SFC disciplinary proceedings
Received a Notice of Proposed Disciplinary Action?
A notice of proposed disciplinary action (NPDA) is a written notice issued under section 194 of the Securities and Futures Ordinance (Cap. 571) — or, for a registered institution, under section 196. It starts disciplinary proceedings against a regulated person, sets out the SFC’s preliminary views on misconduct and/or fitness and properness, and states the sanctions the SFC proposes. An NPDA is not a final decision — that comes later, in a decision notice.
Liva Law advises regulated persons — firms and individuals, including responsible officers, directors and Managers-In-Charge of Core Functions (MICs) — on representations, evidence requests, meetings where fairness requires, resolution-by-agreement strategy, and Securities and Futures Appeals Tribunal (SFAT) review of decision notices.
Discuss your NPDAor call +852 3520 3333
What is a notice of proposed disciplinary action?
A notice of proposed disciplinary action (NPDA) is the instrument by which the SFC commences disciplinary proceedings under Part IX of the Securities and Futures Ordinance (Cap. 571). The primary power is section 194, which covers licensed persons and others within the disciplinary regime; for registered institutions, the parallel power is section 196 and the process described on this page is materially the same.
An NPDA may concern misconduct, the regulated person’s fitness and properness, or both. It records the SFC’s preliminary views on the conduct in question and the sanctions the SFC considers appropriate on the facts as it understands them at the time. Preliminary views are not final findings: before exercising a disciplinary power, the SFC must first give the regulated person a reasonable opportunity of being heard (section 198(1)). The SFC’s final decision is set out in a later decision notice.
The NPDA states a deadline for representations and identifies the SFC officer to whom representations should be sent. It is accompanied by a list of the documents relevant to the facts and matters set out in it.
Who may receive an NPDA?
The SFC may take disciplinary action against regulated persons only. An NPDA may be addressed to:
- licensed corporations and registered institutions;
- representatives and responsible officers of licensed corporations;
- executive officers, relevant individuals and former relevant individuals of registered institutions; and
- persons involved in the management of a licensed corporation or registered institution — including directors and Managers-In-Charge of Core Functions (MICs) — even where they are not themselves licensed.
A firm and one or more individuals may each receive an NPDA arising out of the same facts. Where their interests may differ, separate representation should be considered before representations are filed.
What may the SFC propose?
The NPDA states the sanctions the SFC considers appropriate. The range available under the Securities and Futures Ordinance includes:
- a public or private reprimand;
- a fine — up to a statutory maximum of HK$10 million or three times the profit gained or loss avoided, whichever is higher;
- suspension or revocation of a licence or registration, in whole or in part;
- suspension or revocation of approval as a responsible officer; and
- prohibition on applying for a licence or registration, or for approval as a responsible officer, executive officer or relevant individual.
These are proposals, not final decisions. The SFC expects representations on the facts and the proposed sanctions to be made at the same time, in writing, to the person who signed the NPDA. The regulated person may also ask the SFC for copies of the documents on the list provided with the NPDA. All sanctions other than a private reprimand are generally published by press release; if a fine is ultimately imposed and not paid, the order may be registered in the Court of First Instance (section 194(5) / section 196(5)).
How this differs from other SFC processes
An NPDA starts the disciplinary track. It is not an inspection, an investigation notice or an intervention measure.
Scroll sideways for the full table
| NPDA (sections 194 / 196) | section 180 inspection | section 183 notice | restriction notice | |
|---|---|---|---|---|
| Stage | Disciplinary — commencement of disciplinary proceedings | Supervisory | Investigation, after section 182 | Intervention — in effect on service |
| Two instruments? | Yes — NPDA, then decision notice | No | No | No |
| What is expected | Written representations on the facts and the proposed sanctions | Access to records; explanations | Production; explanations; interview attendance | Compliance with prohibitions and/or requirements |
| Meeting normal? | No — written representations are the norm | Meetings are common | An interview may be required | No |
| Review path | SFAT review of the decision notice (section 217) | No direct review; supervisory dialogue | No review of the requirement itself | SFAT review for the firm; section 208 applications |
The same facts can involve more than one process: a firm facing an inspection or a section 183 investigation may later receive an NPDA, and a restriction notice may operate in parallel.
First steps after receiving an NPDA
Record receipt and the 30-day clock
Note the date, time and method of receipt and who received the NPDA. Under the usual framework, written representations are due within 30 days — but the deadline stated in the NPDA controls. Diarise it immediately; a reasoned extension request can be made, but do not assume it is granted unless the SFC confirms.
Identify the signatory and the channel
Representations are made in writing to the person who signed the NPDA. Confirm the named officer, the reference number and the required delivery method before drafting, and route all correspondence through one controlled channel.
Request the document list before drafting
The NPDA is accompanied by a list of documents relevant to the facts and matters set out in it, and the regulated person may ask the SFC for copies. Obtain and review the listed documents before committing to a position on the facts.
Address facts and sanction together
The SFC expects representations on the facts and on the proposed sanctions at the same time. Prepare the factual response and the mitigation case — including cooperation and remedial steps — as one exercise, not sequentially.
Treat resolution by agreement as a later step
A regulated person may propose resolving disciplinary proceedings by agreement, usually considered after written representations. It is discretionary and not a shortcut around representations; discussions are generally treated as without prejudice.
