for the person not to comply with the requirement, order the person to comply with the requirement within the period specified by the Court; and

(b) if the Court is satisfied that the failure was without reasonable excuse, punish the person, and any other person knowingly involved in the failure, in the same manner as if he and, where applicable, that other person had been guilty of contempt of court.” (Emphasis added)

19.I agree with Mr Wong SC that under s.185(1), the Court would need to consider 3 separate questions, namely:

(1)  whether the defendant has “failed” to do something which he was required to do by an SFC investigator under s.183;

(2)  whether there is any reasonable excuse for why the defendant should not now comply with the requirement – if the Court is satisfied that there is no reasonable excuse, then it may order the defendant to comply with the requirement in a specified period (s.185(1)(a)); and

(3)  whether the defendant’s (prior) failure to comply with the requirement was without reasonable excuse – if the Court is satisfied that the defendant had no reasonable excuse, it may punish the defendant as if he had been guilty of contempt (s.185(1)(b)).

20.There is no dispute that different considerations would apply to s.185(1)(a) and s.185(1)(b).

21.Under s.185(1)(a):

(1)  The SFC bears the legal burden to prove, on the balance of probabilities, that the defendant has failed to do something which it was required to do by an SFC investigator under s.183.

(2)  The burden of showing a reasonable excuse is on the defendant. The standard of proof is on the balance of probabilities.

(3)  As to reasonable excuse:

(a)  The Court will (i) identify the matters said to constitute reasonable excuse, (ii) examine whether the excuse is genuine and (iii) assess whether the excuse is reasonable.[3]

(b)  The assessment of whether an excuse put forward is reasonable is an objective one depending on the particular facts of the case.[4]

(c)  Reasonable excuse should be given an ordinary construction and includes any excuse which would be accepted by a reasonable person to justify the non-compliance with a notice lawfully issued; each case is highly sensitive to its own facts.[5]

(d)  Physical or practical difficulties in producing documents are illustrative of matters constituting reasonable excuse. So are cases where the non-compliance is based on some right, privilege or immunity recognised by law. However, reasonable excuse is not confined to these cases.[6]

(4)  Whether the Court would make an order under s.185(1)(a) involves the exercise of a discretion. In SFC v EY[7], Ng J said:

“107. By using the word “may”, s.185 SFO gives the court a discretion in deciding whether and if yes what remedy to grant, even if all the statutory criteria set out in that section are fulfilled.” (Emphasis added)

(5)  A relevant consideration in the exercise of the discretion is what would more effectively advance the public interest. Where the statutory criteria are satisfied, the test for the exercise of the discretion to refuse relief is whether an order compelling compliance with the statutory notice would be oppressive to the recipient, which is a high test. In SFC v EY, Ng J said:

“108. In Kwan Wing Kim v Cheung Ka Kim at 338, Le Pichon J (as she then was) held a relevant consideration in exercising the court’s discretion under the predecessor of s.185 SFO was what remedy would more effectively advance the public interest. Her Ladyship went on to hold that public interest would best be advanced by granting a remedy which facilitated SFC in the discharge of its statutory function ie by putting it in a position of furthering its investigation.

109. This sentiment is fully supported by the Court of Final Appeal in P v Commissioner of the Independent Commission Against Corruption (2007) 10 HKCFAR 293 at [28]–[30] where Li CJ held the statutory intent of s.14 of the Prevention of Bribery Ordinance (Cap.201) was that the integrity and effectiveness of the ICAC’s investigation, which was sought to be advanced by the use of the special investigative power under s.14(1)(d) of the Ordinance as authorised by a court order, should not be compromised. Consistent with this intent, the scope of the court’s discretion is circumscribed. Hence, where the statutory criteria are satisfied, the test for the exercise of the discretion to refuse relief is whether an order compelling compliance with the statutory notice would be oppressive to the recipient — this is a high test.” (Emphasis added)

(6)  Another consideration in the exercise of the discretion is whether the documents requested by the SFC exist and are in the defendant’s possession.

(a) In Kwan Wing Kim v Cheung Ka Kim[8], Le Pichon said:

“…… it is not sufficient for the plaintiff simply to point to the notice and the defendant’s failure to provide documents sought in the notice. The burden is upon the plaintiff to establish to the satisfaction of the Court that the documents and/or records sought in the notice are documents that, on a balance of probabilities, exist and are in the defendant’s possession or under his control.” (Emphasis added)

(b) In SFC v EY[9], Ng J said:

“252. … the Court will only consider exercising the discretion to grant the order sought if it is satisfied that EY has possession of the information, records or documents in question and has failed to show reasonable excuse for its non-compliance. ……” (Emphasis added)

22.Under s.185(1)(b):

(1)  It is expressly stated in s.185(1)(b) that making an order under this limb would be same as punishing the defendant as if he had been guilty of contempt of court. Thus, the burden of proving the elements in this limb would be on the SFC, and the standard of proof would be beyond reasonable doubt.

(2)  The SFC has to prove that the defendant has failed to do something which he was required to do by an SFC investigator under s.183.

(3)  In my view, in order to successfully seek an order under s.185(1)(b), the SFC would also need to prove that the documents requested under the relevant notice issued under s.183 existed and were in the defendant’s possession or under his control at the time of the s.183 notice. It would not be necessary to show that the documents requested still exists and are still in the defendant’s possession or control. Obviously, on the one hand, the SFC cannot hold the defendant liable if the documents requested did not exist or were not in the defendant’s possession or control at the time of the s.183 notice. On the other hand, the defendant cannot escape liability by deliberately destroying the relevant documents in his possession or control after receiving the s.183 notice. If the documents requested existed and were in the defendant’s possession at the time of the s.183 notice, but the documents now no longer exist or are no longer in the defendant’s possession or control, unless there is a reasonable excuse (see the subparagraph below), the defendant would still be liable under s.185(1)(b).

(4)  As to “reasonable excuse” in s.185(1)(b), in my view, the defendant bears the evidential burden to raise a reasonable excuse by introducing evidence on the matter. However, the defendant would have no need to prove that matter. Once the matter is raised by evidence, the burden of disproving the matter is on the SFC. At the end, if the Court is of the view that taking all the evidence into account, the matter raised by the defendant is believable (ie the defendant’s case may be true) and would constitute a reasonable excuse if believed, the Court cannot hold the defendant liable under s.185(1)(b). In my view, this approach is consistent with what the Court of Appeal has said in Ip Pui Lam Arthur and Ip Pui Sum (Joint and Several Trustees in Bankruptcy) v Alan Chung Wah Tang and Alison Wong Lee Fung Ying[10]. In that case, Cheung JA said:

“4.2 It is important to address at the outset the issue of burden of proof. Because of the penal consequence of not complying with paragraph 3 of the March 2015 Order, in order to prove that the defendants are in contempt, the burden on the plaintiffs is to show, on the criminal standard of beyond reasonable doubt, that the documents are in existence and that they are within the custody or power of the defendants to produce them and the defendants intended not to produce them. This burden which is described as the persuasive burden rests on the plaintiffs and the plaintiffs will fulfill this persuasive burden by calling evidence to prove their case. In other words, they carry the evidential burden as well. In a criminal case, a defendant does not carry any burden to prove that he is not guilty of the offence. The burden rests throughout on the prosecution or, like the present case, on the party who is pressing for committal for contempt and there is no burden on the party being cited for contempt to show that it is not in contempt. This is a recognition of the presumption of innocence provided by Article 11(1) of the Bill of Rights as entrenched by Article 39 of the Basic Law.

