Amro International SA & Anor, R (on the application of) v The Financial Services Authority & Ors

The statutory scheme permits the Financial Services Authority to assist an overseas regulator in pursuing a civil enforcement claim. The assistance may include compulsory document production. Where the request is tied to a particular pleaded claim, however, the nature and scope of that claim are fundamental. The Authority must not authorise wide-ranging disclosure aimed at investigating unpleaded allegations, particularly where non-parties may be accused of misconduct without an opportunity to defend themselves. Requests for confidential documents must be approached proportionately and by reference to relevance and necessity. The Authority may generally rely on information supplied by the overseas regulator, but should make enquiries where the request appears inconsistent with the case it is said to support. There is no general duty to consult the affected persons.

The claimants challenged decisions of the Financial Services Authority under Part 11 of the Financial Services and Markets Act 2000. The Authority had agreed, at the request of the United States Securities and Exchange Commission, to appoint investigators and obtain documents from the claimants’ accountants.

The request concerned a United States civil action alleging fraudulent short selling of Sedona Corporation shares. It sought extensive documents relating not only to the Sedona transactions but also to Amro, Creon, their special purpose vehicles, ownership, funding and other transactions over a period of several years. The claimants argued that the request exceeded the statutory powers, was disproportionate and improperly sought discovery for the foreign proceedings. The central issue was the proper scope of assistance where the request supported a pre-existing civil claim.

1. The claim succeeded. The decisions to appoint inspectors and issue the document-production notice were quashed, subject to an undertaking by Amro to procure the provision of a limited category of documents relating to the alleged Sedona short-selling scheme. The relevant documents were to be preserved for six weeks, with liberty to apply.
2. Section 169 of the Financial Services and Markets Act 2000 permits assistance to an overseas regulator in support of a civil enforcement claim. The fact that the assistance facilitates discovery in foreign proceedings does not itself place the request outside the statutory purpose. It is, however, a relevant factor in deciding whether assistance should be given.
3. Under sections 171(2) and 171(3), documents must be specified, and the investigator must reasonably consider their production relevant to the purposes of the investigation. In the case of confidential documents, the statutory scheme also requires an approach based on necessity, expediency and proportionality. The investigator may be mistaken about the ultimate relevance of a document, provided the view formed at the time was reasonable.
4. Where the request is expressly based on a particular civil claim, the nature of that claim becomes of fundamental importance. The Authority could not properly authorise a request extending beyond the matters covered by the claim in order to investigate whether Amro, Creon or related entities had themselves engaged in unpleaded unlawful conduct. The breadth of the request and the prejudice to non-parties who had no opportunity to defend themselves made the proposed disclosure disproportionate.
5. There was no general duty to consult the claimants or to investigate independently the factual basis supplied by the overseas regulator. The Authority was ordinarily entitled to rely on that regulator’s information. Here, however, it had properly made limited enquiries because the request appeared inconsistent with the pleaded case; having received the clarification, it should not have agreed to the request in its proposed form.
6. The defendants were ordered to pay the claimants’ costs. Permission to appeal was granted.

This was a first-instance judicial review in the Administrative Court. The court granted permission to appeal.