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MEMORANDUM OF UNDERSTANDING 

BETWEEN TilE 

UNITED STATES COMMODITY FUTURES TRADING COMMISSION 

AND TilE 

HONG KONG SECURITIES M'D FUTURES COMMISSION 

CONCERNING CONSULTATION 

\ AND COOPERATION IN TilE • 

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ADMINISTRATION AND ENFORCEMENT OF 

FUTIJRES LAWS 

• 

October 5, 1995 
The Commodity Futures Trading Commission of the United States and the Hong Kong 

Securities and Futures Commission, recognizing the increasing international activity in the 

futures markets and the corresponding need for mutual cooperation as a means for improving 

their effectiveness in administering and enforcing the futures laws, regulations and rules of 

their respective countries, have reached the following understanding: 

1: DEFINITIONS 

For the purposes of this Memorandum of Understanding (Memorandum): 

1.1 "Authority" means: 

1.1.1 the United States Commodity Futures Trading Commission; or 

1.1.2 the Hong Kong Securities and Futures Commission. 

1.2 "Requested Authority" and "Requesting Authority" mean: 

1.2.1 "Requested Authority" means an Authority to whom a request is made 

under this Memorandum; and 

1.2.2 "Requesting Authority" means an Authority making a request under this 

Memorandum. 

1.3 "person" means a natural person, unincorporated association, partnership, or 

body corporate; or a government, government subdivision, agency, 

instrumentality of a government, or any equivalent authority. 

1.4 "futures business" means any person who is involved, in whole or in part, in 

effecting transactions in futures and options for the accounts of others or 

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soliciting such transactions; buying and selling futures and options for one's 

own account; advising others for compensation, either directly or through 

publications, writings or electronic media, as to the desirability of trading in, 

purchasing or selling futures and options; the management, promotion, offer or 

sale of any collective investment scheme; or equivalent activities conducted by 

persons; and includes persons acting in the capacity of trading advisors, pool 

operators, futures commission merchants, introducing brokers, associated 

persons, floor brokers, and floor traders. 

1.5 "futures processing business" means a futures and/or options clearing 

organization. 

1.6 "futures transaction" means a transaction in futures or options that is regulated 

or subject to regulation by the Authorities whether transacted on or subject to 

the rules of an exchange or market, or over-the-counter. 

1. 7 "laws", ''regulations" and "rules" mean the provisions of the laws of the United 

States and Hong Kong and regulations promulgated thereunder, and rules 

promulgated by the Authorities, concerning: 

1. 7.1 insider trading, misrepresentation or the use of fraudulent, deceptive or 

manipulative practices in connection with the offer, purchase or sale of 

any futures or options contract or the conduct of futures businesses or 

futures transactions; 

1.7.2 the duties of persons to comply with reporting requirements; 

I. 7.3 the making of a false or misleading statement or any material omission 

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in any application or report made to the Authorities; 

1. 7. 4 the duties of persons or futures businesses to make full and fair 

disclosure of information in connection with futures transactions; 

l. 7.5 the duties of futures businesses and futures processing businesses 

pertaining to their fmancial, operational or other requirements and their 

duties of fair dealing in the offer and sale of futures and options, the 

execution of transactions and the conduct of their businesses; and 

I. 7.6 the fmancial and other qualifications of those engaged in, or in control 

of, futures businesses or futures processing businesses. 

The laws, regulations and rules identified in 1. 7 represent examples of matters for 

which assistance will be available under this Memorandum and are not intended to 

limit the Memorandum as it may apply to other laws, regulations, rules and regulatory 

policies of the United States and Hong Kong concerning futures and options. 

2: ESTABLISHMENT OF A FRAMEWORK FOR CONSULTATION 

REGARDING MATTERS OF MUTUAL INTEREST 

The Authorities intend to consult periodically about matters of mutual interest in order 

to enhance cooperation and to protect investors by ensuring the stability, efficiency, and 

integrity of the futures and options markets of the United States and Hong Kong; the 

coordination of market oversight; and the administration of United States and Hong Kong 

futures laws, regulations and rules. The purpose of such consultations is to assist in the 

development of mutually agreeable approaches for strengthening the futures and options 

markets of the United States and Hong Kong while avoiding, whenever possible, conflicts that 

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may arise from the application of differing regulatory practices. 