Apply in writing if a meeting is needed
Written representations are the norm. A meeting with the SFC is available only on written application explaining why it is necessary, and is held where fairness in the circumstances requires it — or where the SFC itself proposes one.
Preserve materials; mind privilege and secrecy
Preserve the records relevant to the matters in the NPDA. Legal professional privilege does not vanish because a regulator is involved, and the secrecy provisions mainly regulate the SFC’s own handling of information — take advice before circulating the NPDA beyond those who need it.
Track the next clock now
The 21-day SFAT review window runs from service or giving of the decision notice, not the NPDA. Note this now so that when the decision notice arrives, the review deadline is recorded and diarised on day one.
Consequences of not making representations
If no response is provided before the deadline stated in the NPDA, the SFC will make its final decision on the evidence before it, and it is likely that the SFC will impose the sanctions proposed in the NPDA. The SFC will then issue a decision notice.
Silence does not pause the process or preserve arguments. The decision notice starts the 21-day SFAT review period, and a regulated person who has not engaged at the representations stage will be preparing a review application without having tested the SFC’s factual case or put mitigation on record.
How we can assist
- Analyse the NPDA — the alleged misconduct and/or fitness and properness concerns, the proposed sanctions, the evidence assumptions behind the SFC’s preliminary views, and where those views can be tested.
- Prepare written representations — factual response and sanction mitigation together, supported by documents, with cooperation and remediation put forward accurately.
- Evidence requests — obtain the list of relevant documents and copies from the SFC, identify gaps, and organise the materials needed to answer the case.
- Meetings where fairness requires — assess whether a meeting would assist, and prepare the written application and reasons where it would.
- Resolution-by-agreement strategy — whether and when to propose resolving the disciplinary proceedings by agreement, and the terms to seek.
- Decision notice and SFAT review — advice on the decision notice, merits and grounds for review, and representation before the Securities and Futures Appeals Tribunal within the 21-day period.
Who we advise
Licensed corporations and registered institutions; responsible officers, licensed representatives and directors; Managers-In-Charge of Core Functions and others involved in management; and executive officers, relevant individuals and former relevant individuals of registered institutions. Where a firm and an individual receive an NPDA arising out of the same facts and their interests may differ, we advise on separate representation.
Frequently asked questions
Is an NPDA a final decision by the SFC?
No. An NPDA sets out the SFC’s preliminary views and the sanctions it proposes. Before exercising a disciplinary power, the SFC must give the regulated person a reasonable opportunity of being heard (section 198(1)). The final decision is set out in a decision notice issued after the SFC has considered any representations and the evidence before it.
How long do I have to make representations?
Under normal circumstances the SFC allows 30 days for representations, but the deadline stated in the NPDA controls. The SFC says it will consider reasonable requests for further time — for example, to consider complex evidence. Make any extension request promptly, with reasons, and keep working to the existing deadline unless the SFC confirms a change.
Should representations address the proposed sanctions as well as the facts?
Yes. The SFC expects representations on the facts and the proposed sanctions to be made at the same time. Mitigation — including cooperation, remedial steps and past record — should be evidenced and put forward with the factual response, not held back for later.
Can I see the evidence the SFC relies on?
The NPDA is accompanied by a list of the documents relevant to the facts and matters set out in it, and the regulated person may ask the SFC for copies of documents on the list. Requesting the list early helps avoid drafting representations on assumptions.
Can I ask for a meeting with the SFC?
Disciplinary proceedings are normally determined on written representations. A regulated person who wants a meeting must apply in writing and explain why it is necessary; a meeting is held where the SFC considers fairness in the circumstances requires it. The SFC may also itself invite a regulated person to a meeting to clarify issues. A meeting is an exception to prepare for carefully, not a default.
Can disciplinary proceedings be resolved by agreement?
Yes. A regulated person may make a resolution proposal, and the SFC has power to resolve disciplinary proceedings by agreement where it considers that appropriate in the interest of the investing public or the public interest. Resolution is usually considered after written representations, and discussions are generally treated as without prejudice unless the parties agree otherwise.
What happens if I do not respond to an NPDA?
The SFC will make its final decision on the evidence before it, and it is likely that the SFC will impose the sanctions proposed in the NPDA. A decision notice will then be issued, starting the 21-day period for applying to the Securities and Futures Appeals Tribunal.
What can I do after a decision notice?
A regulated person aggrieved by a specified decision may apply to the Securities and Futures Appeals Tribunal for a review under section 217, generally within 21 days after the decision notice is served or given; the SFAT may extend the period for good cause. If the regulated person appeals within that period, the decision will not take effect until the SFAT makes a final decision. A further appeal to the Court of Appeal is on a point of law only; SFC practice describes a 28-day period from the SFAT’s final decision.
Does an NPDA suspend my licence or registration?
An NPDA states the sanctions the SFC proposes — it does not itself impose them, and the SFC states no automatic effect on a licence or registration at the NPDA stage alone. If the NPDA proposes suspension or revocation, take advice on your position and on continuing to operate while the disciplinary proceedings run their course.
Discuss your NPDA
If you or your firm has received a notice of proposed disciplinary action, contact Liva Law to discuss the NPDA, the representations deadline and the practical next steps. At first contact, please provide your name, a safe contact number and the deadline stated in the NPDA. Please do not send the NPDA or other confidential documents until we have confirmed how they should be provided and whether we can accept the engagement.
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