How an SFC code of conduct can be used in legal proceedings

A code of conduct can set regulatory standards without being an Ordinance or subsidiary legislation. This distinction matters in exam questions that ask whether a breach automatically creates an offence or whether a court can consider the code when assessing conduct.

A code is not itself an Ordinance

The SFC may publish codes and guidelines under statutory authority. They explain expected standards for licensed or registered persons, but they do not become statutes merely because the regulator issued them. A question that asks whether a code is “law” should distinguish its regulatory importance from the legal status of legislation.

No automatic standalone liability

The SFO provides that failure to comply with a code does not, by itself, make a person liable to judicial proceedings. That does not make a code optional in practice: the SFC can consider conduct against applicable standards when exercising disciplinary powers, and other statutory duties may independently apply. Identify the legal basis for the alleged liability rather than relying only on the code breach.

A court or tribunal may still consider it

The statutory scheme permits a relevant code to be admitted and taken into account in proceedings before a court or tribunal. A code may assist the decision-maker in assessing a person’s conduct, competence, honesty, or fitness and properness. It can inform the analysis without becoming a separate criminal offence or replacing the elements of the statutory claim.

A useful three-part distinction

1. The code states regulatory standards and expectations.
2. A breach alone is not automatically a standalone civil or criminal cause of action.
3. The code may nevertheless be admissible and relevant in a proceeding or regulatory assessment.

Publication under section 399

Section 399 authorizes the SFC to publish codes and guidelines to provide guidance about the SFO, its regulatory objectives and functions. The publication is not itself subsidiary legislation merely because it is issued by the regulator. Read the document’s legal-status statement and the enabling provision. Some codes are also recognized in other statutory provisions; do not assume every SFC communication has identical status.

No automatic standalone cause of action

A failure to comply with a code does not, by itself, automatically create civil or criminal liability. The code does not replace the elements of an offence, statutory duty or private claim. A claimant or regulator must still identify the legal basis for proceedings and prove the required facts. This avoids treating a code paragraph as if it were an independently enacted offence.

Admissible evidence in SFO proceedings

Section 399 provides that a code or guideline can be admissible in evidence in proceedings under the SFO before a court. If a provision appears relevant to a question in those proceedings, the court may take it into account in determining that question. A tribunal or court can therefore consider the standard described by the code when assessing conduct, reasonableness, compliance or fitness and properness.

Regulatory use outside court

The SFC may also have regard to codes and guidelines when performing its functions, including supervision and disciplinary assessment, subject to the relevant statutory provisions. A departure may raise questions about systems or conduct even though the code is not legislation. Compliance with a code is relevant but does not necessarily prove that every underlying statutory obligation has been met.

Example: weak order controls

Suppose a licensed firm’s order handling falls below the client-priority standard in the Code. In an SFO proceeding, the Code may be admitted and considered alongside transaction records, policies, training and the relevant statutory duties. The court or regulator must still analyze the legal claim or disciplinary power; the paragraph does not automatically decide the case.

Distinguish law, codes and circulars

An Ordinance or subsidiary rule creates binding legal requirements according to its text. A code sets regulatory standards and can have evidential or supervisory significance. A circular communicates expectations or supervisory information and may explain how existing duties apply. Identify the source and legal effect before describing a failure as a breach of law.

How to explain the effect

State that the code is not legislation and non-compliance alone does not create proceedings; then explain admissibility and relevance under section 399; finally identify the separate statutory duty or fitness-and-properness analysis. This balanced answer avoids both extremes: “codes have no legal effect” and “every code breach is automatically an offence.”

Exam framework

Name the code and its audience, identify whether it is issued under section 399 or another power, explain its evidential relevance in SFO proceedings, and separate that relevance from standalone liability. If asked about a sanction, point to the SFO provision that authorizes it rather than citing only the code.

Understand what section 399 does

Section 399 gives specified SFC codes and guidelines an evidential role. A failure to comply with a code does not, by itself, create a standalone civil or criminal cause of action. But a code may be admitted in proceedings and taken into account where relevant to a question the court or tribunal must decide. That can make conduct expectations practically important even though the code is not legislation in the same way as an SFO provision.

The decision-maker considers the code alongside the facts, statutory duties and other evidence. A breach may support an inference about whether a licensed person acted competently, honestly or in clients’ interests; it is not an automatic finding on liability. The code may also help explain the standards expected in the industry at the relevant time.

Apply the code to the relevant issue

Start by identifying the proceeding and the legal issue: fitness and properness, reasonable care, disclosure, supervision, or another question. Then identify the code paragraph relevant to that issue and connect it to evidence such as policies, messages, transaction records, training or supervision. A conclusory statement that “the Code was breached” is weaker than an explanation of what the person did and why the provision matters.

A firm’s own procedures can also be evidence of the control it designed and whether it followed that control. An internal policy does not replace the Code, but a departure from a clear policy may help show what staff knew or what supervision was expected. Conversely, a policy on paper is not proof that the control worked.

Key takeaway

Treat SFC codes as important regulatory standards, not statutes. Breach alone does not automatically create liability, but a code can still be used as evidence and inform disciplinary or fitness assessments under the SFO.