3: MUTUAL ASSISTANCE FOR TilE EXCHANGE OF INFORMATION 

3.1: SCOPE OF ASSISTANCE 

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3.1.1 The Authorities will provide the fullest mutual assistance, to the extent 

permitted by the laws of the United States and Hong Kong, within the 

framework of this Memorandum. Such assistance will be provided to 

facilitate the enforcement of the laws, regulations or rules applicable to: 

futures and options transactions, markets and their members; market 

surveillance and oversight; futures processing businesses; the granting of 

licenses, authorizations, waivers or exemptions for the conduct of 

futures businesses; and the conduct of investigations, litigation or 

prosecutions where information located within the jurisdiction of the 

Requested Authority is needed to determine whether, or to prove that, 

the laws, regulations or rules of the Requesting Authority may have 

been violated. 

3.1.2 Assistance available pursuant to this Memorandum includes, but is not 

limited to: 

(a) providing access to information in the files of the Requested 

Authority; 

(b) taking testimony and statements of persons; and 

(c) obtaining information and documents from persons. 

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3.2: GENERAL PRINCIPLES FOR PROVIDING ASSISTANCE 

3. 2.1 This Memorandum sets forth a statement of intent of the Authorities to 

establish a framework for mutual assistance and to facilitate the 

exchange of information between the Authorities to enforce or secure 

compliance with the laws, regulations or rules of their respective 

jurisdictions, as defined herein. 

3.2.2 This Memorandum does not modify or supersede any laws, regulations 

or rules in force in, or applying to, the United States or Hong Kong. 

This Memorandum does not create any legally enforceable rights or 

impose any legally binding obligations. This Memorandum "does not 

affect any arrangements under other Memoranda to which either 

Authority may be a party. 

3.2.3 The Authorities recognize the need for and desirability of providing 

mutual assistance and exchanging information to assist each other in 

securing compliance with their respective laws, regulations or rules. A 

request for assistance may be denied, however, by the Requested 

Authority: 

(a) where the request would require the Requested Authority to act 

in a manner that would violate its laws; 

(b) where the request is not in accordance with the provisions of this 

Memorandum; or 

(c) on grounds of public interest. 

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Where a request for assistance is denied or opposed, or where assistance is not available under 

the law of the Requested Authority, the Requested Authority will provide the reasons why the 

assistance is not being granted, and consult pursuant to 3.7. 

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3.3: REQUESTS FOR ASSISTANCE 

3.3.1 Requests for assistance wil1 be made in writing. and addressed to the 

Requested Authority's contact officer listed in Appendix A. 

3.3.2 Requests will specify: 

(a) a general description of both the subject matter of the request 

and the purpose for which the assistance or information is 

sought; 

(b) a general description of the assistance, documents, infonnation, 

testimony, or statements of persons sought by the Requesting 

Authority; 

(c) any infonnation in the possession of the Requesting Authority 

that might assist the Requested Authority in identifying the 

persons believed by the Requesting Authority to possess the 

information sought, or the places where such information may be 

obtained; 

(d) the provisions of laws, regulations or rules pertaining to the 

matter that is the subject of the request and the role of the 

Authority in relation to the administration or enforcement of 

such laws, regulations or rules; 

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(e) to whom, if anyone, other than those bodies listed in Appendix 

B, onward disclosure is likely, and the reasons for such 

disclosure; and 

(f) the desired time period for the reply. 

3.3.3 In urgent circumstances, a request for assistance and a reply to such 

request may be effected by summary procedures, such as by means of 

communication other than the exchange of letters, provided that all such 

communications are confmned in writing in the manner prescribed in 

3.3. 

3.4: EXECUTION OF REQUESTS 

3 .4.1 Access to infonnation held in the files of the Requested Authority will 

be provided upon the request of the Requesting Authority pursuant to 

the procedures set forth in 3. 3. 

