Mexico Invest Ltd v Securities Comission of the Bahamas

• Jurisdiction: Bahamas
• Judge: Winder, J.
• Judgment Date: 26 May 2014
• Court: Supreme Court (Bahamas)
• Docket Number: CLE/gen 1527 of 2012
• Date: 26 May 2014

Supreme Court

Winder, J. (Ag.)

CLE/gen 1527 of 2012

Mexico Invest Ltd.

and

Securities Comission of the Bahamas

Appearances:

Courtney Pearce for the appellant.

Gwaine Ward with Vandera Carey for the respondent.

Appeal from the decision of the Securities Commission to accede to the request for information from the Financial Services Authority of the UK — Whether the decision of the Commission to accede to the request of the Authority was a proper exercise of its statutory functions — Whether the respondent has fulfilled the conditions set down in section 36 of the Securities Industries Act in acceding to the request — Fishing expedition.

Winder, J. (AG.): This is an appeal of the decision of the Securities Commission of the Bahamas (“SCB”) to accede to the request for information of the Financial Services Authority (now the Financial Conduct Authority) (“FSA”) of the UK for information from Banque Privee de Rothschild Ltd. (“BP”) as reflected in the letter to BP dated 17 October 2012. The appeal is lodged by Mexico Invest Ltd., a party affected by the decision of the SCB.

1 The appellant filed a Notice of Originating Motion on 15 November 2012. The Notice of Originating Motion is settled in the following terms:

TAKE NOTICE THAT the Supreme Court of The Bahamas, Appeals Division, will be moved before His Lordship Mr. Justice ………….. on ………….., the ……………. day of ……………….., A.D. 2012 at …………. o'clock in the ………… noon ON THE HEARING OF AN APPEAL by the appellant, Mexico Invest Ltd., pursuant to Section 157 of the Securities Industry Act, 2011 (“the Act”); the Rules of the Supreme Court, 1978; and the inherent jurisdiction of the Court or otherwise, the appellant being a party directly affected by the final decision of the Securities Commission of The Bahamas (“the Commission”) made on 17th October, A.D. 2012 pursuant to Section 37(1)(b) of the Act ordering, requesting or requiring that Banque Privee Edmond de Rothschild Ltd., Lyford Financial Centre, Lyford Cay, No. 2, Nassau, Bahamas (“Banque Privee”) provide, furnish, transmit or disclose information and material (including any relevant documents and records, tapes of telephone conversations and e-mails, Bloomberg messages and any messages on any instant messaging system) regarding trades made by the appellant on 2nd, 8th, 9th, 15th, and 28th March, 2012 in the securities of International Power plc, such information to include:

• (a) confirmation of the trades;

• (b) the names, addresses, and dates of birth of the final beneficial owner or owners on whose behalf the shares were bought;

• (c) the type of account or accounts used by the final beneficial owners (that is, discretionary or advisory — if discretionary, the same details as above for the account manager who instructed the trade);

• (d) any known connections between the final beneficial owner or owners (or account manager if a discretionary account) and International Power plc, GDF Suez, or any of their advisors; and

• (e) confirmation of the reason the trades were undertaken;

such that upon Banque Privee producing the said information, materials, documents, and records to the Commission, the Commission would exercise its authority under Section 36(1)(a) of the Act to disclose and transmit the said information and material to an unidentified overseas regulatory authority (“ORA”) (“the Commission's Decision”) In aid of the ORA's alleged investigation into a potential breach of insider trading and market abuse by the appellant regarding the trades undertaken ahead of International Power plc's announcement on 29th March, 2012 that it had received an offer of 390p per ordinary share from GDF Suez of France for the 30% of International Power plc's shares that GDF Suez did not already own (“the GDF Suez Purchase”)

2 The appeal sought the following relief:

• (1) pursuant to Section 157(2) of the Act, a stay of the Commission's Decision and any subsequent decision of the Commission upholding or continuing the Commission's Decision until disposition of this appeal;

• (2) a permanent stay of the Commission's Decision requesting, ordering or requiring Banque Privee to disclose, provide, and transmit the requested information, material, and documents to the Commission for onward transmission to the ORA;

• (3) an Order that, in the circumstances, the requirements of Section 36(1)(e) and (g) of the Act have not been met or satisfied;

• (4) an Order that there has been no evidence or any reasonable evidence provided by the ORA to the Commission or at all that the appellant or its principals are insiders of International Power plc or GDF Suez;

