There are several 'crisis' scenarios in which a
regulated financial services institution might be required to
disclose documents they hold. Three of the most significant
When involved in litigation (e.g. when a former client brings
an action against the business);
When the business is investigated by the GFSC; and
When a company for which the business provides services is
under investigation (which could result in a notice from the
Financial Investigation Unit (FIS) requiring disclosure of all
documents relating to that company).
In the current environment; litigation continues to rise, the
GFSC has found new and more formidable appetite, and foreign
governments are reaching further and with more enthusiasm than ever
before. There is an ever increasing chance of a business finding
itself faced with one of the above scenarios.
So what can you as the business do to ensure that your position
remains as strong as it can be when one of the above scenarios
There will be a very broad requirement to disclose any
'relevant' documents in the context of the subject matter
of the investigation or proceedings. Anything loosely connected to
the subject will, in all likelihood, need to be disclosed to the
regulator, authorities or opposing party.
The requirement to disclose 'documents' covers not only
written material, but anything held electronically (including
emails) and even audio material. It can be surprising to many that
informal internal communications between colleagues can constitute
discloseable documents. This can at best sometimes be embarrassing,
but at worst open you up to incriminating your clients.
There are several lines of defence to be deployed in minimizing
the chance of being required to disclose embarrassing or critical
Firstly, and as a general rule businesses should avoid creating
unnecessary records. It is prudent to keep in mind that any
document you create about a client (including any internal emails
discussing that client) could become discloseable in one of the
Once a crisis situation has arisen, it becomes even more
important not to create unnecessary documents. This can be
counter-intuitive where a natural reaction can be to engage in open
and frank discussion with your colleagues by email about the
perceived weaknesses of your position. Always try and speak to
colleagues in person and think carefully about whether notes or
minutes need to be taken, and if so what they say.
Secondly, It is vital to involve lawyers at an early stage to
allow you to benefit from confidential advice that cannot be
disclosed. The only relevant documents that can be legitimately
withheld from a requirement to disclose are those which are
'Privileged'. There are several different heads of
Privilege, but of these Legal Professional Privilege (Legal
Privilege) is likely to offer the greatest assistance to the
institution in crisis.
Legal Privilege is a complex area with several different limbs
and advice should always be sought. As an overview it allows any
communication from lawyers which offers advice (and in some cases
also communications of a more general nature) to be withheld (on
the basis that they are privileged). Communications to lawyers in
seeking that advice can also be privileged.
Questions can arise over who constitutes a lawyer (e.g. in
relation to in-house counsel), and not all communications with
lawyers necessarily attract privilege, so it is always necessary to
be guided by your lawyer.
Finally, and to further protect the privileged status of any
advice that is provided by your lawyer, a core team within the
business should be identified to deal with the crisis. Great care
should be taken if anyone outside that team is required to input or
enter into correspondence with the lawyers. The advice of lawyers,
or any information relating to the situation should not be
circulated outside that core team.
Either in reacting to a crisis, or from a general interest in
tightening up policies on document production to avoid embarrassing
and potentially damaging disclosures, we are happy to help.
Educating staff on the potential effects of the emails they create
can go a long way to ensuring your company's paper trail can
emerge from a disclosure exercise in a positive light.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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