Court of Appeal backs FMA in battle to disclose ANZ documents

Tuesday, 5 March 2019

Rob Everett is chief executive of the Financial Markets Authority.

The Financial Markets Authority (FMA) has won its appeal in a fight with ANZ over the disclosure of documents related to a failed business that took investors' money.

The bank and market regulator went to the High Court in 2017.

Much of the key information about the case is suppressed.

It started when the FMA began receiving complaints from investors about an unnamed company.

* FMA expects to settle with ASB**

ANZ held the bank accounts of a company that collapsed, taking investor money with it.

It wrote to all five major banks to work out which one held the company's accounts.

At first, the FMA wanted to determine where investors' funds were and whether they could be returned to them.

The company's liquidators obtained legal advice on the prospect of a claim against ANZ for participation in the company's breaches.

It was determined that it was not the liquidators' place to do that, but should be left to the investors or the FMA.

The FMA then used its legal powers to require the bank to hand over records, which it said it would disclose to third parties as part of its investigation.

Doing so would help it to obtain additional information from investors, determine the next steps to enable the investors to evaluate the merits of a claim against ANZ and to enable the FMA to consider whether to exercise its powers to start proceedings.

The bank said the FMA was acting outside its legal remit and breaching confidentiality agreements.

The High Court agreed the disclosure to unnamed third parties was outside the FMA's powers.

But the FMA appealed that decision and has succeeded.

Now, the Court of Appeal has said the Financial Markets Authority Act was designed to assist investors before they invested, and if they suffered losses.

'If the FMA is prevented from continuing its investigation because obtaining further evidence would involve disclosure of existing material, how can the FMA fully assess the strength of an investor claim?

Justice Raynor Asher said it was appropriate that disclosure might increase the likelihood of a person with a right of action starting proceedings themselves - not a problem, as the High Court suggested.

He noted that ANZ does not claim the information is market or commercially sensitive.

'The FMA has proposed a number of measures to ensure that confidentiality is maintained by the persons to whom disclosure is made… those measures involve obtaining confidentiality agreements on an individual basis before any information or documents are disclosed.

'The FMA can disclose the information and documents to [third parties] [redacted] providing it obtains enforceable confidentiality undertakings. In pursuit of fair and transparent markets it is appropriate for the FMA to provide information to investors so the FMA can get their feedback to aid the FMA's investigation, and to consult with investors in the exercise of its decision-making powers …provided proper steps are taken to ensure confidentiality.

'We disagree with the Judge's assessment that the disclosure would not be for a permitted purpose. To the contrary, we see disclosure for the purposes of assisting the FMA and investors to decide whether to bring a claim against a financial market participant as exactly within the purposes of the Act.'

ANZ will have to pay the FMA's costs for a standard appeal.

Karen Chang, FMA head of enforcement said she was pleased the court had affirmed the FMA's exercise of its powers in this case was lawful and appropriate.

'More specifically, that the FMA may disclose information it has obtained under its compulsory powers to investors in appropriate circumstances. We cannot comment further as the case remains under appeal before the Supreme Court.'