4.3 The only exception is where the law imposes a reverse burden on the defendant to show a defence or prove an ultimate fact which is necessary to the determination of his guilt or innocence. Where such a reverse onus is imposed, the defendant is required to satisfy that burden on the balance of probabilities. But in order to give effect to the presumption of innocence, the Court has construed such a burden on the defendant as an evidential burden only. It does not require the defendant to establish anything as a matter of proof. An evidential burden arises where the defendant wishes to put in issue some matter that is potentially exculpatory while the prosecution continues to bear the persuasive burden throughout. In such cases, there must be evidence supporting such exculpatory matter which is sufficiently substantial that it raises a reasonable doubt as to the defendant’s guilt. Unless such a reasonable doubt is removed, the prosecution fails to prove its case. If, on the other hand, the defendant fails to adduce or points to any evidence on the relevant issue or if the evidence adduced is rejected or is not sufficiently substantial to raise a reasonable doubt, the potentially exculpatory matter places no obstacle in the way of the prosecution proving its case beyond reasonable doubt ……” (Emphasis added)

(5)  Subject to the aforesaid, in my view, the matters set out in §21 above concerning s.185(1)(a) would also be applicable to s.185(1)(b).

D.  THE PARTIES’ RESPECTIVE CASES

D1.  SFC’s case

23.Mr Wong SC on behalf of the SFC submits that D1 has failed to comply with the Relevant Notices.

(1)  D1 has never disputed that the Relevant Notices were not properly issued under s.183 or it has no obligation to comply with any of the requirements thereunder.

(2)  Notwithstanding the fact that some replies were given by D1, there are still some outstanding requests (“the Outstanding Requests”) in the Relevant Notices not having been complied with by D1. Pursuant to the directions given by the Court in the hearing, the Outstanding Requests are set out in a List of Outstanding Requests submitted to the Court on 6 August 2025 (“the List”, a copy of the same was also given to GDC). The SFC requests the Court not to include the table in the List (“the Table”) as part of this judgment, given the sensitivity in the SFC’s ongoing investigations. I am of the view that the request is reasonable and I would accede to this request. Although the Table are not set out in this judgment, no doubt that both the SFC and D1 would know the contents of the Table.

(3)  D1 would have the documents and information requested in its possession by reason of the following:

(a)  The documents and information sought relate to D1’s business activities and can reasonably be expected to have been obtained or created and retained in the usual course of business.

(b)  For the documents and information in relation to the activities of D1’s clients, D1 was required to obtain and retain such information under client onboarding and record keeping requirements under the SFO and its subsidiary legislation and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“AMLCTFO”), including the following:

(i)  Under the Securities and Futures (Keeping of Records) Rules, D1 was required to keep records to account for all client assets it received and held (s.3(1)(a)(iii)), including particulars of all money received and disbursed by it (Sch 1, para 1(a)), all orders and instructions concerning and disposals of securities (Sch 1, paras 1(d)-(e)).

(ii)  Under the Securities and Futures (Contract Notes, Statements of Account and Receipts) Rules, D1 was required to prepare and provide contract notes (s.5) and daily and monthly account statements (ss.8, 11) for its clients.

(iii)  Under the Code of Conduct for Persons Licensed by or Registered with the SFC, licensed persons were required to take all reasonable steps to establish the true and full identity of each of its clients (r.5.1(a)), the identity and particulars of persons responsible for originating an instruction relating to a transaction (r.5.4(a)); and

(iv)  Schedule 2 to the AMLCTFO imposes initial ongoing due diligence (paras. 2, 3, 5) and record keeping requirements (para. 20) on licensed institutions in respect of their clients.

(c)  In relation to the 2021/22 Notices, D1’s then solicitors, JCC, did not suggest in its initial responses that the documents/information were not in its possession.

(d)  In the first 3 affirmations made by Mr He Chuan (“He”, Managing Director of D1)[11], there is no suggestion that D1 did not have the documents and information requested in the Relevant Notices in its possession.

(e)  Given that the information/documents sought must, on a balance of probabilities, have been obtained or created and retained by D1, unless there is some basis to suggest that such information/documents have since been lost, then such information/documents must, on a balance of probabilities, still be in the possession of D1

(f)  Insofar as the Change in Ownership and Management (see §29(1) below) is concerned, the relevant sale and purchase agreement provided for the handover of all books and records relating to D1, such that the information/documents sought must still be in the possession of D1 and its current management.

(g)  Even if there is any truth in D1’s allegation that some documents were lost in the Beijing Incident (see §29(2) below), there is no doubt that D1 is now in possession of the Returned Documents. It is beyond credibility to say that those documents do not contain any outstanding documents and/or information.

(h)  In fact, D1 was able to provide various documents records requested by the SFC in the June 2025 Responses, notwithstanding the Change in Management and Control, the Beijing Incident and the Seizure Incident.

(i)  In the June 2025 Responses, it is stated that the Moved Books and Records (see §29(2) below) and the Seized Documents “may include records and documents requested in the Notice”[12].

(j)  Insofar as D1 needs to seek information from any former members of staff, D1 can do so without breaching its obligation of secrecy as it can simply request this information from those former members of staff and seek consent from the SFC under section 378(7) of the SFO if necessary.

(k)  Mr Wong SC also relies upon the reasons as set out in the Table in support of the point that the documents and the information in the Outstanding Requests are in D1’s possession.

24.As to the Jan 2023 Notice, Mr Wong SC submits that:

(1)  It is inconceivable that the Jan 2023 Notice did not come to D1’s attention by way of the email sent by the SFC to William Fung. William Fung remained a responsible officer and director of D1 until 6 April 2023. Further, it is D1’s own evidence that D1’s former management continued to assist in handling D1’s litigation and legal matters following the purported Change of Ownership and Management.

(2)  In any event, the Jan 2023 Notice was validly served on D1 by way of the 6.7.2023 Letter which the SFC sent to D1’s new registered office at the Lippo Centre (“the Lippo Centre Office”) by post. S.141(1)(b)(ii) provides that any written notice to be served on a licensed corporation for purposes of the SFO shall be regarded as duly served if sent by post to the last address provided by the corporation to the SFC. S.400(1)(b)(ii) also provides for services on registered office of a company. Both provisions have been complied with by service of the Jan 2023 Notice on the Lippo Centre Office, which was D1’s registered office at the time.

(3)  Without prejudice to the foregoing, D1 also has acquired knowledge of the Jan 2023 Notice by reason of these proceedings, commenced in November 2023.

(4)  D1 does not suggest that it made any attempt to comply with the Jan 2023 Notice prior to the commencement of proceedings, or at any time prior to 11 June 2025[13].

25.Mr Wong SC submits that D1 does not have a reasonable excuse for its past failures to comply with the Relevant Notices.

(1)  The SFC does not accept that the Change of Ownership and Management of D1 in December 2022 is genuine. Even if the allegation is genuine, that does not constitute a reasonable excuse for the past failures.

(2)  For the 2021/22 Notices, D1’s failures to comply with the same occurred prior to the Change of Ownership and Management in December 2022. Thus, it is plain that the Change of Ownership and Management cannot be a reasonable excuses for those failures.

