How to handle regulatory and law enforcement investigations

Kevin Yam and Rachel Yuen

Kevin Yam, Partner, and Rachel Yuen, Of Counsel at Kennedys, on practical steps to take when dealing with stressful yet important regulatory investigations

Text size: A+A-

Kevin Yam and Rachel Yuen


So you get asked by a regulator or law enforcement agency to attend an interview and answer questions or to produce documents. Or they simply turn up at your office or your home to seize documents and devices, or to arrest you.

A million things run through your head. Why are they asking me for things? What have I done wrong? What have my employees or clients done wrong? Did I fail to pick up signs that things were amiss with the clients for whom I act? Might the investigation become public? Might my reputation suffer? Might I lose my right to practice as an accountant? Might I be fined? Might I be sued? Might I even go to jail?

At moments like this, the key is to take a moment to calm down and, depending on your firm’s set up, immediately contact either your firm’s risk management or in-house legal team, or your external lawyers. Hopefully they will not just cite legislation and case law at you about the powers of regulators and law enforcement agencies, when what you need instead is a steer on what to do next.

We will also steer clear of legal babble here. While word limits prevent us from providing a comprehensive practical guide on handling investigations, here are a few high level things to know or to think about asking your lawyers if you get caught up in an investigation.

Why me?

Regulators or law enforcement agencies would seek things from you if they think you might be a potential wrongdoer in what they are investigating, or have documents or information that may be relevant to their investigation into others, such as your clients. This is relevant when it comes to answering questions on whether you are subject to an investigation for the purpose of regulatory licences, applications or renewals.

However, this distinction does not matter much when it comes to the need to respond carefully to an investigation. The reality is that one can change from being a person assisting in an investigation to being a person under investigation (or vice versa) during the course of an investigation.

Can I say “no”? Should I say “no”?

If a regulator or law enforcement agency asks you to answer questions or provide documents, the answer to whether you can or should refuse to comply is “it can be complicated.”

For example, regulators can typically compel (i) the production of documents by written notice or by search warrant; and (ii) individuals to attend interviews and answer questions. Law enforcement agencies can typically compel (i) the production of documents by search warrant; and (ii) individuals arrested by them to sit down for interviews.

However, there are a range of full or partial exceptions to these powers. Such exceptions include documents or information where legal professional privilege or privilege against self-incrimination applies, or where acting in compliance of a regulator’s or law enforcement agency’s exercise of powers could lead to the breaching of non-Hong Kong laws. Depending on the situation in an investigation, consideration will need to be given to whether to rely on such exceptions.

Conversely, regulators and law enforcement agencies might sometimes try and seek voluntary assistance from you. They might ask for information over the phone or through non-legally enforceable letters or emails, or they might request a voluntary interview. Legally, you can refuse them. Indeed, there are times when there might be breaches of duties of confidentiality to third parties such as clients.

But what if refusing such requests for voluntary assistance might have consequences for longer term regulatory relationships, or might create publicity issues? Do you still refuse to give assistance then? Or are there ways where you can ultimately give such assistance, whether voluntarily or by legal compulsion? These issues all need to be thought through as they arise.

Not everything is about the law

So far, so complicated. But it actually gets even more complicated than that, as not everything about handling investigations is merely about the law or how to deal with regulators and law enforcement agencies. Issues involving publicity, human resources, or even individual medical or financial needs, as well as family, workplace and client relationships can all come into play, and they in turn could create secondary legal issues that require handling.

Investigations can be a nuisance for those who are being investigated or otherwise asked to assist. They are often messy, and are sometimes painful to handle. Nonetheless, they are almost invariably important, and handling them badly can lead to damaged reputations, reprimands, lawsuits, fines or even jail. It is vital that you take investigations seriously, and consider seeking professional advice as early as possible.

“If a regulator or law enforcement agency asks you to answer questions or provide documents, the answer to whether you can or should refuse to comply is ‘it can be complicated.’”

Add to Bookmark
Text size
Related Articles
January 2023
The new skills and experience chief financial officers need in order to transition to chief executive officer
Human resources
September 2022
The pandemic has changed the way we work and what employees expect. What can companies do to attract and retain staff?
September 2022
Experts chime in on the latest topics in accountancy and business
August 2022
Catherine Wong, Chief Development Officer, Chorev Consulting International Ltd., on how to build strong business relationships with clients
March 2022
Fiona Nott, Chief Executive Officer of The Women’s Foundation, on breaking down barriers for men to further gender equality in the workplace


We use cookies to give you the best experience of our website. By continuing to browse the site, you agree to the use of cookies for analytics and personalized content. To learn more, visit our privacy policy page. View more
Accept All Cookies