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Confidentiality agreement: Difference between revisions
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*Only use it to carry out the “purpose” or “project”. | *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. | 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. | ||
====Obligation to notify provider of regulator requests==== | |||
This is a common and oft accepted provision: where you are obliged to disclose to a regulator, you must first notify the provider of the information, to allow them to make | |||
*'''[[Trade reporting|Trade]]/[[transaction reporting]]''': [[Broker]]s will be obliged to disclose a lot of trade-specific client information to regulators and exchanges every day on account of {{t|MiFID}}/{{t|EMIR}} [[Trade reporting|trade]] and [[trade reporting]]. We are not going to repeatedly tell the client that. | |||
*'''Ad-hoc ''general'' information requests''': Outside [[Trade reporting|trade]]/[[transaction reporting]], when regulators ask for [[ad hoc]] information from a [[broker]], it is usually for a wide-ranging data set across whole trading books and sectors, covering multiple clients. It is unrealistic to accept [[Brokers]] to monitor which clients within that population have confis, much less a right to be specifically notified beforehand. Nor will they want to go to the trouble of getting all those consents. Why? BECAUSE LIFE IS TOO SHORT. | |||
*'''Ad-hoc ''client-specific'' information requests''': Where a regulator specifically asks for data on a single client, it is likely the regulator will also have made equivalent disclosure requests to the client at the same time (or copied the client on those requests to the [[broker]]) — if the request is benign — and if it has not, the investigation is likely to be one where the regulator would not allow the [[broker]] to alert the client anyway, and indeed where such notification could be a criminal offence (market abuse, etc). Even where the notification clause carves out where “notification being illegal” this leaves the [[empty set]] of circumstances where the [[broker]] would have to give info about a specific client and the client doesn’t, but was entitled to know about it. | |||
*'''Commercial sensitivity''': Lastly, the legitimate point of a confi is ''to respect the client’s legitimate interest in protecting the commercial value of non-public information''. It is ''not'' to keep silent about behavioural turpitude; indeed a [[broker]]’s regulatory obligations may oblige it to report, without invitation, bad acts it observes, whether the client likes it or not and whether there is a [[confidentiality agreement]] or not. Generally, client information a [[broker]] holds is not legally or professionally [[privilege]]d. Since, by definition, passing information to a regulator should not<ref>Absent a severe dereliction of the regulator’s duty, and in that case there’s not really much the broker can be expected to do about it, is there?</ref> prejudice the commercial value of that information, it is hard to see when client would have a valid reason to seek injunctive relief to prevent disclosure of information to a competent regulator. | |||
And that is borne out by the [[JC]]’s tawdry personal experience (anecdotal though it may be, it does span 22 years and four different investment banks): the [[JC]] has never ever, ever seen anyone take injunctive relief to prevent disclosure of confidential information to a regulator. | |||
===='''Return of information'''==== | ===='''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. | 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. | ||
====Possibility of injunctions==== | ====Possibility of injunctions==== | ||
Some people like to acknowledge that the potential consequences of breach of confidence are so severe that ordinary contractual damages might not be adequate and [[equitable]] relief might be the only means of protecting your position. Injunctions, dawn raids and so on. Whatever floats your boat. Really an acknowledgment so that the poor wronged person who goes to the [[courts of chancery]] seeking injunctive relief can point to M'lud and say, “You see, your honour? That rascal knew perfectly well I might need an injunction here.” | Some people like to acknowledge that the potential consequences of breach of confidence are so severe that ordinary contractual damages might not be adequate and [[equitable]] relief might be the only means of protecting your position. Injunctions, dawn raids and so on. Whatever floats your boat. Really an acknowledgment so that the poor wronged person who goes to the [[courts of chancery]] seeking injunctive relief can point to M'lud and say, “You see, your honour? That rascal knew perfectly well I might need an injunction here.” | ||