Watch out Rumpelstiltskin…
You never know who is listening!
Back in April last year we told the tale of the “granny turned wolf” as the Pensions Regulator (TPR) began to bare its teeth and prosecute those who had failed to comply with notices issued under s72 Pensions Act 2004 requiring information/documentation to be provided to it to assist in the exercise of its regulatory functions. In this blog we examine the disclosure of restricted information under s82 of the Pensions Act 2004 and the implications for anyone in receipt of a Warning Notice from TPR.
In the fairy tale, when Rumpelstiltskin revealed his name he thought no-one was listening but in fact the Queen’s messenger was close by. When contents of Warning Notices issued in respect of British Home Stores (BHS) were revealed, the media were on hand, ready to spin strands of straw into pure gold.
TPR stamps its feet
TPR has been very vocal in the last year about its increased focus on enforcement and the exercise of the full range of its powers to ensure good governance, prevent problems arising and protect pension savers. There has been a particular increase in the use of these s72 Notices, with Nicola Parish, Executive Director for Frontline Regulation at TPR saying in July 2017 “Our power to require companies and individuals to provide us with information is an important tool in our regulatory case work…… From now on we will not hesitate to prosecute further companies or individuals if they refuse to give us the right information to investigate cases and ultimately protect pension savers.”
Some 123 s72 Notices have been issued in relation to TPR’s proposed regulatory action in respect of the BHS pension schemes. The prosecution of Dominic Chappell earlier this month for failure, without reasonable excuse, to provide information or documents requested made headline news in the TV and press. Mr Chappell, whom the judge found to not be a credible witness, is to be sentenced on 23 February 2018. More novel than the level of fine he will receive, however, is the background to the third offence of which he is convicted, which relates to the unauthorised disclosure of “Restricted Information” concerning the proposed regulatory action in respect of the BHS schemes.
Restricted Information is defined under s82 Pensions Act 2004, as being any information obtained by TPR in the exercise of its functions which relates to the business or other affairs of any person. There are three carve outs – (i) if the information is already in the public domain, (ii) if the information is summarised in a form from which one is unable to ascertain information relating to a particular person or (iii) if the consent of the person to whom it relates (or gave it to TPR) is obtained. Any person who discloses Restricted Information is guilty of a criminal offence.
Secrets are revealed
As well as not responding to TPR’s request for documents about the purchase of BHS, Mr Chappell also failed to provide any information on his knowledge of a potential leak to the press of information contained in Warning Notices issued by TPR in relation to the case. Quite how the leak, if there was one, came about remains unclear and is no doubt still being investigated by TPR, but it seems that ITN news, if not others, were aware of some of the allegations made in the Warning Notices and were seeking comments. Mr Chappell gave evidence that he himself had been contacted by the Daily Telegraph and that his lawyer had advised TPR of this, although the judge did not believe his account of events. What is clear is that TPR began to investigate whether there had been an unauthorised disclosure and asked Mr Chappell for details but he did not respond.
TPR does not routinely announce when Warning Notices have been issued, although such was the public interest that it did so in the BHS case. TPR will not, however, make public the content of a Warning Notice, and the only real insight available into allegations is from decisions of the Determinations Panel which are published on TPR’s website. Likewise, recipients of Warning Notices (whether as a target for regulatory action or as a directly affected party) would not be prevented from advising anyone that they had received one but may choose not to do so, there being obvious reputational reasons (amongst others). Disclosure of the existence of a Warning Notice may be appropriate from a corporate governance perspective or to deal with member queries and TPR is likely to have little issue with that. TPR would, and rightly so, have an issue with a flagrant breach of confidentiality such as the divulgence of information it collected using its powers to any party not directly involved in the particular case.
So, when is it safe to talk?
More troubling, however, is how a party might go about taking steps to prepare any response to a Warning Notice it has received and how to deal with any publicity which arises. On the face of it, sending a copy of a Warning Notice which contains information not only about yourself but information that TPR has obtained from other parties to your lawyer/actuary/insurer/PR firm etc seeking advice would be an offence. Sending a copy to a potential witness asking them to comment runs a similar risk, as may liaising with other regulatory bodies (for example, the Pension Protection Fund and the Financial Conduct Authority).
However, it would be perverse if an interested party on whom a Warning Notice containing Restricted Information were served could not take steps to communicate the contents to potential advisers or witnesses in order to enable that interested party to participate in the proceedings in the way contemplated under the legislation. The answer may lie in s87 Pensions Act 2004 (“Other permitted disclosures”), which confirms that s82 does not preclude the disclosure of Restricted Information in connection with any proceedings arising out of the Act. This would seem to allow disclosure of Restricted Information so long as it is “in connection with” proceedings arising out of this Act. A Warning Notice would form part of proceedings arising out of the Act so that, if a disclosure were made by an interested party on whom the Warning Notice has been served and who was entitled to make representations, the disclosure of Restricted Information in the Warning Notice would be a disclosure made “in connection with” those proceedings. The recipient of the Restricted Information would be bound to not disclose it further as he would have received the information indirectly from TPR and this is also covered by s82.
A word of caution here – it would be wise to limit any disclosure to the extent necessary to enable the adviser/witness to assist in preparing a response to a Warning Notice. This might mean, for example, sending a witness or adviser information covering only a certain time period or only sharing with a PR firm information already available from other sources when considering a PR strategy, to avoid making an inadvertent disclosure of Restricted Information and opening the door to prosecution.
The “consent” of TPR for permitted disclosures is not required but, as a matter of courtesy, it might be appropriate for TPR to be told that it is likely that an interested party would be speaking to certain individuals who would be given warnings about disclosure of Restricted Information. This would then give the opportunity to reflect on any objection raised by TPR before any disclosure is made.
There is yet to be a prosecution by TPR for an unauthorised disclosure of Restricted Information but that time may be coming soon. Sponsors, Trustees and advisers alike would do well to carefully consider the source of the information they would like to discuss, in case, like Rumpelstiltskin, they are overheard and meet their downfall in Brighton Magistrates Court.