A Court of Appeal ruling has caused uproar and may have jeopardised the FSA’s capacity for gathering information. The case brought by Real Estate Opportunities Limited (R) against UBS and Aberdeen Asset Management has established that evidence brought together from enquiries carried out by the FSA can be released to third parties in subsequent legal actions.

In June 2005, R claimed that UBS and Aberdeen breached certain agreements between them relating to R's flotation. In their disclosure lists, UBS and Aberdeen identified transcripts of evidence given by their employees to the FSA that existed but which they claimed they were entitled to withhold from inspection by virtue of s348 and s391 FSMA 2000. The judge held that s348 did not prohibit their disclosure because they were already privy to the information; they were deemed to have knowledge of that information by reason of their being the witness' employers. UBS and Aberdeen appealed, submitting that the information provided to the FSA by their employees would not make them a source of information for that purpose unless the employees had been specifically authorised to give that information on their employers’ behalf.

The Court of Appeal held that a person could not be said to obtain information from the FSA for the purpose of s348 if the FSA gave that person a document containing information that he already had. UBS and Aberdeen’s appeal was therefore dismissed and they were ordered to disclose the relevant documents to R. In light of this outcome, there is now concern that witnesses called to assist the FSA in enforcement investigations will be less co-operative for fear that any sensitive information they reveal might be used in later lawsuits. Equally, potential claimants might now go delving for salacious information from FSA files in order to amplify their claims.

The courts, however, maintain that access to sensitive FSA documentation will remain closely monitored and there is no reason for regulated firms to become guarded in their dealings with the FSA.

There is little doubt however, that this ruling will have shaken the bond between the FSA and the firms it regulates. Despite the court’s assertions, the FSA should be alive to the fact that it might now find it harder to ascertain all the relevant information from its wary witnesses.