When a firm may restrict an employee’s expert-witness service

The provision addresses an employer’s response when an employee is asked to provide expert evidence to Hong Kong’s securities regulator or monetary authority. It supports regulatory fact-finding while preserving room for genuine operational and legal concerns.

The rule is a qualified prohibition

Code of Conduct paragraph 12.7 states that a licensed or registered person, acting as a firm, should not prohibit an employee from performing expert-witness services for the SFC or HKMA without reasonable excuse. The words “without reasonable excuse” matter. The rule is not an absolute requirement to approve every request, and it does not impose a positive duty on the firm to recruit or supply expert witnesses.

What may amount to a reasonable excuse

The SFC’s consultation conclusions discuss concerns such as an actual or potential conflict of interest, confidentiality, resource constraints, and interference with normal work duties. The regulator said reasonableness is assessed case by case. These are not automatic safe harbors: the facts and the firm’s explanation matter.

How to analyze a scenario

1. Confirm the proposed expert service is for the SFC or the HKMA.
2. Identify whether the employer is a licensed or registered firm covered by the Code.
3. Ask whether the firm prohibits the employee or merely manages the scope, timing, or confidentiality safeguards.
4. Evaluate the stated reason against the specific facts; do not treat “business preference” as automatically reasonable.
5. Do not infer that the firm must actively provide or fund expert-witness services.

The Code’s protection and its limit

Paragraph 12.7 of the SFC Code of Conduct says a firm should not, without reasonable excuse, prohibit an employee from performing expert witness services for the SFC or HKMA. The wording matters: it protects participation in regulatory proceedings while recognizing that a reasonable excuse may exist on the facts. It is not an unlimited right to disclose confidential client information, ignore court obligations, or perform work that creates an unmanaged conflict.

Assess reasonableness case by case

Relevant considerations may include whether the request creates a conflict with the employee’s duties, whether the evidence concerns confidential or privileged information, whether the employee has relevant expertise or first-hand knowledge, the timing and operational impact, and whether safeguards can address the concern. A firm should not rely on a generic policy that bars all external testimony. It should identify the actual risk, explore steps such as redaction or confidentiality protections, and document why restriction is or is not justified.

Regulatory cooperation and confidentiality

The firm should support lawful cooperation with the SFC or HKMA while protecting client confidentiality and complying with applicable secrecy, privilege, and data-protection rules. The employee should clarify the scope of the request, preserve relevant records, and coordinate with compliance or legal counsel. The firm must not coach or pressure a witness to give inaccurate evidence. Where legal restrictions are genuinely engaged, seek a lawful protocol rather than treating confidentiality as an automatic reason to refuse.

Scenario: client conflict

An employee is asked to give expert evidence about a trading system used by the firm. The firm has a client confidentiality concern and an operational deadline. A reasoned assessment would determine what evidence is requested, whether the employee’s testimony can be limited to non-confidential technical matters, whether a protective arrangement is available, and whether another qualified witness can address the issue. A blanket refusal without examining alternatives may be difficult to justify; an unmanaged disclosure of client information is also inappropriate.

Exam answer structure

Identify that the request is to provide expert witness services to the SFC or HKMA. State the Code’s “should not, without reasonable excuse, prohibit” standard. Then apply the facts to conflict, confidentiality, expertise, and practicable safeguards. Conclude with a proportionate response and proper documentation. Do not state that the employee must always testify or that the firm may always prohibit it. The test is whether a reasonable excuse exists in the particular case.

A proportionate review process

Acknowledge the request, clarify scope and deadline, and identify confidentiality or conflict concerns. Assess whether redaction or protective arrangements solve them before refusing. Document the facts, alternatives and reason for any restriction. That demonstrates application of the Code rather than reliance on a blanket rule.

Protect evidence integrity

The employee should give accurate evidence within their expertise and distinguish knowledge from assumption. The firm must not alter records, coach inaccurate testimony or retaliate for cooperation. If a question exceeds the witness’s expertise, state the limit clearly.

Privilege differs from confidentiality

Privilege can restrict disclosure; ordinary confidentiality may sometimes be managed through consent, redaction or lawful directions. Obtain legal advice before disclosing protected information. Equally, do not invoke “confidentiality” without identifying the basis and considering lawful alternatives.

Other witness requests require separate analysis

Paragraph 12.7 specifically concerns expert witness services for the SFC or HKMA. A private litigation request or another authority’s request may involve different rules. Identify the requesting body and capacity, then assess the applicable professional, statutory and employment duties.

A refusal should be explainable

If the firm concludes that a reasonable excuse exists, it should be able to identify the concrete conflict or legal restriction and why safeguards are insufficient. A generic reputational concern is not the same as a documented legal or operational reason. Reassess if circumstances or requested scope change.

Protect against retaliation

A firm should not disadvantage an employee for good-faith cooperation with the SFC or HKMA. HR and compliance should keep the witness request confidential to those who need to know, protect records and route concerns through legal channels. The firm can manage genuine conflicts without obstructing truthful regulatory evidence.

Key takeaway

Paragraph 12.7 protects the ability to provide expert evidence by barring prohibition without reasonable excuse. The qualification preserves case-specific restrictions where the circumstances justify them.