Restricted Information: What Is It? What Shall I Do?
The Jersey Financial Services Commission (the “JFSC”) has wide statutory powers to compel the disclosure to it of otherwise confidential and private information, by both regulated and unregulated entities and individuals. Overseas regulators may also share such information with the JFSC.
Articles 37 and 38 of the Financial Services (Jersey) Law 1998 set out the “restricted information” regime that protects the confidentiality of an individual’s otherwise private information once disclosed to the JFSC. The unlawful disclosure of restricted information, in breach of Article 37, is a criminal offence, carrying up to two years’ imprisonment.
Once held by the JFSC, the individual’s private information is restricted as to when the JFSC may, in the discharge of its statutory duties, make onward disclosure of it to a third party. In turn, the regime then restricts the onward disclosure of information by third parties, where the information has been received from JFSC, say, during the course of an interview under compulsion
The reasons for the restricted information regime are two-fold:
- It ensures respect for the private life of the individual, the subject of the information, by requiring the individual’s consent before onward disclosure that does not fall under an exception under Article 38; and
- It protects those providing information to the JFSC, encouraging voluntary disclosure by institutions, third parties and whistle-blowers, who might otherwise be inhibited from coming forward and disclosing what is known or suspected by them.
The regime is, in some respects, complex. We recommend always obtaining clear legal advice on any restricted information before disclosure by you to third parties.
The regime does not apply either (i) to information that is in the public domain or (ii) to information that was previously known to the recipient of the information prior to its disclosure by the JFSC. This latter criterion means the JFSC will not reliably know whether the information was “previously known” to the individual. Consequently, it is difficult for the JFSC to inform a third party in interview as to whether certain information in the third party’s hands is “restricted” or not. As a result, the JFSC routinely issues a warning at the outset of interviews under compulsion and with documentation (such as Warning Notices, Interview Summons or Directions) that it believes the interview or documentation may contain restricted information. This is to alert the recipient to the existence of Article 37 and of the important need for caution before making any onward disclosure.
In the landmark appeal of Francis v JFSC, it was argued before the Royal Court that Mr Francis had wrongly been prevented from speaking to former directors of Horizon during the investigation by the JFSC’s Enforcement Division by a “spurious reliance upon the terms of Article 37 of the FS Law”. It was argued that Mr Francis should have been free to disclose any information provided to him by the JFSC to former directors and vice versa. The Court rejected those arguments. However, it went on to carefully analyse the restricted information provisions and find that information in documents provided to an individual by the JFSC during an investigation falls under the Article 37 regime if not previously known to the individual. It observed that, in Mr Francis’ case, much of what was said in his interview or in key documents would have already been known to him and he would have been free to discuss it with anyone. Conversely, some information may have been made known to him for the first time by the JFSC during the interview or in the documents.
An individual or entity faced with the daunting prospect of a regulatory investigation or interview should always obtain legal advice before making onward disclosure of documentation or information from the JFSC and not previously known. In the Francis case, the JFSC was criticised for certain restricted information warnings previously issued.
Advocates Beverley Lacey and Eloise Layzell appeared on behalf of the JFSC in Francis v JFSC. Solicitor Michelle Cabot project-managed the case. Lacey Advocates have leading knowledge of regulatory law and practice and the current issues facing the JFSC and all those operating within the Island’s finance industry. Should you require advice on regulatory issues, including the operation of the restricted information regime, please contact us.