There are three main reasons a regulator might require confidential information from us relating to a client:
Trade/transaction reporting: Brokers will be obliged to disclose a lot of trade-specific client information to regulators and exchanges every day on account of Dodd Frank and other regulatory reporting regimes (for example MiFID/EMIR trade and trade reporting). You should assume we will do that.
Ad-hoc general information requests: Outside trade/transaction reporting, when regulators ask for ad hoc information from us, it is usually for a wide-ranging data set across whole trading books and sectors, covering multiple clients. Given the benign nature of these requests, it is not poracticable to obtain consents or make disclosures to all affected clients beforehand.
Ad-hoc client-specific information requests: Where a regulator specifically asks for data on a single client, either:
- 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, or
- it has not, and the investigation is one where the regulator would not allow us to alert the client anyway, and indeed where such notification could be a criminal offence (market abuse, etc).
Thus, even where the notification clause carves out where “notification being illegal” this leaves the empty set of circumstances where we would have to give info about a specific client and the client doesn’t, but was entitled to know about it. Lastly, a confidentiality agreement is designed to respect the client’s legitimate interest in protecting the commercial value of non-public information. It is not meant to be a tool to prevent regulatory disclosure. Generally, client information a broker holds is not legally or professionally privileged and we will not be in a position to make demands as to how a regulator treats that information when we disclose it. Since, by definition, passing information to a regulator should not 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 our experience is that no client has ever in fact attempted to do so.