The Financial Services Commission welcomes many of the decisions of the
Supreme Court included in its judgement in respect of the judicial review of
a decision by the Financial Services Commissioner to pass information to a
foreign regulatory authority. The Commissioner's decision to assist the
foreign regulator was challenged on a number of very wide bases including a
challenge on the powers of the Commissioner to seek information from
regulated entities. Had that challenge been successful, it would have
hampered seriously the Commissioner's powers to carry out regulatory
investigations in Gibraltar. The Commissioner, therefore, welcomes the fact
that the Court upheld his interpretation of his powers to seek information
under sections 33 and 38 of the Financial Services Act 1989. The
Commissioner also welcomes the decision of the Court that he has the power
under section 58 of the same Act to pass information to a foreign
regulator exercising functions corresponding to his own.
In addition, the Court upheld the arguments put on the Commissioner's
behalf in respect of a number of other grounds which the claimants suggested
were a basis for contesting the Commissioner's decision.
Unfortunately, the Court decided to quash the Commissioner's decision on
two limited grounds. The first, concerned a procedural question as to
whether or not the Commissioner had established that it was necessary for
the information to be passed to the foreign regulator, given the duty the
Commissioner has to maintain confidentiality. In the Commissioner's opinion,
he did establish that the disclosure of the information was necessary.
Unfortunately, it appears that the Court was not persuaded that the test of
necessity had been properly satisfied.
The second ground for the Court judgement is that, as there was a
possibility that the information provided to the foreign regulator would
have been passed to prosecuting authorities in the same jurisdiction to be
used as evidence in respect of alleged criminal conduct, the appropriate
channel for the passage of the information was the prosecuting authority in
Gibraltar, namely the Attorney General. The Court considered that it was
more appropriate for the information to be transmitted in this way as the
process would then be subject to the provisions of the Evidence Act
which the Court felt contains greater safeguards for the individual or
individuals to whom the information relates.
Co-operation between regulatory authorities in different jurisdictions
is, of course, a fundamental pillar of the international supervisory
infrastructure to maintain the integrity of the world's financial system,
and to safeguard markets and investors. The recent IMF review of Gibraltar's
regulatory regime laid great emphasis on the importance of regulators having
adequate powers in this area.
The Commissioner is now considering the judgement, and will take further
legal advice before deciding whether or not to exercise his right to appeal.