(3)  There is no basis to say that the Change of Ownership and Management affected D1’s ability to comply with the Relevant Notices for the period after December 2022. If (as alleged by D1) the new purchasers had in fact conducted due diligence, they would no doubt have discovered the existence of the 2021/22 Notices and D1’s failures to comply with them before the completion of the sale and purchase. Further, by D1’s own admissions, all the books and records had been handed over to the purchasers at completion, and D1’s former management assisted D1 in handling legal proceedings after the transition. D1’s new management therefore cannot say that they did not know about the 2021/22 Notices, or that they had difficulties in finding the documents or information necessary to respond to the Relevant Notices.

(4)  The Jan 2023 Notice was issued after the Change of Ownership and Management in December 2022. The non-compliance with the Jan 2023 Notice cannot be caused by the Change of Ownership and Management.

(5)  If the new management were truly unaware of the Relevant Notices until the SFC commenced the present proceedings in November 2023, one would have expected them to immediately take steps to comply with the Relevant Notices. Yet, D1 only effected partial compliance in June 2025 (over 1.5 years after the commencement of proceedings and just one month prior to the substantive hearing of these proceedings), producing documents that had been in its possession all along without providing any explanation for its earlier inability to comply.

(6)  The SFC does not accept the genuineness of the Change of Ownership and Management. The SFC says that:

(a)  No particular of the commercial considerations behind the sale and purchase has been given.

(b)  No particular of the due diligence conducted by the purchasers is provided.

(c)  No satisfactory evidence showing the fund flow in the sale and purchase is produced.

26.Mr Wong SC further submits that D1 does not have a reasonable excuse for not complying with the Relevant Notices now.

(1)  D1’s current management is now aware of the Relevant Notices. By their own admission, they are able to seek assistance from former management to comply with the Relevant Notices.

(2)  Notwithstanding the Jun 2025 Responses, the Outstanding Requests as shown in the List has not yet been complied with.

(3)  The Returned Documents are now in D1’s possession. D1 accepts that among the Returned Documents, there may be documents and information requested by the SFC in the Relevant Notices.

(4)  There is no reasonable excuse why D1 should not be required to furnish a further response to the SFC after going through the Returned Documents.

27.Mr Wong SC submits that although by the 13.10.2022 Letter, the SFC has informed D1 that the SFC decided not to pursue the investigation relating to Company C further, this does not excuse D1’s non-compliance with the Relevant Notices in so far as they related to Company C up to that point.

D2.  D1’s case

28.In the 1^st Affirmation of He, it is stated:

“6. As an overview, I should stress that it was and still is the intention, out of utmost sincerity and respect, of the current shareholder and management team of [D1] to provide assistance to [the SFC] to the extent reasonably practicable. However, as explained further below, given the change of shareholding and management, there had been and still are a number of practical difficulties in complying with the requirements made in the s.183 Notices. As such, insofar as the Honourable Court is invited to inquire into whether [D1] had any reasonable excuse and/or mitigating factors in connection with [D1]’s compliance with the s.183 Notices, the Honourable Court is invited to take into account the matters set out herein.” (Emphasis added)

29.According to D1, the practical difficulties in complying with the Relevant Notices are as follows:

(1)  D1 underwent a complete change in shareholding and management in late December 2022 and early 2023 (“Change of Ownership and Management”). This complete exit of the previous shareholder and management means that the current management was not privy to the dealings with the Relevant Notices, and is not in a position to verify the accuracy of the SFC’s account insofar as they relate to events prior to December 2022.

(2)  A significant portion of D1’s books and records (“Moved Books and Records”) were moved to Beijing between January and August 2023. However, they were subsequently lost due to the fault of the service provider responsible for storing the Moved Books and Records in Beijing (“the Beijing Incident”). D1 has commenced legal proceedings in Hong Kong against the service provider in this respect, and has obtained leave to effect service on the service provider out of jurisdiction. This is relevant to D1’s ability to produce relevant documents and provide the required responses to the Relevant Notices.

(3)  A significant volume of its books and records (both physical and electronic) was seized by the SFC during Seizure Incident on 29 October 2024. The Returned Documents were only provided to D1 very recently. This likewise severely impacted D1’s ability to continue to produce documents and provide the required responses to the Relevant Notices.

30.Mr Yu SC on behalf of D1 submits that the circumstances set out in the paragraphs above constitute “[p]hysical or practical difficulties in producing the documents” and providing the required responses to the SFC, which “are illustrative of matters constituting reasonable excuse”[14].

31.Mr Yu SC submits that there is no basis to challenge the genuineness of the evidence given by D1’s witnesses on oath in their respective affirmations. In any event, while the SFC is trying to hold D1 liable under s.185(1)(b) in the same manner as if D1 had been guilty of contempt of court, D1 must be afforded the usual safeguards in connection with such quasi-criminal proceedings and be given the benefit of doubt.

32.Mr Yu SC has invited me to bear in mind the fact that the SFC has discontinued these proceedings against D2 to D4, and does not seek to proceed against D5. The SFC’s case is that the Relevant Notices had been served on each of D2 to D5 since June 2021, and it was only recently, ie in 2024/2025 that these defendants attended interviews with the SFC. In other words, SFC’s approach regarding these defendants is to take no action against these defendants in respect of their apparent failure to respond to the Relevant Notices during the period from 2021 to 2024/2025. However, the fact that the SFC has sought to take the position that what it regards as “delay” on the part of D1 in making attempts to comply with the Relevant Notices is unacceptable. This is a cherry-picking exercise unfair to D1. The SFC, as a public body exercising statutory powers in its regulatory function under the SFO, is under a public law duty to act fairly. Substantive fairness in public law requires the SFC to act consistently and to accord equal treatment to persons who are regulated, including all the defendants in these proceedings.[15] Furthermore, the Court has not been told what information the SFC has obtained from D2 to D5; and hence the Court and D1 are wholly in the dark as to the SFC’s ability to obtain the relevant information and/or documents via alternative means from inter alia those defendants.

33.Mr Yu SC has drawn my attention to the fact that the SFC is now proceeding against D1 by relying upon, inter alia, matters relating to Company C. Mr Yu SC argues that by choosing to proceed against D1 by relying upon matters relating to Company C, the SFC is trying to resile from its position stated in the 13.10.2022 Letter. That is not permissible.

34.Mr Yu SC submits that all the above are relevant matters in determining whether there is any reasonable excuse on the part of D1. This is because “[i]nherent in the concept of “reasonable excuse” is a balancing of all the consequences of the refusal to give evidence or produce documents”, including whether “there were alternative means to obtain the documents without materially adverse consequences to the investigation”.[16]

35.Mr Yu SC has also made the following points:

(1)  In D4’s Affirmation, D4 purported to give hearsay evidence. For the purpose of this hearing (which is the substantive hearing of the Amended Originating Summons, not an interlocutory hearing), by reason of Order 41 rule 5, D4’s Affirmation is inadmissible.

(2)  There is no satisfactory evidence proving the service of the Jan 2023 Notice on D1 on 30 January 2023, and the service of the 6.7.2023 Letter on D1.

(3)  The expression in the June 2025 Responses that the Moved Books and Records and the Seized Documents “may include records and documents requested in the Notice” is not an admission by D1 that the documents requested by the SFC existed and were in D1’s possession at any time. In the June 2025 Responses, D1 was merely saying that the Moved Books and Records and the Seized Documents may include the documents requested by the SFC. D1 did not say that the Moved Books and Records and the Seized Documents definitely include the documents requested by the SFC.

