On 10 and 11 March 2026, the Securities and Futures Commission (“SFC”) and Independent Commission Against Corruption (“ICAC”) executed a major joint operation codenamed “Fuse”. The operation targeted suspected insider dealing and corruption involving senior executives of three licensed corporations, specifically two securities firms and a hedge fund management firm.
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During the operation, authorities searched 14 locations and arrested eight individuals. Those arrested included senior executives from the implicated firms and a middleman. Investigators suspect that senior executives at the securities firms accepted bribes exceeding HK$4 million from the hedge fund’s owner. In return, they allegedly leaked confidential information about upcoming share placements by various Hong Kong-listed companies before the information was publicly announced.
Leveraging this confidential information, the hedge fund established short positions through short selling and short equity swap contracts. When the share placements were eventually publicised, the relevant stock prices dropped, allowing the hedge fund to allegedly make illicit profits of approximately HK$315 million.
The joint raid is the latest instalment of joint operations between the SFC and the ICAC, driven by the escalating complexity of financial crime and the necessity for a unified regulatory response. Historically, the SFC handled the administrative regulatory sphere, while the ICAC governed the criminal investigative sphere. However, this distinction has become increasingly permeable, formalized by a 2019 Memorandum of Understanding (“MoU”) and hardened through successive joint operations. Legal practitioners advising listed issuers, licensed intermediaries, and directors of listed companies must all understand the mechanics of this unified enforcement regime.
The Statutory Architecture
The efficacy of the joint operation model is predicated not on the merging of powers, but on their parallel and coordinated application. The 2019 MoU establishes a framework where the limitations of one agency are offset by the capabilities of the other. The current enforcement doctrine utilizes a “pincer movement” strategy to dismantle complex networks systematically.
- SFC Compulsory Powers: The SFC derives its investigative authority primarily from the Securities and Futures Ordinance (Cap. 571) (“SFO”). Under Section 183 of the SFO, the SFC can compel a person to attend an interview and answer questions, effectively abrogating the common law right to silence. A person cannot refuse to answer on the grounds that it might incriminate them.
- The Section 187 Safeguard: While the interviewee must answer, Section 187 of the SFO provides a statutory safeguard: if the person claims privilege against self-incrimination before answering, the answer is inadmissible against them in criminal proceedings. However, this “use immunity” is limited and does not extend to civil proceedings, the Market Misconduct Tribunal (MMT), or disciplinary actions.
- ICAC Enforcement Powers: Operating under the Independent Commission Against Corruption Ordinance (Cap. 204) and the Prevention of Bribery Ordinance (Cap. 201) (“POBO”), the ICAC possesses the power of arrest, the power to detain suspects for up to 48 hours, and the power to seize travel documents. Suspects interviewed by the ICAC are interviewed under caution, preserving their right to remain silent.
- Tactical Execution: In a typical “dawn raid”, the ICAC executes search warrants and arrests the primary targets, preventing flight or the destruction of evidence. Simultaneously, the SFC issues Section 183 notices to the suspect or their associates (e.g., brokers or accountants), compelling them to provide documents and answer questions. The intelligence gathered by the SFC provides a “roadmap” for ICAC investigators to obtain independent, admissible evidence.
The Evolution of Enforcement
The operationalization of the MoU has evolved from focusing on singular instances of corruption to targeting sprawling, multi-jurisdictional syndicates.
- The Formative Years: Sea Pearl and Jade Qilin (2021): The first major tests of the 2019 MoU occurred in the summer of 2021. Operation Sea Pearl targeted an IPO corruption scheme. The ICAC arrested a senior executive for offering bribes to an underwriter, while the SFC searched offices to secure the “paper trail” of the listing application. Operation Jade Qilin targeted a more complex scheme involving suspicious money lending. The syndicate allegedly bribed executive directors to approve sham loans that were defaulted upon, effectively looting the company’s assets. Five individuals were arrested.
- Ramp-and-Dump Schemes (2022): In 2022, the focus shifted to “ramp-and-dump” schemes, which fuse market manipulation with fraud and corruption. A landmark joint operation in November 2022 demonstrated the scale of this crackdown. Deploying nearly 200 officers to search 50 premises, the SFC and ICAC arrested eight people who utilized a complex cross-shareholding network of Hong Kong-listed companies to generate HK$191 million in illicit gains. Among those arrested are the suspected ringleader, the chairperson of a listed company, and three responsible officers of licensed brokers who allegedly accepted bribes to facilitate share placements for the scheme.
- The Tripartite Model (2023): In October 2023, the enforcement model expanded to include the Accounting and Financial Reporting Council (AFRC). This operation targeted listed companies suspected of falsifying HK$193 million in corporate transactions. Bringing the AFRC into the task force allows regulators to effectively target Public Interest Entity (PIE) auditors who may facilitate these crimes.
- Cross-Boundary Reach (2024): Operation Demarcation in August 2024 involved the SFC, the ICAC, and the Macao Judiciary Police, dismantling the assumption that utilizing Macao-based subsidiaries could shield syndicates from Hong Kong regulators.
Judicial Hardening and Strategic Preparation
The courts have responded to the surge in sophisticated financial crime with increasingly severe sentences. In May 2024, the Court of First Instance handed down the heaviest prison sentences for market manipulation since the enactment of the SFO, sentencing three defendants to terms ranging from 4 years and 4 months to 6 years and 8 months for their roles in manipulating shares of Ching Lee Holdings Limited.
In light of these developments, adopting a proactive defence strategy is imperative. Listed companies and financial institutions must prioritize the following:
- Dawn Raid Readiness: When officers arrive, it is essential to verify the scope of the search warrants. Persons under investigation must be mindful of the distinct statutory obligations when interfacing with SFC and ICAC officers.
- Digital Hygiene: Ensure that all data is preserved, as the destruction of evidence is a standalone charge that is diligently prosecuted. Legal advisors can assist persons under investigation with ascertaining what data may be covered under legal professional privilege and hence withheld from disclosure to the SFC and ICAC.
- Navigating the Interview Matrix: As interviewees shall answer questions raised by the SFC during an SFC interview conducted pursuant to section 183 of the SFO, seeking legal advice from legal advisors prior to such interview is crucial to preserving the interviewee’s interests and avoid disclosing information beyond what is legally necessary. For ICAC interviews, any statements made should not be inconsistent with the answers given to the SFC, as any discrepancies may be regarded as an indication of dishonesty.
Conclusion
With enforcement actions becoming more frequent, complex, and punitive, financial advisory work must go beyond technical compliance and address the broader risks of financial crime and internal corruption. It is foreseeable that the frequency of joint operations conducted by regulators such as the SFC and the ICAC will only increase in the future. Surely, this is a potent development for maintaining an orderly and clean financial market. While these collaborations boost market integrity and investor confidence, they also create a high-stakes environment where financial participants must be acutely aware of their legal obligations and rights.
To discuss how we can assist you, please contact our Partner Rainbow Ip, Consultant Kenneth Leung or Associate Ronnie Tse.
This article is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.