• (5) an Order that there has been no evidence or any reasonable evidence provided by the ORA to the Commission or at all of insider trading or market abuse by the appellant or its principals;

• (6) an Order preventing the Commission from providing any assistance to the ORA or transmitting any information or material regarding the appellant to the ORA in the circumstances; and

• (7) an Order preventing Banque Privee from providing any assistance to the Commission or transmitting, furnishing, releasing or disclosing any information or material regarding the appellant to the Commission in the circumstances until further Order, if any;

3 The grounds of the Appeal were cited in the Notice of Originating Motion as follows:–

• (1) That there was no factual basis for the request made by the ORA to the Commission;

• (2) The trade(s) undertaken 2nd March 2012 in the shares in International Power plc were not trade(s) placed or undertaken by the appellant.;

• (3) Information on and speculation of the GDF Suez Purchase was widely rumoured, speculated, reported on, and discussed in the public domain in newspapers, on the Internet, and via various financial reports;

• (4) The said trades in International Power plc were placed and undertaken by the appellant and its principals based on public information and material that was disclosed and available to the general public;

• (5) The appellant and its principals only had available to them and therefore only acted on information that was in the public domain and available to all other investors in International Power plc and GDF Suez;

• (6) The appellant and its principals are not and were not insiders of International Power plc or GDF Suez and did not have any private or inside information;

• (7) The appellant and its principals were sophisticated investors and as such undertook their own independent research from information available in the public domain regarding the GDF Suez Purchase;

• (8) Given the miniscule volume of the appellant's purchases and trading in International Power plc's shares (International Power plc being a company with a market capitalization of between 15.18 billion pounds and quoted on the London FTSE Exchange with very active trading in its shares), the Commission could not have been satisfied as required by Section 36(1)(e) and (g) of the Act that the material requested by the ORA was of sufficient importance to the ORA carrying out the supervision, investigation or enforcement to which the request related or that the matter to which the request related was of sufficient gravity; and

• (9) The fact that on 15th March, 2012, 2 weeks before the announcement of the GDF Suez Purchase, the appellant sold 782, 600 shares in International Power plc., if the appellant had insider information regarding the GDF Suez Purchase, it would have continued to purchase additional shares in International Power plc, not sell shares before the GDF Suez Purchase.

4 The appellant filed two affidavits in support of its case. The affidavit of Martin Lundy II filed on 3 September 2013 provided, in part, as follows:

4

On 17 October 2012, the respondent, the Securities Commission of The Bahamas (the “SCB”), issued a letter to Banque Privee Edmond de Rothschild Ltd. (“Banque”), the appellant's registered office, advising that it had received a request for information from an undisclosed overseas regulatory authority. A true copy of the respondent's letter of 17 October 2012 is annexed hereto and marked exhibit “MAL-1”. 5. The respondent's letter further stated that pursuant to section 36(1) of the Securities Industry Act, 2011 (the “SIA”) it “…is authorized to disclose information to an overseas securities regulatory authority [the “ORA”] in order to enable that authority to exercise its regulatory functions” and that pursuant to section 37(1)b of the SIA, it “…may order any person to furnish the Commission [with] any material that is requested by the overseas regulatory authority”. 6. According to the SCB, the ORA is concerned that there may have been a leak of information resulting in Insider-trading and is therefore, “conducting an investigation in the securities of International Power plc ahead of the announcement on 29 March 2012 in which the Company announced that it had received an offer of 390p per ordinary shares for GDF Suez of France for the 30% of the shares issued that GDF Suez did not already own. Following the announcement, the Company's shares closed at a mid-price of f4.05, an increase of 5.6% on the previous day's closing price”. 7. On the basis of the ORA's request for assistance in connection with the aforesaid allegations or suspicion of insider-trading, the respondent requested that Banque provide the particulars of certain trades on 2, 8, 9, 15 and 28 March 2012. Four of the five trades (namely, the 8, 9, 15 and 28 March trades) were handled by Banque on behalf of the appellant; the appellant did not participate in the 2 March trade. The respondent has also requested that Banque “…secure any relevant documents and records, including tapes of telephone conversations and e-malls (including Bloomberg messages and any messages on any instant messenger system).” 8. By letter in reply dated 13 November 2013, Callenders' advised the SCB that the appellant...