36.In my view, the objection raised by Mr Yu SC against the admissibility of D4’s Affirmation is valid as a matter of law. During the hearing, Mr Wong SC accepted that D4’s Affirmation should be put aside. Accordingly, D4’s Affirmation is not part of the evidence before the Court in this hearing.

E.  DISCUSSION

E1.  Company C

37.One of the issues in dispute is that given the SFC’s position as stated in the 13.10.2022 Letter, whether it is permissible for the SFC now tries to seek an order under s.185(1)(a) and/or s.185(1)(b) against D1 by relying upon matters relating to Company C. The parties’ respective positions on this issue have been set out in §27 and §33 above.

38.In the 13.10.2022 Letter, the SFC said:

“We write to inform you that [the investigation concerning Company C] has been recently concluded and [the SFC] does not propose to take any further action against you about this matter on the information now known to it. This letter is not intended nor should it be construed as a bar to any enforcement action by the SFC in the future if different facts or circumstances come to the SFC’s attention.” (Emphasis added)

39.The meaning of the 13.10.2022 Letter is clear and unambiguous. Unless different facts or circumstances come to the SFC’s attention, the SFC would not take any further action against D1 on the matters relating to Company C. In the context of the letter, “any further action” must mean any action by the SFC after issuing the letter.

40.In my judgment, by seeking an order under s.185(1)(a) and/or s.185(1)(b) against D1 based upon matters relating to Company C by commencing these proceedings on 3 November 2023, the SFC would be taking further action against D1 on matters concerning Company C. Unless the SFC is able to show that different facts or circumstances have come to the SFC’s attention after the 13.10.22 Letter, this course would not be permissible, for the SFC would be going back on its own words as stated in the 13.10.22 Letter in doing this.

41.The SFC does not say, and there is no evidence showing that, after the 13.10.2022 Letter, different facts or circumstances relating to Company C have come to the SFC’s attention. Accordingly, the SFC should not be allowed to pursue these proceedings against D1 by relying upon matters relating to Company C.

42.The SFC, being a public body, has a duty to act fairly in exercising its powers. In view of the aforesaid, as a matter of fairness, I would exercise my discretion against the SFC by disallowing the SFC to rely upon any matters relating to Company C to seek an order under s.185(1)(a) and/or s.185(1)(b) against D1 in these proceedings.

E2.  Service of the Jan 2023 Notice and the 6.7.2023 Letter

E2.1  Whether service is required?

43.There is a dispute between the parties as to whether, as a matter of law, the SFC would need to prove service of the Jan 2023 Notice for the purpose of the SFC’s application made in these proceedings.

44.Companies Ordinance (Cap.627), s.827 provides:

“A document may be served on a company by leaving it at, or sending it by post to, the company’s registered office.”

45.The provisions concerning service in the SFO are as follows:

(1)  S.141(1)

“…… any written notice, decision or direction or other document (however described) to be, or required to be, issued or served (however described) to or on a licensed person for the purposes of this Ordinance shall for all purposes be regarded as duly issued or served only if —

……

(b) in the case of a corporation, it is—

(i) delivered to any officer of the corporation by hand; or

(ii) (A) left at, or sent by post to, the last address;

(B) sent by facsimile transmission to the last facsimile number; or

(C) sent by electronic mail transmission to the last electronic mail address,

provided by the corporation to the Commission pursuant to section 116, 117, 130(1), 135(2) or 138(4) (as the case may be).”

(2)  S.400(1)

“…… any written notice or direction or other document (however described) to be, or required to be, issued or served (however described) to or on any person, other than the Commission, for the purposes of this Ordinance shall for all purposes be regarded as duly issued or served if —

……

(b) in the case of a company, it is—

(i) delivered to any officer of the company by hand;

(ii) left at, or sent by post to, the company’s registered office in Hong Kong;

(iii) sent by facsimile transmission to its last known facsimile number; or

(iv) sent by electronic mail transmission to its last known electronic mail address”

46.Mr Wong SC submits that it would not be necessary for the SFC to prove the service of the Jan 2023 Notice and the 6.7.2023 Letter on D1 for the purpose of these proceedings. Mr Wong SC submits that in s.183, nowhere one can find the word “service” or “issued” or “serve”. He further submits that if service is required, it would be expressly set out in the provisions, for example, see s.116(7) and (8), and s.134(2). It is not a requirement under s.183 itself that the notice has to be served on the addressee of that notice. All the SFC would need to show is that D1 has knowledge of the Jan 2023 Notice. By the email to William Fung (who was a responsible officer and a director of D1 at that time) on 30 January 2023, the SFC has given notice of the Jan 2023 Notice to D1. Submissions in support of this point have been summarized in §24(1) above.

47.Mr Yu SC submits that:

(1)  Ss. 183, 184 and 185 should be read and considered together. S.184 creates a criminal offence for failure to comply with a s.183 notice. S.185 also imposes liability on the addressee of a s.183 notice for failure to comply with the notice. In view of the severe liabilities imposed on the addressee of the notice in the event of a failure to comply with the notice, it would be unreasonable to say that service of the notice on the addressee would not be necessary for the purpose of an application against the addressee under s.184 and/or s.185.

(2)  In a letter from the SFC to D1 dated 22 July 2021 (in relation to the Jul 2021 Notice), the SFC said that:

“[The SFC] has directed me to conduct an investigation under [s.182(1)].

At the same time as you received this letter, you will be served with a notice under [s.183(1)] to produce records or documents and answer written questions.” (Emphasis added)

Thus, prior to this hearing, the SFC adopted a position that service of a s.183 notice on the addressee of the notice is necessary. The change of stance by the SFC on this point in the hearing is unreasonable.

48.I note that in relation to each of the Aug 2021 Notice, the Jun 2022 Notice, and the Jan 2023 Notice, there is a letter with the contents same as those set out in §47(2) above. That reinforces the conclusion as set out in §47(2).

49.I agree with Mr Yu SC on his interpretation of the relevant sections as set out in §47(1) above. I hold that in order to obtain an order under s.185(1)(a) and/or s.185(1)(b), it would be necessary for the SFC to prove the service of the relevant s.183 notice on the defendant.

E2.2  Any evidence proving service?

50.As to the Jan 2023 Notice, there is no evidence showing that the notice has been served on D1 in accordance with any of the statutory provisions as set out in §§44 and 45 above. Accordingly, the SFC has not proved the service of the Jan 2023 Notice on D1 for the purpose of s.185(1)(a) and/or s.185(1)(b).

51.Without prejudice to the aforesaid, I am further of the view that sending the Jan 2023 Notice to WF’s Email Address does not mean that notice of the Jan 2023 Notice has been given to D1.

52.S.378 provides:

“(1) …… except in the performance of a function under, or for the purpose of carrying into effect or doing anything required or authorized under, any of the relevant provisions, a specified person —

(a) shall preserve and aid in preserving secrecy with regard to any matter coming to his knowledge by virtue of his appointment under any of the relevant provisions, or in the performance of any function under or in carrying into effect any of the relevant provisions, or in the course of assisting any other person in the performance of any function under or in carrying into effect any of the relevant provisions;

(b) shall not communicate any such matter to any other person; and

(c) shall not suffer or permit any other person to have access to any record or document which is in his possession by virtue of the appointment, or the performance of any such function under or the carrying into effect of any such provisions, or the assistance to the other person in the performance of any such function under or in carrying into effect any such provisions.

......

