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Chapter 17: Use of evidence obtained during FSA enquiries: Real Estate Opportunities Limited v Aberdeen Asset Managers Jersey Limited & Ors [2007] EWCA Civ 197

The Court of Appeal held that evidence obtained in the course of FSA enquiries could be released to third parties for use in private lawsuits, notwithstanding the provisions of Sections 348 and 391 of the Financial Services and Markets Act 2000 (FSMA),

The case concerns an appeal from the order of the Court below ordering the inspection of documents. The Court considered the effect of Sections 348 and 391 of FSMA on the obligations of a Defendant to give inspection of documents disclosed in litigation pursuant to CPR 31.

Arden LJ held decisively on the four principle issues arising on this appeal as follows:

  1. A person cannot be said to "obtain" information from the FSA for the purpose of Section 348 of FSMA if the FSA gives that person a document containing information which he already has even if he is not the source so far as the FSA was concerned.
  2. A person cannot be said to "obtain" information from the FSA for the purpose of Section 348 of FSMA if he knew that information already, or, in the case of a body corporate, knowledge that that information was attributed to it under the general law.
  3. The Learned Judge in the Court below did not err in the exercise of his discretion by ordering inspection of the documents notwithstanding the objections raised by UBS.
  4. The order for inspection given by the Judge in the exercise of his discretion of the warning notices would not of itself result in a breach of Section 391 of FSMA.

The implications of this judgment are that the FSA may be required to release to third parties evidence gleaned from its enquiries in the context of private lawsuits. Witnesses called to the FSA (some under compulsion) may be more wary about imparting sensitive information to the FSA's investigators as a consequence of this judgment placing at risk the information they impart may be placed into the public domain in the context of civil litigation. The Court of Appeal ruled that the transcripts of interviews given by staff at UBS and Aberdeen Asset Management should be made available to an investment fund that was suing the Defendants over its role in setting up a split capital investment trust. This judgment may have significant implications not only for those who are subject to the regulatory obligations imposed under the FSMA but also for the ability of the FSA itself to gather in a spirit of openness with those whom it regulates all relevant information in relation to enquiries it conducts.

The regulatory risk to be managed by the regulated community must now include the prospect of regulatory exposure in the context of civil litigation. The obligation contained within the FSA principles to conduct relations with the regulator in the spirit of openness and co-operation is fundamental to the regulatory process. This may be placed at risk by such a judgment.

Whilst blanket public access to sensitive FSA documentation will not result from this case and it is likely that "fishing expeditions" conducted by litigants or potential litigants will continue to be treated robustly by the Courts, this judgment places at risk the effective operation and supervision of the financial markets if those who are supervised by the FSA are wary about imparting information to it in conformity with their regulatory obligations within the principles for business.

 

4th Edition » | Chapter 17