Outside street and metal joints view.

FSA report into RBS - whose report is it anyway?

04 May 2011

The continuing excitement about the FSA's report into the (near) collapse of RBS may be a storm in a teacup but it raises an interesting issue about the rights to similar reports and publicity.

I presume (given the conclusion that no further disciplinary action was required) that the report will not say too much to expose RBS or its Directors to more than embarrassment.  I presume the concern raised by RBS's lawyers about 'US action' refers to the risk of US investor class actions against any Directors criticised for negligence - or worse - by the report's authors, PwC.  I presume any such action could obtain the report during 'discovery' in any event.  It all appears, therefore, to be more of an argument about the principle of transparency than interest in the contents of the report.

PwC were reportedly paid over £7m by the FSA and RBS.  Even if the report had been fully-funded by the FSA, it would not be determinative as the paying party does not necessarily own the report or decide on its publication.  In December 2010, Adair Turner's letter noted that RBS's permission would be required under s.348 FSMA to publish but objections from RBS still prevent publication.

S.348 of FSMA prevents disclosure of confidential information by a 'primary recipient' (which includes the FSA, Secretary of State or a s.166 'skilled person'), or if it is obtained from a 'primary recipient', unless consent is given by the person who provided the information and, if different, the person who the information is about.

It is worth noting (as explained in the Information Commissioner's guidance) that the FoI does not apply to confidential information protected by another enactment.  As s.348 trumps FoI, it is not possible to demand disclosure by the FSA that way.  However, Parliament (like a Court) could order disclosure of the report to the Treasury Committee, thereby making it a public document.  For the time being, RBS is being allowed to argue for an acceptable version of the report for publication.

The RBS report is a unique political football, kicked between players trying to scalp the FSA or RBS - or both - for failures in the banking system.  It is unlikely to set generally applicable precedents.

An ordinary s.166 report is paid for by (and addressed to) the target firm but is for the benefit of the FSA.  Neither s.166 or SUP5.4 contain any rules on disclosure of a s.166 report.  The target firm is nominally the client of the skilled person who provides the report to the FSA, which then holds it, subject to s.348.  As the firm would be very unlikely to want to disclose a s.166 report, the process remains confidential.

Proposals to publish FSA enforcement action at the Warning Notice stage do not have a direct impact as they relate to a much later stage in the process but, if the confidentiality rules and practices are changed, we may see the disclosure of the reports on which enforcement action is based.