(7) Where information is disclosed by a specified person pursuant to subsection (1) …… —

(a) the person to whom that information is so disclosed; or

(b) any other person obtaining or receiving the information, whether directly or indirectly, from the person referred to in paragraph (a), shall not disclose the information, or any part thereof, to any other person, unless—

(i) the Commission consents to the disclosure;

......

(15) In this section —

......

specified person (指明人士) means—

(a) the Commission;

(b) any person who is or was a member, an employee, or a consultant, agent or adviser, of the Commission; …

……” (Emphasis added)

53.I am of the following view:

(1)  In the letter from the SFC to D1 dated 30 January 2023, the SFC said:

“You are a person assisting [the SFC] in the performance of its functions. Section 378 of the Ordinance imposes obligations of secrecy upon you. You must not disclose anything about this investigation to anyone. It is a criminal offence to fail to comply with section 378.” (“the Secrecy Warning”)

(2)  According to the evidence adduced by the SFC, the attempt to deliver this letter together with the Jan 2023 Notice to the Nexxus Building Office by hand is unsuccessful. Thus, the SFC can only rely upon the sending of this letter together with the Jan 2023 Notice to WF’s Email as evidence in support of the submission that D1 should be regarded as having knowledge of the Jan 2023 Notice on or around 30 January 2023. The reasons in support of this have been set out in §24(1) above.

(3)  However, the letter dated 30 January 2023 contains the Secrecy Warning. By sending the letter dated 30 January 2023 and the Jan 2023 Notice to WF’s Email, the SFC was disclosing the information therein to William Fung pursuant to s.378(1). William Fung would be “the person to whom that information is so disclosed” in s.378(7)(a). There is no evidence showing that William Fung has sought the consent from the SFC under s.378(7)(i), and there is no evidence showing that such consent has been given by the SFC to William Fung. In the circumstances, there is no basis to say that William Fung would have passed the Jan 2023 Notice to some other persons.

(4)  Accordingly, I do not regard that sending the Jan 2023 Notice to WF’s Email Address should be regarded as giving notice of the Jan 2023 Notice to D1.

54.As to the 6.7.2023 Letter, the evidence relied upon by the SFC to prove the service of the letter on D1 is the Affirmation of Kwan Hoi Ying Catherine (“Ms Kwan”)[17] filed on 3 November 2023, in which Ms Kwan said:

“19. Despite being duly served with the 30 Jan Notice by email to its responsible officer, [D1] never responded to [the SFC]. On 6 July 2023, I issued a letter to [D1] addressed to its board of directors, sent by post, to [the Lippo Centre Office]. ……

20. …… The letter was not returned to [the SFC] as being undelivered. ……” (Emphasis added)

55.The problem here is that Ms Kwan did not state in her affirmation that she personally went to a post office to send out the 6.7.2023 Letter, or she personally put the letter into a mailbox to send out the letter. By reading the affirmation, it is also unknown if Ms Kwan is not the one personally sending out the letter, why she would have known that the letter has been sent out.

56.The following provisions of the Rules of the High Court should be borne in mind:

(1)  Order 38, rule 2(3):

“In any cause or matter begun by originating summons, …… evidence may be given by affidavit unless in the case of any such cause, matter or application any provision of these rules otherwise provides or the Court otherwise directs ……” (Emphasis added)

(2)  Order 41, rule 5:

“(1) Subject to Order 14, rules 2(2) and 4(2), to Order 86, rule 2(1), to paragraph (2) of this rule and to any order made under Order 38, rule 3, an affidavit may contain only such facts as the deponent is able of his own knowledge to prove.

(2) An affidavit sworn for the purpose of being used in interlocutory proceedings may contain statements of information or belief with the sources and grounds thereof.” (Emphasis added)

57.The hearing before me is the substantive hearing of the SFC’s application as per the Amended OS, not an interlocutory hearing. Thus, in accordance with the provisions in the Rules of the High Court as set out in the above, Ms Kwan’s affirmation may contain only such facts as Ms Kwan is able of her personal knowledge to prove. By reasons as set out in §§54 and 55 above, the evidence in Ms Kwan’s affirmation concerning the sending out of the 6.7.2023 Letter by post cannot be regarded as admissible evidence in this hearing.

58.By reason of the aforesaid, the SFC has failed to prove the service of the 6.7.2023 Letter on D1.

E2.3  Consequences of the failure in proving service

59.The SFC has failed to prove the service of the Jan 2023 Notice and the 6.7.2023 Notice on D1. Without prejudice to the aforesaid, the SFC has also failed to prove that notice of the Jan 2023 Notice was given to D1 prior to the commencement of these proceedings. However, there is no dispute that the Jan 2023 Notice has been referred to in the Originating Summons issued on 3 November 2023, and D1 has knowledge of the Jan 2023 Notice after the commencement of these proceedings.

60.In my view, the fact that D1 has notice of the Jan 2023 Notice after the commencement of these proceedings would not form a sufficient basis in support of the SFC’s application for an order under s.185(1)(a) and/or s.185(1)(b) based upon D1’s failure to comply with the Jan 2023 Notice.

(1)  In order to obtain an order under s.185(1)(a) and/or s.185(1)(b), the SFC must prove that there is a failure on D1’s part to do the matters required to be done by an investigator under the relevant s.183 notice before the commencement of the proceedings.

(2)  While the relevant s.183 notice has never been validly served on D1, it cannot be said that there has been a failure by D1 to comply with the requirements in the s.183 notice before the commencement of the proceedings.

(3)  The Jan 2023 Notice has never been validly served on D1 before the commencement of these proceedings. Hence, the SFC cannot seek an order under s.185(1)(a) and/or s.185(1)(b) against D1 based upon failure to comply with the Jan 2023 Notice.

61.Given my conclusion as stated in the paragraph above, the SFC’s application for an order under s.185(1)(a) and/or s.185(1)(b) against D1 based upon failure to comply with the Jan 2023 Notice must be refused.

62.The above would be sufficient for disposing the SFC’s application in relation to the Jan 2023 Notice. That being the case, it would not be necessary for me to go into other arguments raised by the parties respectively concerning the Jan 2023 Notice. Hence, the discussion below would focus on the 2021/22 Notices.

E3.  Change of Ownership and Management

63.AMTD Group Company Ltd indirectly held D1 through AMTD International Holding Group Ltd (“AMTD International”) and AMTD Securities Ltd (“AMTD Securities”). As per a Sale and Purchase agreement dated 1 December 2022 produced by He, AMTD International sold its entire interest in AMTD Securities to companies owned by He (33.34%), Sun Yao (33.33%) and Wang Xue (33.33%). The completion date of the sale and purchase would be a date not later than 20 December 2022. Based upon the evidence adduced by D1, I am satisfied that the Change of Ownership and Management occurred in late December 2022 and early 2023.

64.It is plain that before and after the Change of Ownership and Management, D1 is the same legal entity. The SFC now is seeking an order under s.185(1)(a) and/or s.185(1)(b) against D1, not an order against the new management or any officer in the new management. Thus, Change of Ownership and Management per se would not be a reason preventing this Court from holding D1 being liable under s.185(1)(a) and/or s.185(1)(b).

65.Mr Yu SC submits that the Change of Ownership and Management is relevant in the following aspects:

(1)  The new management was not involved in the handling of 2021/22 Notices, or in the matters or events to which they relate, prior to December 2022 / January 2023. As such, the new management is not in a position to address the allegations in those notices. The current management of D1 has no involvement or knowledge regarding the matters which are the subject of the 2021/22 Notices.