3.4.2 When requested by the Requesting Authority, the Requested Authority 

will take the testimony or statements of persons involved, directly or 

indirectly, in the activities underlying the request, or possessing 

infonnation that may assist in carrying out the request. The Requested 

Authority also may require the production of other evidence from any 

other person to the extent necessary to satisfy the request. The 

Requesting Authority may, in its discretion, request the taking of the 

testimony or statements of specific persons. 

3.4.3 The obtaining of testimony or statements and the gathering of 
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documents in response to a request under this Memorandum will be 

conducted in accordance with the procedures of the Requested Authority 

and by persons designated by the Requested Authority, unless otherwise 

agreed by the Authorities. 

3.4.4 Notwithstanding 3.4.3, when the Requesting Authority believes it is 

necessary, testimony or statements will be taken under oath or 

affirmation and a transcript will be made. In addition, a representative 

of the Requesting Authority may be present at the taking of testimony 

or statements and may prescribe, to a designated representative of the 

Requested Authority, specific questions to be asked of any Witness. 

3.4.5 Notwithstanding any other provision of this Memorandum, any person 

providing testimony, statements, information, or documents as a result 

of a request made under this Memorandum will be entitled to all the 

applicable rights and privileges of the laws of the Requested Authority. 

Assertions regarding rights and privileges arising exclusively pursuant to 

the laws of the Requesting Authority will be preserved for consi.deration 

by the courts in the Requesting Authority. 

3.4.6 In addition to participating in the taking of testimony or statements 

pursuant to 3.4.4, the Requesting Authority may submit to the 

Requested Authority a request, with reasons, that a person or persons 

designated by the Requesting Authority be permitted to conduct the 

testimony or take a statement of any person. 
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(a) The request may be granted, modified or denied by the 

Requested Authority in its discretion. 

(b) Where the Requested Authority grants a request which specifies 

that the law of the Requesting Authority requires the opportunity 

for counsel for the witness or any party .to the proceeding to pose 

questions to the witness, the Requested Authority will use its 

best efforts to ensure that such an opportunity will be given. 

(c) 3. 7 applies to the denial of a request referred to in 3.4. 

3.5: PERMISSIDLE USES OF INFORMATION 

3.5.1 The Requesting Authority may use the infonnation fumisheil solely: 

(a) for the purposes stated in the request with respect to ensuring 

compliance with, or enforcement of, the laws, regulations or 

rules of the Requesting Authority, including the legal provisions 

specified in the request and related provisions; and 

(b) for the purposes within the general framework of the use stated 

in the request, including conducting a civil or administrative 

enforcement proceeding, assisting in a self-regulatory 

organization's market surveillance, market oversight or 

enforcement proceeding, assisting in a criminal prosecution, or 

conducting any investigation related thereto for any general 

charge applicable to the violation of the provisions specified in 

the request. 

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3.5.2 In order to use the information furnished for any purpose other than 

those stated in 3.5.1, the Requesting Authority will flrst notify the 

Requested Authority of its interest in such use. The Requested 

Authority will advise its views within 14 days and, if necessary, the 

Authorities will consult pursuant to the provisions of 3. 7 to ensure full 

consideration of both their views on the proposed use. Fourteen day 

advance notification need not be provided where disclosures are made to 

persons having the legal power to compel disclosure; in such cases, 

notification will be provided according to 3.6.4. 

3.6: CONFIDENTIALITY OF REQUESTS AND INFORMATION · 

3.6.1 To the extent permitted by law, except for disclosures in accordance 

with 3.5, including disclosures to those persons listed in Appendix B, 

and disclosures that are absolutely necessary to carry out the request: 

(a) each Authority will keep confidential requests made under this 

Memorandum, the contents of such requests, and any other 

matters arising during the operation of this Memorandum, 

including consultations between the Authorities, and unsolicited 

assistance; and 

(b) the Requesting Authority will keep confidential any information 

received from the Requested Authority pursuant to this 

Memorandum. 

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3.6.2 When a Requesting Authority discloses information to another person, 

the Requesting Authority will obtain an undertaking from the other 

person that it will maintain the confidentiality of the information, except 

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when disclosure is required pursuant to a legally enforceable demand. 

