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Financial Services Authority v Information Commissioner

17 August 2009

Judgment useful in clarifying the scope of the confidentiality provisions in section 348, FSMA.

In a recent appeal by the Financial Services Authority (FSA) against a decision of the Information Tribunal, Munby J has shed further light on the operation of section 348 (Restrictions on disclosure of confidential information by Authority etc) of the Financial Services and Markets Act 2000 (FSMA) in the context of a refusal by the FSA to provide information pursuant to section 44 (Prohibitions on disclosure) of the Freedom of Information Act 2000 (FOIA).

Background

This Appeal arose from the decision of the Information Tribunal in relation to two separate decisions of the Information Commissioner (see Information Tribunal dismisses FSA's appeals against disclosing information in relation to mortgage endowment charges and equity release products).  The two cases came before the Information Tribunal together and the facts of each are further detailed in the Information Tribunal's decision.  Both related to requests made under FOIA to the FSA and the FSA's refusal to disclose the information requested by relying on, inter alia, section 44 of FOIA.  The first request related to the misselling of mortgage endowment premiums and a subsequent FSA review and was referred to by Munby J as the Owen Appeal.  Mr Owen had asked "How many and which providers used "inappropriate charges" to set premiums as described in the FOS "Decision Trees"….?"  In other words, how many firms had applied charges which were higher than those used in setting the premiums.  The second request (the Lewis Appeal) arose out of Press Release by the FSA "FSA work discovered consumers are not being properly advised on equity release" with an accompanying Briefing Note "Mystery shopping exercise".  Mr Lewis requested the names of the firms that had been the subject of the mystery shopping exercise and the identity of seven of those firms that had been subjected to a follow-up investigation.  The Information Tribunal dismissed both appeals and found in favour of the Information Commissioner.  Consequently the FSA filed an appeal to the High Court under section 59 of FOIA which provides for appeals on a point of law.

Section 44 of FOIA provides an absolute exemption from the relevant provisions of section 1 if the disclosure of the information is "prohibited by or under any enactment".  It is common ground that section 348 of FSMA is such an enactment.  Subject to certain exceptions (which were not relevant in these circumstances) section 348 of FSMA provides that "confidential" information must not be disclosed without the consent of the person who supplied it or to whom it relates.  Confidential information under section 348 has a specific meaning and means information which "(a) relates to the business or other affairs of any person; (b) was received by the primary recipient for the purposes of, or in discharge of, any functions of the Authority…; and (c) is not prevented from being confidential information by subsection (4)".  Subsection (4) states that information is not confidential information if it is already in the public domain or "(b) it is in the form of a summary or collection of information so framed that it is not possible to ascertain from it information relating to any particular person".  

The appeal

The point of law which came before the Court was whether section 348 of FSMA prohibited the disclosure of information which by itself would not breach section 348 but which, when read in the context of a request for information or other information already in the public domain or the hands of the requester, would have the effect of disclosing information which had been "received" by the authority in the course of exercising its statutory functions.  The Tribunal had, the Court found, taken a plainly wrong approach in construing section 348 so narrowly.  The Tribunal had suggested that all one needed to consider when deciding whether information was prohibited from disclosure under section 348 was "the information itself, self-contained and self-referential".  Munby J dismissed this approach stating that the substance or effect of any disclosure must necessarily and in the nature of things be affected by the context of the disclosure.  A name or a list of names may not disclose anything but, in a particular context, may constitute the disclosure of, for example, confidential information.  In the context of a FOIA request, as in these cases, Munby J believed that the true meaning, substance, effect and significance of an answer to a question can only be ascertained by the reference to the question of which it is the answer. 

In relation to the Owen Appeal Munby J held that answering the question posed by the requester under FOIA would have resulted in revealing information which the FSA had "received" in the context of section 348(2)(b) - the FSA would not have known the charges used by the individual firms without having been told these by the particular firms and, therefore, revealing which firms used "inappropriate charges" to set premiums, would have revealed information which was confidential under section 348.  Therefore, Munby J allowed the appeal in relation to the Owen Appeal.

The Lewis appeal had two limbs: first whether the list of the names of the firms which had been chosen by the FSA itself for the mystery shopping exercise was "confidential information" which had been "received" by the FSA and secondly, whether revealing the seven firms which were further investigated would involve the disclosure of confidential information.  The Court agreed with the Tribunal on the first limb but disagreed with the Tribunal on the second limb.

In relation to the second limb of the Lewis Appeal Munby J followed the approach in the Owen Appeal.  The information requested had to be considered in the context of the press release and accompanying briefing note, which explained that "in all of the 7 firms looked at, advisers failed to explain the link between this type of borrowing and subsequent investments".  This limited information was not "confidential" within section 348 because it was anonymised.  However, had the FSA provided the list of names as requested, it would have identified the seven firms whose "advisers failed to explain the link between this type of borrowing and subsequent investments" – "information" within the meaning of section 348 which manifestly "relate[d] to the business" of those seven firms within the meaning of section 348(2)(a) and which equally was available to be disclosed by the FSA only because it had, within the meaning of section 348(2)(b) been "received" by the FSA.

Comment

This judgment is useful in clarifying the scope of the confidentiality provisions in section 348 FSMA.  It will be of some comfort to regulators and those firms which submit information to such regulators that the Court has construed section 348, and the information falling within it, more widely than the approach taken by the Information Tribunal.  The Court's decision that the Tribunal had erred in failing to consider that the substance of any disclosure must be affected by the context of that disclosure represents a practical approach which recognises the true impact of a proposed disclosure under FOIA in the context of information already in the public domain.

Reproduced from PLC Financial Services with the permission of the publishers.  For further information visit www.practicallaw.com or call 0207 202 1200.

Andrew Denny