(2)  Given the time necessary to handle the transition, and coupled with the issues surrounding the Moved Books and Records (see subsection E4 below) and the subsequent Seizure Incident, there are practical difficulties in D1 complying with the 2021/22 Notices.

(3)  D1’s new management has not attempted to reach out to the former management for assistance or input in relation to the 2021/22 Notices as a result of the secrecy warning based upon s.378 imposed on D1 pertaining to the 2021/22 Notices.

66.With respect, I am unable to agree with Mr Yu SC that the Change of Ownership and Management would have any impact on D1’s liability under s.185(1)(a) and/or s.185(1)(b). Although the new management may not have knowledge of the matters or events to which the 2021/22 Notices relate, I agree with Mr Wong SC that s.378 would not be a hurdle preventing the new management from approaching the former management to ask for the relevant information. As submitted by Mr Wong SC:

(1)  S.378 would not apply insofar as the new management does not disclose the fact of notice of investigation, but just asks the direct questions which SFC asked D1 in the 2021/22 Notices.

(2)  In any event, if the new management has any concern because of the secrecy provision in s.378, the new management could always seek the SFC’s consent under s.378(7)(i). However, the new management has never sought such consent from the SFC.

E4.  Beijing Incident and Moved Books and Records

67.On 20 August 2024, GDC on behalf of D1 wrote to the SFC and told the SFC the following:

(1)  On 7 January 2023, 19 February 2023, 23 April 2023, 27 May 2023 and 11 August 2023, He carried some books and records of D1 (ie the Moved Books and Records) from Hong Kong to Beijing and store the same in a storage in Beijing (“the Beijing Storage”).

(2)  On each occasion, He personally carried the books and records from Hong Kong to Beijing, without engaging a third-party logistics company.

(3)  For the use of the Beijing Storage, the sole shareholder of D1 and a Mr Junfeng Hou (“Mr Hou”) have entered into a written agreement dated 3 January 2023 (“the Storage Agreement”). A copy of the Storage Agreement was enclosed in the letter to the SFC.

(4)  The Moved Books and Records include hard copies of the following types of documents:

(a)  client account opening forms and supporting documents, such as photocopies of identity information and corporate records and profiles;

(b)  risk assessments undertaken for client accounts, as well as supporting documents to these risk assessments;

(c)  the results of annual due diligence processes and updates undertaken in relation to clients;

(d)  client account statements, as well as transaction agreements relating to client accounts, such as records of stamp duty payable in relation to transactions contracts and “bought and sold” notes;

(e)  HR records, including records of employment of all D1’s employees and their appraisal forms;

(5)  The Moved Books and Records also include electronic data storage devices containing soft copies of:

(a)  client records;

(b)  HR records, including records of employment of all D1’s employees and their appraisal forms;

(c)  D1’s share/common drive; and

(d)  D1’s corporate records.

(6)  Mr Hou informed D1 that all the Moved Books and Records in the Beijing Storage were lost and could not be located (ie, the Beijing Incident).

(7)  D1 had undertaken extensive searches and enquiries in an effort to locate the Moved Books and Records, but those books and records could not be found.

68.On 13 November 2024, D1’s shareholder and D1 commenced proceedings in Hong Kong by issuing a writ of summons (“the 2258 Writ of Summons”) claiming for damages against Mr Hou because of the Beijing Incident (HCA 2258/2024).

69.In June 2025 Responses, the account concerning the Moved Books and Records in GDC’s letter dated 20 August 2024 was repeated. In GDC’s letter dated 14 June 2025, a copy of the 2258 Writ of Summons is enclosed in the letter.

70.In the 4^th Affirmation of He dated 23 July 2025 and filed on 24 July 2025, He said:

“8. …… as stated in the [GDC’s letters dated 11 and 14 June 2025], [the Moved Books and Records] were moved to Mainland China between January and August 2023 … and were subsequently lost, which has affected [D1]’s ability to produce all relevant records and documents in response to the Relevant Notices. As previously disclosed to [the SFC], [D1] has commenced legal proceedings in Hong Kong against the service provider responsible for storing the Moved Books and Records in Mainland China, Mr Hou Junfeng (“Mr Hou”). There is now produced and shown to me marked Exhibit "HC-4" a copy ofthe Writ of Summons against Mr Hou. Leave has been obtained to serve a concurrent Writ of Summons on Mr Hou out of the jurisdiction in Mainland China - as of the date of this Affirmation, I understand that the Mainland judicial authorities are still in the process of serving the Writ on Mr Hou.”

71.Leave to file He’s 4^th Affirmation was granted by consent on 23 July 2025.

72.Mr Wong SC submits that D1 should not be allowed to rely upon §8 of He’s 4^th Affirmation in support the Beijing Incident and the Moved Books and Records as alleged by D1. Mr Wong SC submits that:

(1)  The only sworn evidence in support of this allegation is §8 of He’s 4^th Affirmation, which was only filed on 24 July 2025, just a few days before the substantive hearing of the Amended OS. No explanation has been offered by D1 as to why the evidence on this allegation was not adduced at an earlier time. If D1 is allowed to rely upon §8 of the Amended OS, there would be prejudice to the SFC in terms of (a) the disruption to its preparation for this hearing, (b) the lack of any opportunity to file evidence in response to this entirely new factual case or apply for cross-examination of He, and (c) the inevitable position of having to decide whether to adjourn the substantive hearing of the Amended OS which was fixed almost one year ago[18]. In the circumstances, D1 should not be permitted to rely upon §8 of the Amended OS in this hearing. See Wise Union Industries Ltd v Hong Kong Science and Technology Parks Corporation[19].

(2)  It is no answer for D1 to say that it had informed the SFC of the Moved Books and Records in correspondence in August 2024. GDC’s letter dated 20 August 2024 is in relation to entirely separate s.183 notices issued by the SFC, not those which are the subject of these proceedings. Further and in any event, the SFC is entitled to proceed with these proceedings on the basis of the evidence which D1 has chosen to adduce in these proceedings.

(3)  The SFC has all along made clear its objection to D1’s reliance on the alleged Moved Books and Records in its submissions (see the SFC’s Skeleton Submissions dated 16 July 2025, §45 and fn 47) and expressly reserved the right to make submissions on the same in its second letter dated 21 July 2025 consenting to the filing of He’s 4^th Affirmation. In that letter, the SFC said:

“We refer to our letter dated 15 July 2025 enclosing our Summons dated 15 July 2025, and your letter dated 18 July 2025 enclosing a copy of the 4th Affirmation of He Chuan (He 4^th) exhibited to the 3rd Affirmation of Andrew On Tao Cheng (Cheng 3^rd).

We note that paragraphs 8 and 9 of He 4^th raises new factual matters that are not the subject of the 6^th Affirmation of Chong Wai Cheung dated 11 July 2025 (Chong 6^th). Our Counsel will be making submission on those matters (among other issues raised in He 4^th) in due course.

On the basis that your client is agreeable with our application for leave to file and serve Chong 6^th, we have no objections to the filing and service of Cheng 3^rd and He 4^th. We enclose a draft Consent Summons for your review.” (Emphasis added)

73.In my view, while saying that D1 should not be allowed to rely upon §8 of He’s 4^th Affirmation, Mr Wong SC is trying to argue that §8 of He’s 4^th Affirmation should not be regarded as admissible evidence in this hearing. I am unable to agree with Mr Wong SC on this point.