3.6.3 Except as contemplated by 3.5, the Requesting Authority will not offer 

the information to, and shall use its best efforts to ensure that it is not 

obtained by, any other person. To ensure confidentiality of any 

infonnation provided by a Requested Authority in response to a request 

under this Memorandum, where appropriate, the Requested Authority 

will in good faith determine and represent that such public disclosure of 

the infonnation would violate its laws. Unless otherwise agreed, if such 

infonnation is obtained by any other person the Requesting Authority 

will use its best efforts to ensure that such information will not be used 

by that person in any way that involves disclosure to any other person. 

3.6.4 The Requesting Authority will notify the Requested Authority of any 

legally enforceable demand for infonnation prior to complying with the 

demand, and will assert such appropriate legal exemptions or privileges 

with respect to such information as may be available. 

3.6.5 In response to a request by the Requested Authority, and to the extent 

permitted by law, as soon as the Requesting Authority has terminated 

the matter for which assistance has been requested under this 

Memorandum or the material provided is no longer required for the 

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conduct of the matter, it will return to the Requested Authority all 

documents and copies thereof not already disclosed in proceedings 

referred to in 3.5 and all other material disclosing the contents of such 

documents, other than material that is generated as part of the 

investigative, deliberative or internal analytical .process of the 

Requesting Authority. 

3.7: CONSULTATION REGARDING MUTUAL ASSISTANCE PURSUANT 

TO THIS MEMORANDUM 

3.7.1 In any case of dispute over the meaning of any tenn used in this 

Memorandum, the Authorities will defme such term in accordance with 

the relevant laws, regulations or rules of the Requesting Authority. 

3.7.2 The Authorities will consult with each other regarding this 

Memorandum with a view to improving its operation and resolving any 

matters that may arise. In particular, the Authorities will consult upon 

request in the event of: 

(a) a denial by one Authority of, or opposition by one Authority to, 

a request or proposal made by the other Authority pursuant to 

this Memorandum; or 

(b) any circumstance that makes it necessary or appropriate to 

amend or extend this Memorandum in order to achieve its 

purposes, such as a change in market or business conditions, or a 

change in the legislation governing the matters set forth in 1. 7. 

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3.7.3 The Authorities may agree on such practical measures as may be 

necessary to facilitate the implementation of this Memorandum. 

3. 7.4 Any of the conditions of this Memorandum may be amended, relaxed, 

or waived by mutual agreement. 

3.8: UNSOLICITED ASSISTANCE 

To the extent permitted by their respective laws, each Authority will use reasonable 

efforts to provide the other Authority with any information it discovers that gives rise to a 

suspicion of a breach, or anticipated breach, of the laws of the other Authority. 

3.9: COSTS OF INVESTIGATION 

The Requested Authority may, as a condition of agreeing to give or continuing to give 

assistance under the Memorandum, require the Requesting Authority to make a contribution to 

costs. Such a contribution may, in particular, be required where the cost of satisfying a 

request is or is likely to be substantial, or where a substantial imbalance has arisen in the 

cumulative costs incurred as a consequence of satisfying two or more requests. 

4: FINAL PROVISIONS 

4.1: EFFECTIVE DATE 

Cooperation in accordance with this Memorandum will begin on the date of its 

signing by the Authorities. 

4.2: TERMINATION 

Cooperation in accordance with this Memorandum will continue until the expiration of 

30 days after either Authority gives written notice to the other Authority of its intention to 

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discontinue the cooperation. If either Authority gives such notice, cooperation in accordance 

with this Memorandum will continue with respect to all requests for assistance that were made 

before the effective date of notification until the Requesting Authority terminates the matter 

for which assistance was requested. 

this siy odJef-ckl, 1995 

FOR THE COMMODITY FUTURES 

TRADING COMMISSION OF THE 

UNITED STATES: 

-, I , : 

/) f i i -, '._1 It L-- :··~ \--1__ 

Mary L:'!ichapiro 1 

Chairman 

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thisd:lay of {'ek,~;, 1995 

FOR THE HONG KONG SECURITIES 

AND FUTURES COMMISSION: 

·Anthony Neoh 

Chairman 

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