Confidentiality agreement
Also known, to those for whom the glass is half-empty, as a non-disclosure agreement. An agreement whereby you promise not to tell. If Robert Plant were writing one, he would write it like so:
Confidentiality Agreement - Rock ’n’ Roll Style
What’s in a confi?
Confis can be “one way”, where one party discloses and the other receives, or “two way”, where both parties disclose sensitive information. A broker’s template will tend to be far more generous when it is receiving only, than when it is giving information up.
Length
Firstly, let’s be blunt about this: there is a special place in hell for any advisor who serves up a confidentiality agreement more than 3 pages long. Even three pages is purgatorially tedious. GET TO THE POINT. It’s a goddamn confi, not the sale of your soul. Oh hang on.
Purpose
Why are the parties sharing the information in the first place? Typically, you’ll want to restrict use of the information to matters relevant to the project. Expect to see a definition of “purpose”, or something similar.
What information is in scope?
Parties give each other all kinds of information. Not all of it is sensitive. Seeing as a confi imposes onerous obligations, you should carefully define the “confidential information” that’s in scope.
- Personal information: If the information is personal information about individuals, there may be additional provisions concerning storage, processing and rights to access and correct that information. Especially once the General Data Protection Regulation (GDPR) comes into force. Hoo boy.
- What information that otherwise would be in scope, is out of scope?: Even within the definition of confidential information, you’ll need to make exceptions:
- Information the receiver already held at the time of disclosure
- Information the receiver receives separately from someone else other than in breach of a confidentiality undertaking
- Information the receiver develops independently of the disclosure and without reference to information disclosed
- Trick for young players: Don't make the schoolboy error of including in this exclusion from the definition of confidential information “information required to be disclosed to regulators or government authorities”. This is a legitimate exception to the prohibition on disclosing information — see below — but it shouldn’t disqualify the information from being Confidential Information altogether. If it did, once you were required to give any information to the regulator, it would suddenly be open season and you could tell everyone about it.
====What is the confidentiality restriction?==== Now you know what counts as confidential information, what can you do with it and what’s not allowed? You’ll often see:
- Keep the information confidential. Don’t disclose it except to a limited group of people — and you may be required to ensure that these people only receive the information subject to an equivalent duty of confidentiality:
- Inside the organisation: In a large organisation this may be to a small group of people in the organisation (for example, credit, legal or the onboarding team). There may be specific restrictions to prevent it getting to trading desks or front office personnel who may use the information to profit from it (this will usually be illegal: it’s likely to constitute insider trading or market abuse, but no harm is specifying in the contract).
- Outside the organisation: you may be allowed to share it with your professional advisers, and to regulators and quasi regulatory authorities (stock exchanges etc) where required by law (or you reasonably consider it expedient). There may be some tiresome details about only giving in formation that is reasonably necessary, and taking what steps are necessary to take legal action to prevent disclosures to regulators.
- Only use it to carry out the “purpose” or “project”.
This is somewhat hard to enforce — it’s nebulous, right? — and in practice you’ll bever know what goes on bhind closed doors, but in the English law-speaking world this is pretty uncontroversial precisely because it isn't practically actionable. But the yanks can get very worked up over it. At least that's what I recall, but it may have been a fever dream.
Return of information
The disclosing party will want rights to get the information back at the end of the project. In this modern era of distributed network computing, the old entreaties to “return all copies of information” are faintly absurd: as if they’ve been kept in a manila folder in a filing cabinet somewhere, only inspected by chaperoned employees wearing white cotton gloves. Of course everything will have been transmitted electronically, will exist on servers all around the world, and the very action of attempting to return it will oblige it to be copied onto other servers. Some of these copies will be stored for years under document retention policies. So the real ask ought to be “to put beyond practical use” and have an exception for regulatory retention. There’s also a conceptual issue with information the receiving party has derived from the confidential information — this may include information which is confidential to the receiver, and should not have to be offered up to the discloser.
Special AKA
The same as a: