Section 31(2)(c) applies to the "purpose"
of consideration by a person or body as to whether
regulatory action should be taken in a particular
case or class of cases, as distinct from whether
unlawful or improper conduct has occurred.
Examples of the type of disclosure to which Section
31(2)(c) would be likely to be relevant might be:
| • |
The disclosure of
policy documents, which describe the type of
circumstances in which enforcement action should
be taken, or in which action short of enforcement
is appropriate, and what evidence is necessary
for the taking of enforcement action; and |
| • |
Details of the decision-making
process in a particular case, as to whether
enforcement action should be taken or not.e.
The prejudice test and the Ppblic interest balancing
test |
The section 31 (2) purpose is linked to the prejudice
test imposed by section 31 (1) and the test of the
balance of the public interest. The information
will only be exempt information if:
| • |
Its disclosure under
the Act would be likely to prejudice the exercise
of an authority's regulatory functions for the
purposes specified in section (2); and |
| • |
In all the circumstances of the
case, the public interest in withholding the
information outweighs the public interest in
disclosing it. |
How these tests will play in different regulatory
contexts will depend on the nature of the regulatory
regime and the particular information sought. But
it should be borne in mind that there is a clear
public interest in the satisfactory operation of
statutory regulatory regimes in particular - a public
interest which has after all been reinforced by
Parliament in the parent legislation itself. Where
a disclosure would or would be likely to have an
adverse impact on that regime (that is, prejudice
a relevant function), the regime's underlying policy
should be clearly understood, considered, and where
necessary articulated as part of the process of
balancing the public interest both for and against
disclosure. If the prejudice test has been satisfied,
the policy underlying the statutory regime in question
is to some extent put in jeopardy, and the public
interest to that extent weighs against disclosure.
But the nature, magnitude and probability of the
prejudice always have to be taken into account in
balancing the public interest.
An example of the prejudice and public interest
tests in the context of section 31(2)(a) to (c)
can be seen from the exercise by the FSA of its
powers to investigate problems which have been identified
in a particular market. Disclosure of the fact that
an investigation was taking place, the methods used
(such as the use of mystery shoppers) and the factors
taken into account in deciding whether to take regulatory
action, might allow firms to take evasive action
and artificially represent themselves in a favourable
light and thus undermine the effectiveness of the
investigation. That would be likely to prejudice
its regulatory functions. There is a clear public
interest in the proper operation of the markets;
that is fundamental to the stability of the economy
and the security of individuals and companies who
rely on it, and underlies the entire regulatory
regime. The prejudicial disclosure has a clear potential
to inhibit the proper operation of market controls
and therefore of the markets themselves. There is
therefore a clear public interest weighing against
disclosure.
On the other hand, disclosure of information itself
has a part to play in the delivery of the policies
underlying statutory regulatory regimes. Very often,
these regimes are designed to provide public reassurance
that particular activities are being conducted to
reliable standards and by reliable people or bodies.
Public confidence in regulated activities does rely
to some extent on public confidence in the regulators
and the proper conduct of regulatory activity. That
can be enhanced by transparency, and the public
interest in the disclosure of information in these
areas must be fully taken into account.
It is therefore likely to be necessary at the same
time to consider disclosure from the point of view
of its potentially prejudicial effects in an individual
case, and its potentially prejudicial effects on
the operation of a regime more widely, at the same
time. The public interest in avoiding that prejudice
then has to be carefully weighed against the advantages
of transparency and the public interest in disclosure."
