Financial Services Authority (FSA) & Ors v Amro International SA & Ors

When a domestic regulator assists an overseas regulator, it may rely on the information supplied and need not verify the foreign regulator’s allegations, procedures or need for particular documents. It must nevertheless exercise its statutory discretion and consider the matters identified by the governing legislation.

For a document-production requirement under section 171(2) of the Financial Services and Markets Act 2000, the investigator need only reasonably consider that the documents are relevant to the investigation. The stricter necessity-or-expediency test in section 172(3) applies to questioning or information requirements under section 172(2), not to document production. Documents may be required by specified classes, provided the recipient can identify what must be produced. Article 8 proportionality may arise, but is readily satisfied where relevant documents concern suspected financial malpractice.

The Financial Services Authority appointed investigators under section 169(1)(b) of the Financial Services and Markets Act 2000 at the request of the United States Securities and Exchange Commission. The request concerned documents held by Goodman Jones LLP, accountants for Amro International SA, Creon Management SA and associated entities, for use in civil proceedings in New York concerning alleged manipulative trading in Sedona Corporation shares.

Amro and Creon successfully sought judicial review. Collins J quashed the appointment and the investigators’ notices, holding that the assistance should be confined to material relevant to the pleaded allegations and that the requested material had to satisfy a necessity-or-expediency or proportionate approach. The FSA appealed from that decision, reported at [2009] EWHC 2242 (Admin). The central questions concerned verification of the foreign request, the effect of memoranda of understanding, the statutory tests under sections 169, 171 and 172, and whether the documents were sufficiently described.

1. Appeal allowed. The FSA’s appointment of the investigators and the requirement in the notice of 11 August 2009 were lawful. The judge was wrong to quash them.
2. Under section 169 of the Financial Services and Markets Act 2000, the FSA had to consider whether to exercise its investigative discretion, including the matters listed in section 169(4). It was not required to second-guess the SEC on its own law and procedures, verify the genuineness of its request, or assess whether the documents would ultimately be useful or admissible in the New York proceedings. The FSA had asked pertinent questions and received sensible answers, and its assessment showed that it had considered the statutory factors.
3. The requirements in the bilateral and multilateral memoranda of understanding were not statutory conditions. The legality of the assistance depended on FSMA, so non-compliance with the memoranda did not prevent the FSA from acting.
4. Section 169(2) gave an investigator appointed under section 169(1)(b) the powers of an investigator appointed under section 168(3), but did not import the notice duty in section 170. Section 170 applied to investigators appointed under section 168(3) or (5), not to the present appointment. The absence of a section 170(2) notice was immaterial.
5. The appointment was to assist the SEC with its ongoing civil action. It was not confined to documents admissible in that action or relevant to allegations already pleaded. The FSA was exercising an investigatory power, not a domestic disclosure power, and the court should not assess the possible enlargement of the New York proceedings after disclosure.
6. The applicable test under section 171(2), read with sections 169(2) and 172(1), was whether the investigator reasonably considered the requested documents relevant to the purposes of the investigation. The necessity-or-expediency test in section 172(3) applied to the additional powers under section 172(2), including questioning, and could not be transferred to section 171(2). The requirement was therefore justified under section 171(3); it was unnecessary to decide whether section 172(3) was also satisfied.
7. The notice sought specified classes of documents. The recipient could identify the documents required, particularly after the unclear reference to affiliated persons was removed. The requirement was therefore lawful under section 171. Article 8 could be engaged, but proportionality was satisfied in the circumstances.

• Court of Appeal (Civil Division) [2010] EWCA Civ 123: appeal allowed; the quashing of the investigators’ appointment and the 11 August 2009 notice was set aside.
• Administrative Court [2009] EWHC 2242 (Admin): Collins J granted judicial review, quashed the appointment and notices, and accepted that assistance should be confined to material relevant to the pleaded Sedona allegations, subject to the stated undertaking.