FOIA – High Court decision on disclosure of confidential information by a regulator 

In Financial Services Authority v Information Commissioner [2009] EWHC 1548 (Admin) the High Court considered whether information requested from the FSA under the Freedom of Information Act 2000 ("FOIA") was protected from disclosure by virtue of the provisions on confidential information in s.348 Financial Services and Markets Act 2000 ("FSMA").

The FSA's appeal was substantially upheld and the Court (Munby J) held that most of the information should not be disclosed.

• This judgment clarifies the approach to be adopted to requests for the identity of firms involved in regulatory investigations by the FSA and the scope of the confidentiality provisions in s.348 FSMA. The Court held that a disclosure of information cannot be regarded in isolation but must be considered in the light of the request which instigates it. This approach has implications for other regulators. For example, Ofgem, Ofcom and the CAA have all relied on confidentiality provisions in their governing legislation to resist disclosure under FOIA.

• Regulators and those firms which submit information to them will derive some comfort from the decision, which confirms that the Information Commissioner and Tribunal adopted an unduly narrow approach to the meaning of 'confidential information' and erred in failing to consider the disputed information in context. The effect of the judgment is likely to be that the FSA (and possibly other regulators) can successfully resist more information requests on the basis that a statutory bar on disclosure applies.

The information requests

The appeal arose from two separate information requests. In the first case, the requester wanted to know which providers had been found to have used 'inappropriate charges' in setting premiums for endowment related products, following an FSA review in 2001. The second request was prompted by a 2005 press release referring to the results of a mystery shopping exercise which revealed inadequate advice on equity release schemes. The requester sought the identity of all the firms which were 'mystery shopped' and a smaller number which were subject to a follow-up investigation. The FSA refused to disclose the information and the requesters complained to the Information Commissioner, who found that the information should be disclosed. The Information Tribunal agreed, so the FSA appealed to the Court.

The FOIA exemption for statutory prohibitions on disclosure and s348 FSMA

FOIA provides a right of access to information held by public authorities, subject to exemptions. Section 44 (1) (a) provides an exemption for information if its disclosure 'is prohibited by or under any enactment.' Section 348 FSMA is one such statutory prohibition on disclosure. It provides that 'confidential' information must not be disclosed without the consent of the person who supplied it or to whom it relates. 'Confidential' in this context has a very particular meaning, namely:

"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 the discharge of, any functions of the Authority…(c) is not prevented from being confidential information by subsection (4)."

Subsection (4) provides that information is not confidential if it is already in the public domain or where "(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 key issue in this case was whether the identities of the firms involved in the investigations was 'confidential' information within the scope of s.348 and thereby protected by s.44 FOIA.

The 'Mortgage Endowment 12'

Munby J focused on the wording of the information request, which referred to the 'number and identity of providers which used inappropriate charges to set premiums as described in the FOS Decision Trees' (a Decision Tree being a type of flowchart used by FOS to show the different stages of investigation into a complaint).

The FSA had, for the purposes of conducting its review, obtained from firms information about the charges used in formulating quotations and the charges actually applied during the policy. This had subsequently been evaluated by the FSA. However, the question of what constituted 'inappropriate charges' was a simple matter of fact. In interpreting the request, it was necessary to refer to the Decision Tree, which clarified the meaning of 'inappropriate charges' to be where the charges actually used by the firm were higher than those used in setting the premium. As Munby J put it, this is a question "which involves no process of evaluation more complex than deciding whether 6 is greater than 4". Moreover, it was a fact which could only be known to the firm itself and could therefore only have come to the FSA's knowledge as a result of information supplied to it by the firms.

Having found that the FSA had 'received' the information as to whether firms had used 'inappropriate charges', the Court then had to decide whether the identity of those firms could be disclosed. The FSA argued that whilst the disclosure of a list of names may not in itself breach s.348, the information had to be read in context. It argued that when the names were read in the context of the request for information, the effect would be to disclose information which manifestly related to the business of the relevant firms and which had been 'received' by the FSA in the course of exercising its statutory functions. The Court agreed, rejecting the Information Commissioner's argument that nothing in the language of s.348 suggests that anything other than "the information itself, self-contained and self-referential" should be considered. Munby J accepted the FSA's argument that the Commissioner's interpretation was so narrow that it would undermine the important public policies behind s.348 and emasculate it.

The Mystery Shopping Appeal

There were 2 categories of disputed information involved in the second appeal. First, the identity of the firms which had been involved in the mystery shopping exercise; second, the identity of the 7 firms which had been subject to follow-up investigation.

As to the first category, the Court agreed with the Tribunal's conclusion that where the FSA had selected firms to take part in the exercise, the identity of those firms could not fall within s.348 FSMA as it could not be said that the FSA had "received" that information.

As to the identities of the 7 firms subsequently investigated, the Court followed the 'composite' approach described above in relation to the 'Mortgage Endowment 12'. The information 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." The information in the press release and briefing note was not "confidential" within s.348 because it was anonymised. However, the effect of releasing the identities of the 7 firms in response to the FOIA request would be to remove that anonymity and thereby to disclose confidential information.

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

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© Herbert Smith LLP 2009