Case C-140/13, Annett Altmann and Others v Bundesanstalt für Finanzdienstleistungsaufsicht: Professional Secrecy Obligations of National Financial Supervisory Authorities 

On November 12, 2014, the Court of Justice of the European Union (CJEU) handed down a judgement that interprets the professional secrecy obligations applicable to national financial supervisory authorities with regard to information on individual investment firms pursuant to the Markets in Financial Instruments Directive (MiFID). 

The CJEU ruled on questions referred to it for a preliminary ruling by a German administrative court.  In the national proceedings, the applicants challenged the decision of the German supervisory authority, BaFin, refusing access to certain documents and information regarding Phoenix, a German investment firm.  The CJEU upheld BaFin’s refusal of access.

Relevant Facts of the Case

  • The applicants in the national proceedings asked BaFin to provide certain confidential information on Phoenix – auditors’ reports, contracts, file notes, internal opinions, relevant correspondence, activity reports, etc.
  • Phoenix had been previously subject to compulsory winding-up and judicial liquidation.  It had also defrauded investors (approximately 30,000 for an amount of €600 million).  Two of its former executives were convicted in criminal proceedings and sentenced to imprisonment for breach of trust and investment fraud; and 
  • BaFin had refused access to certain of the above documents and information on the basis of its obligations of professional secrecy under EU law and its implementation into German law. 

Question for a Preliminary Ruling 

In summary, the German court asked the CJEU whether, in administrative proceedings, a national supervisory authority (as in BaFin) may rely on obligations of secrecy under EU law – in particular, Article 54 of MiFID – as against a person who has applied to it for access to information concerning a financial services provider (as in the case of Phoenix).  The referring court noted that: (i) the provider had been placed in judicial liquidation; (ii) the business concept had resulted in large-scale investment fraud and the wilful harming of investors’ interests; and (iii) executives of the company had been sentenced by final judgment to several years of imprisonment. 

The CJEU’s Findings

The CJEU held that MiFID imposes a general obligation to maintain professional secrecy. 

This obligation is only subject to a limited number of exceptions which are specifically set out in the directive itself.  Supervisory authorities are allowed to grant access to confidential information: 

  • In the context of a case covered by criminal law; or 
  • When an investment firm has been declared bankrupt or is being compulsorily wound up,  provided that three conditions are fulfilled: 
  • The information does not concern third parties; 
  • The information is disclosed in civil or commercial proceedings; and 
  • The information is necessary for carrying out that proceeding. 

Since the dispute arose in an administrative procedure relating to a request for access to information and documents held by a national supervisory authority, the CJEU concluded that the exceptions above did not apply.  Therefore, according to Article 54 of MiFID, a supervisory authority (such as BaFin) could rely on its professional secrecy obligation against a person requesting access to information concerning an investment firm which is in judicial liquidation, if the case is neither covered by criminal law nor in a civil or commercial proceeding.  The CJEU emphasised that the other circumstances surrounding the case, i.e. large-scale fraud and prison sentences, do not affect this interpretation of the obligation of professional secrecy incumbent on the supervisory authority. 

Implications of the Judgment

The judgment confirms that strict confidentiality requirements apply to individual firm information that firms provide to their supervisory authority in the course of supervision.  These requirements take precedence over rights of access.  For the Court, effective monitoring of firms through supervision in their Member States and exchange of information between Member States mean that firms and authorities need to be sure that information remains confidential.  An absence of secrecy is “…liable to compromise the smooth transmission of confidential information necessary for monitoring.”  Unless expressly provided, it is prohibited to divulge confidential information.  In this case, there was no express provision the plaintiffs could rely on.  Furthermore, as Advocate General Niilo Jääskinen emphasised in his opinion for the Court, the obligation of confidentiality is a continuing obligation, and may apply even when the firm is in compulsory liquidation.   

Although the judgment relates to MiFID rules applicable to investment firms, the obligations on professional secrecy and non-disclosure of confidential information by supervisory authorities under MiFID are comparable to those applicable in other financial services sectors, such as credit institutions (banks) (Article 53, Capital Requirements Directive), insurers (Article 64, Solvency II Directive), and the funds sector (Article 102, UCITS V Directive).

Algirdas Semeta.