Briefing

The Brevan Howard injunction case - claiming confidentiality in investor documents

Posted by: Tom Rudkin | Date posted : 10/04/2017

Following a High Court hearing on 22 and 23 March 2017, Brevan Howard Asset Management (BHAM) obtained an interim injunction preventing news agency Reuters from publishing confidential information sent to potential investors. The judgment, which for obvious reasons contains limited specific detail, provides interesting commentary on the importance of asset managers being able to communicate with investors candidly even in the context of public interest journalism.

Background

The confidential information had been sent out electronically (with password protection) to potential professional investors. The front page of the pack of documents contained a disclaimer highlighting its confidential nature. At some point after the documents had been circulated, Reuters contacted BHAM's external communications advisers, threatening to publish certain information about BHAM and asking for confirmation of its accuracy. Although Reuters stated that it had not been given the documents themselves, the information it proposed to publish appeared to derive from them.

Following the contact from Reuters, BHAM applied for an order preventing publication of the information contained in, or derived from, the document pack.

Freedom of expression and confidential information

The Court was required to consider the law relating to injunctions that restrain freedom of expression and, more specifically, relating to unauthorised use of confidential information.

Where a claimant seeks to prevent publication of information before trial (and thereby restrain the media's qualified rights to freedom of expression under Article 10 of the European Convention on Human Rights), the Court must, under section 12(3) of the Human Rights Act 1998, be satisfied "that the applicant is likely to establish that publication should not be allowed".

The question in broad terms was therefore: if the matter proceeded to a trial, would BHAM "probably succeed" in obtaining a permanent order preventing publication? In deciding this, the Court was required to assess the test for breach of confidence.

The Court reached the following conclusions:

(a) First, although Reuters had not received the documents themselves, the information it wanted to publish was probably derived from them. The information was sensitive, as well as being potentially valuable to BHAM's customers while damaging to BHAM's business if circulated more widely. The circumstances of its circulation, including the confidentiality notice and password protection, were also significant. Together, these factors demonstrated that the information had "the necessary quality of confidence".

(b) Although Reuters had not seen the documents themselves, the journalist in question would probably have been aware of the confidentiality of the information that was provided to them. This would have been clear to a financial journalist who specialised in hedge funds. In any event, BHAM made clear that the information was confidential once contacted by Reuters, meaning that it and the journalist were on actual notice from that point. They were therefore subject to a duty of confidentiality.

(c) Notwithstanding these first two conclusions, Reuters could have justified publication if it had shown that the breach of confidence was in the public interest. The Court began by noting that hedge funds are an important feature of the global economy. Moreover, BHAM's institutional investors were investing assets for the benefit of pension plan holders, public employees and other individuals. These categories of people were not provided with the confidential information despite its relevance to investments that affected their financial welfare. Conversely, there was no specific obligation to provide the information to such individuals. In general terms, the Court considered that there was a public interest in the operation of hedge funds and in individuals having relevant information to enable them to influence and hold to account the institutions investing their money.

(d) However, any public interest needs to be balanced against confidentiality. The Court explained that it was especially important for hedge funds to provide full and candid disclosure to investors without feeling at risk that confidential information might be published elsewhere without restraint and in breach of the confidentiality obligations put in place. This was all the more the case due to BHAM's status as a leading market participant with significant investments. If financial institutions could not be confident that such information would be kept confidential, there might be a disincentive to provide full and candid disclosure. It was also important that there was no suggestion that the information would expose some form of illegal or immoral dealing, hypocrisy or even incompetence.

(e) As a result, the importance of maintaining the information's confidentiality was held to outweigh the public interest in its disclosure.

Conclusion

The Court's judgment reinforces the fact that the financial press does not have carte blanche to write what it wants. There is always a careful balance between confidential and commercially sensitive information on the one hand, and public interest journalism on the other. In this instance the Court was keen to underline the strong public interest in maintaining the confidentiality of relationships such as that between an asset manager and its investors. However, cases like this will always be highly fact specific. As the judgement suggests, the situation may have been different if the purpose was to expose some form of wrongdoing or incompetence. In such a case, the balance may well have weighed in favour of disclosure by Reuters. For now at least, BHAM will be happy that its confidential information has remained exactly that.

If you require further information on anything covered in this briefing please contact Tom Rudkin(tom.rudkin@farrer.co.uk, 020 3375 7586) or your usual contact at the firm on 020 3375 7000. Further information can also be found on the Reputation Management page on our website.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, April 2017