74.Having examined the materials before me, I am of the view that the SFC has given its unqualified consent to the filing of He’s 4^th Affirmation in its entirety. §8 of the affirmation has not been excluded in that consent.

(1)  In the SFC’s Skeleton Submissions dated 16 July 2025, at §45 and fn 47, the SFC submitted that the Moved Books and Records as alleged by D1 were not reasonable or genuine, and there was no affirmation evidence in support of the allegation. At that time, He’s 4^th Affirmation had not yet been filed.

(2)  In the SFC’s second letter dated 21 July 2025, the SFC merely said that counsel would make submissions on the matters raised in §§8 and 9 of He’s 4^th Affirmation. Importantly, it was stated in that letter: “On the basis that your client is agreeable with our application for leave to file and serve Chong 6^th, we have no objections to the filing and service of Cheng 3^rd and He 4^th.” Thus, the condition for the SFC’s consent to the filing of He’s 4^th Affirmation is D1’s agreement to the filing of the 6^th Affirmation of Chong Wai Cheung, no more and no less. The SFC has not reserved any right to object to the admissibility of §8 of He’s 4^th Affirmation in that letter.

(3)  In my view, the SFC has given its unqualified consent to the filing of the whole He’s 4^th Affirmation. In the circumstances, the SFC is not entitled to object to the admissibility of §8 of He’s 4^th Affirmation in this hearing.

75.The Beijing Incident and the Moved Books and Records are not something mentioned by D1 for the first time in §8 of He’s 4^th Affirmation. Those matters were raised in GDC’s letter to the SFC on 20 August 2024. Although that letter is in relation to some other s.183 notices issued by the SFC, the contents of that letter on the Beijing Incident and the Moved Books and Records have been repeated in the GDC’s letters dated 11 and 14 June 2025. The Beijing Incident and the Moved Books and Records are not something only raised by D1 shortly before this hearing. The SFC should not be taken by surprise that D1 is relying upon these matters in the substantive hearing of the Amended OS. In any event, prior to this hearing, D1 has raised these matters by He’s 4^th Affirmation, and the SFC has given its unqualified consent to the filing of this affirmation.

76.Mr Wong SC submits that the Beijing Incident and the Moved Books and Records as alleged by D1 are unbelievable and should be rejected in limine.

(1)  For the purposes of the Relevant Notices, the alleged Moved Books and Records were only raised by D1 in the June 2025 Responses and in He’s 4^th Affirmation, and were not mentioned in any of He’s previous affirmations.

(2)  As per the account set out in GDC’s letter dated 20 August 2024 (which has not been confirmed in evidence), He personally carried the books and records to Beijing on 5 separate occasions in 2023 without engaging any third party logistics company. This is so notwithstanding that the alleged Moved Books and Records were extensive.

(3)  There is no serious attempt to explain why He (D1’s Managing Director) took it upon himself to personally move such voluminous books and records to the Mainland. D1 is a licensed corporation with extensive record-keeping responsibilities (see §23(3)(b) above), and is also mandated by s.130 to store books and records relating to its regulated activities at premises approved by the SFC. The SFC would not generally grant approval for premises outside Hong Kong.

(4)  D1 has not attempted to explain when and how the Moved Books and Records were supposedly lost. No particulars have been given as to how these physical documents and electronic data storage devices were lost (whether they have been stolen, destroyed, etc). In response to the SFC’s express request for particulars, D1 stated that “the Books and Records were lost at the Premise itself, but does not have any other details to share with the Commission as to the cause of this loss”[20].

(5)  D1’s account is undermined by the fact that the SFC was able to seize substantial physical and electronic documents from the Nexxus Building Office (ie D1’s former registered office) in October 2024 and the fact that D1 has now produced various documents (including documents falling within the categories of documents allegedly moved to the Mainland) by correspondence in June 2025. It is wholly unclear from D1’s account why certain books and records were selected to be moved to the Mainland but others were not.

(6)  D1 bears the persuasive burden to establish its reasonable excuses for purposes of s.185(1)(a) and an evidential burden to raise reasonable excuses for purposes of s.185(1)(b). Given the wholly unparticularized nature of D1’s account, D1’s account should be rejected for such evidence is unbelievable.

77.There is force in the criticisms made by Mr Wong SC. However, the following would also need to be borne in mind:

(1)  The Moved Books and Records have been mentioned in GDC’s letter dated 20 August 2024. These matters are not something only raised by D1 recently.

(2)  It is not unbelievable that He himself would be able to carry some books and records of D1 (bearing in mind that some were in electronic forms) in 2023 to Beijing on 5 separate occasions.

(3)  The sole shareholder of D1 had rented the Beijing Storage to store the Moved Books and Records. The Storage Agreement has been produced by D1. There is no allegation that the Storage Agreement is not a genuine document.

(4)  According to D1, D1 learned that the Moved Books and Records were lost because Mr Hou told them so. That being the case, what is stated in GDC’s letter dated 20 August 2024 is what D1 can at best know, ie “the Books and Records were lost at the Premise itself, but does not have any other details to share with the Commission as to the cause of this loss” .

(5)  D1’s shareholder and D1 have commenced HCA 2258/2024 against Mr Hou because of the Beijing Incident, and have obtained leave to serve the 2258 Writ of Summons out of the jurisdiction. There is no allegation that D1 has put forward a fabricated case to mislead the Court in the application for leave to serve the writ out of the jurisdiction.

(6)  That D1 could only store books and records relating to its regulated activities at premises approved by the SFC is one matter. Whether D1 has ever stored books and records at premises other than those approved by the SFC is another matter. The focus here is whether D1 has moved some books and records to Beijing, not whether D1 has done something lawful or unlawful.

(7)  The fact that D1 still has many books and records in Hong Kong does not mean that no book or record has ever been moved to Beijing.

(8)  It is true that He did not explain why it would be necessary for him to carry some books and records to Beijing and store those books and records in the Beijing Storage. However, the lack of explanation on this point must be viewed together with all the aforesaid.

78.In my judgment, taking all the aforesaid into account, and in particular the Storage Agreement and the proceedings in HCA 2258/2024 commenced by D1’s shareholder and D1 against Mr Hou, on the balance of probabilities:

(1)  D1 has proved that He did move some books and records to Beijing in 2023, and those books and records were lost in the Beijing Incident.

(2)  However, there is no evidence showing what are the exact items moved to Beijing with sufficient particularities. I do not accept that D1 has adduced satisfactory evidence to prove that the Moved Books and Records would include the documents or some of the documents now requested by the SFC in the Outstanding Requests.

E5.  Returned Documents

79.The Returned Documents are now in D1’s possession.

E6.  S.185(1)(a)

80.For avoidance of doubt, the discussion concerning whether an order should be made under s.185(1)(a) in this subsection should be subject to the discussion in subsections E1 and E2 above.

81.I accept Mr Wong SC’s submissions as summarized in §23 above. In my judgment, D1 is obliged to comply with the Outstanding Requests, including producing the documents sought by the SFC in those requests. For the reasons submitted by Mr Wong SC, I am satisfied that D1 would have the documents requested by the SFC. Unless D1 can show a reasonable excuse on the balance of probabilities, an order under s.185(1)(a) should be made to compel D1 to comply with the Outstanding Requests.

82.For the reasons set out in subsection E3 above, I do not regard the Change of Ownership and Management as a reasonable excuse for not making an order under s.185(1)(a).

83.As to the Moved Books and Records:

(1)  The Moved Books and Records were only moved to Beijing in 2023. Hence, at the times of the 2021/22 Notices, those books and records were not yet moved and were still in Hong Kong and in D1’s possession.

(2)  As said in §78(2) above, I do not accept that D1 has proved that the Moved Books and Records include the documents or some of the documents sought by the SFC in the Outstanding Requests. Thus, Moved Books and Records would not constitute a reasonable excuse allowing D1 not to comply with the Outstanding Requests.

84.As to the Seized Documents:

(1)  Save and except the documents subject to LPP claim, all the other documents have been returned to D1.

(2)  D1 has never said that the documents requested by the SFC in the 2021/22 Notices or any part thereof is covered by LPP.

85.In view of the aforesaid, I am satisfied that the SFC has proved, on the balance of probabilities, that the documents sought in the Outstanding Requests exist and are now in D1’s possession. Those documents should be in the Returned Documents.

86.I would make an order under s.185(1)(a) against D1.

87.D1 says that since the Returned Documents are voluminous, if an order under s.185(1)(a) is made, D1 would need 3 months to comply with the order. I would accede to this request. Taking into account the public holidays in October 2025 and the Christmas and the New Year holidays, I would allow D1 to have time to comply with the order made under s.185(1)(a) until 19 January 2026. At the same time, the parties would have liberty to apply.

E7.  S.185(1)(b)

88.For avoidance of doubt, the discussion concerning whether an order should be made under s.185(1)(b) in this subsection should be subject to the discussion in subsections E1 and E2 above.

89.By reason of the matters submitted by Mr Wong SC as summarized in §23 above (those submissions are accepted by this Court), and bearing in mind that the Moved Books and Records were only carried to Beijing in 2023, I am satisfied beyond reasonable doubt that at the time of the 2021/22 Notices, the documents requested by the SFC in the 2021/22 Notices existed and were in D1’s possession.

90.I am also satisfied beyond reasonable doubt that by reason of the matters set out in §23 above, D1 has not fully complied with the requests in the 2021/22 Notices.

91.The Change of Ownership and Management occurred in December 2022 and January 2023. Moved Books and Records were moved to Beijing in 2023. The Seizure Incident occurred on 29 October 2024. Plainly, it is beyond reasonable doubt that all these matters would not constitute any reasonable excuse for not complying with the 2021/22 Notices by the deadlines stipulated by the SFC.

92.Further, the Moved Books and Records cannot be a reasonable excuse under s.185(1)(b). I agree with Mr Wong SC that moving some books and records to Beijing and keeping the same in the Beijing Storage would be contravening s.130. Since what has been done by D1 is contrary to the law, the Moved Books and Records cannot be regarded as a reasonable excuse for not complying with the 2021/22 Notices in any event.

93.In my view, prior to the Seizure Incident, D1 did not have any reasonable excuse not to comply with the 2021/22 Notices.

94.As to these past non-compliances, Mr Yu SC relies upon the cherry-picking point as set out in §32 above and submits that no order should be made against D1 under s.185(1)(b). Mr Yu SC submits that it would be unfair to D1 if an order under s.185(1)(b) is made against D1 in these circumstances.

95.Mr Wong SC submits that the cherry-picking point was raised by D1 for the first time in their skeleton submissions dated 18 July 2025. That point was never an issue before D1 filing its skeleton submissions. The full circumstances of D2 to D5’s compliance and non-prosecution with the s.183 notices are therefore not before the Court. Mr Wong SC submits that it would not be fair to the SFC when D1 raised the cherry-picking point in these circumstances, depriving the SFC of the opportunity to adduce evidence to deal with the point.

96.Directions for these proceedings have been given in the Order made by Anthony Chan J (as Anthony Chan JA then was) on 5 January 2024. In that order, the learned judge granted, inter alia, leave to D1 to file and serve its affirmation in opposition, and leave to the SFC to file and serve affirmation(s) in reply. The learned judge expressly stipulated in the order that “[n]o new issue is to be raised in any reply affirmation without leave of the court”.[21] In my view, the true meaning of that order is that D1 should raise all its objections in its affirmation in opposition, and then the SFC would have an opportunity to file affirmation(s) to reply to the issues raised by D1. Plainly, while the SFC is not allowed to raise any new issue in the affirmation(s) in reply without leave of the Court, the same restriction should also apply to D1. In my judgment, D1 should not be allowed to raise any new issue after the SFC filing their affirmations in reply without leave of the Court.

97.On the cherry-picking point, I agree with Mr Wong SC. I am of the view that the cherry-picking point is not a pure point of law. It is a point involving both law and facts. By not raising that point in evidence but only raising the point in D1’s skeleton submissions lodged shortly before this hearing, the SFC has been deprived of the opportunity to deal with the point by evidence. In the circumstances, allowing D1 to rely upon this point would be unfair to the SFC. In my judgment, D1 should not be allowed to rely upon the cherry-picking point in this hearing.

98.As to the SFC’s application for an order against D1 under s.185(1)(b) for the past non-compliances concerning the 2021/22 Notices, I am satisfied that the SFC has proved its case beyond reasonable doubt. Accordingly, as to these past non-compliances, D1’s liability under s.185(1)(b) is established.

99.Since the SFC has proved D1’s liability under s.185(1)(b), there would be Part II in these proceedings for the purpose of determining the quantum of the fine to be imposed on D1.

100.I have invited the parties to make submissions concerning the directions for the purpose of Part II of these proceedings in the hearing. Having considered those submissions, for the purpose of Part II, I would direct that:

(1)  Leave to D1 to file and serve an affirmation within 7 days;

(2)  Leave to the SFC to file and serve an affirmation in reply within 14 days thereafter;

(3)  Leave to D1 to file and serve an affirmation in reply within 14 days thereafter;

(4)  No further affirmation be filed without leave of the Court;

(5)  The substantive hearing of Part II be before DHCJ MK Liu in Court on a date to be fixed in consultation with counsel’s diaries, with 1 day reserved.

E8.  Costs

101.I prefer to deal with the costs of these proceedings after the conclusion of Part II. At the moment, costs be reserved.

F.  DISPOSITION

102.For the reasons above, as to the SFC’s application against D1 for an order under s.185(1)(a), I make the following order:

(1)  the SFC’s application is dismissed to the extent that it relates to Company C and the Jan 2023 Notice;

(2)  without prejudice to and subject to (1) above, there be an order under s.185(1)(a) requiring D1 to comply with the Outstanding Requests on or before 19 January 2026; and

(3)  there be liberty to apply.

103.As to the SFC’s application against D1 for an order under s.185(1)(b), the SFC’s application is dismissed to the extent that it relates to Company C and the Jan 2023 Notice. Without prejudice to and subject to the aforesaid, I hold that D1 is liable under s.185(1)(b) and there would be Part II in these proceedings for the purpose of determining the quantum of fine to be imposed on D1. I give the directions as set out in §100 above.

104.Costs be reserved.

105.Lastly, it remains for me to express my gratitude to all counsel for the very helpful assistance rendered to the Court.

Mr Stewart K.M. Wong, SC, Ms Bonnie Y.K. Cheng and Mr Jonathan Fung, instructed by Securities and Futures Commission, for Plaintiff

Mr Benjamin Yu, SC and Mr Byron Chiu, instructed by Gibson, Dunn & Crutcher, for the 1^st Defendant