Professional secrecy in alternative investment companies

Procedures for the circulation of data and the protection of information provided and obtained in the performance of official duties are usually the subject of internal company rules and orders. In some sectors, due to their specificity, the issue is so important that it became necessary to regulate the basic principles in a law. One such area is undoubtedly the financial industry. In the case of investment funds and alternative investment companies, the entire Section XIII of the Act on Investment Funds and Alternative Investment Fund Management has addressed professional secrecy. It is worth recalling the basic information relating to this issue, as from 29 September 2023, amendments to the law came into force that will contribute to greater transparency and investor protection.

SUBJECT MATTER OF PROFESSIONAL SECRECY

It should be recalled that professional secrecy is a secrecy covering information obtained by a person on the occasion of professional activities undertaken. Secrecy covers information of legally protected interests of entities performing activities related to the activities of an investment fund or an alternative investment company. This includes details of investment strategies, financial results or the content of the agreement. The Act does not distinguish the type of information covered by professional secrecy. The object of professional secrecy is therefore any information linked to the fund’s business. What is important from the point of view of a fund participant and a participant in an organised system of trading in financial instruments is that the qualification of a given piece of information as covered by professional secrecy is determined even by the hypothetical possibility of a breach of the interests of these entities as a result of its disclosure.[1]

SUBJECTS OF CONFIDENTIALITY

The list of persons committed to maintain professional secrecy includes members of the management bodies of AICs, internal managers of AICs and employees. Secrecy also applies to entities to which management is outsourced, the depositary; the entity keeping the register of fund participants; entities intermediating in the sale and redemption of investment fund units, or persons remaining with the investment fund or AIC in a contract of mandate or other legal relationship of a similar nature, by way of illustration entities providing legal assistance, the audit firm. Similar commitment binds members of the investor council, the investors’ meeting and their proxies.

It is worth pointing out that, following the amendment of the Act, the provisions on professional secrecy will also apply to an AIC manager performing its activities after being entered in the register of AIC managers, without the authorisation of the PFSA.

The obligation of professional secrecy also exists after the legal relationship between the entities has ceased.

The legislator also commits persons authorised by the President of the PFSA to carry out inspections to maintain secrecy. A novelty is the legislator’s specification of the obligation to keep secret the information obtained by the PFSA when taking measures to counter threats to the security of ICT systems.

DISCLOSURE OF PROFESSIONAL SECRECY

Disclosure of information constituting professional secrecy may occur through an act or omission. Obviously, the breach of secrecy does not occur in the performance of official duties within the scope of one’s strictly defined competence. The legislator also provides for exceptions arising from the need for the proper functioning of the state apparatus and indicates the entities upon whose request one is not only released from secrecy, but is even obliged to disclose the information. The listed entities include: the court or public prosecutor, the KAS authorities, the President of the Supreme Audit Office, or security services such as the Police, ABW, if this is necessary to effectively prevent the commission of an offence, its detection or identification of perpetrators. The obligation to disclose information constituting professional secrecy also exists at the request of the sole investor of the alternative investment company, if the internal provisions of the AIC so provide.

A novelty is the designation of the CBA as an entity that may request information when necessary to effectively prevent the commission of an offence, detect it or identify the perpetrator and obtain evidence or verify the truthfulness of a statement or declaration of a conflict of interest subject to verification by the CBA.

The provisions stipulate that the Claims Fund may disclose information on acquired claims or pools of claims to entities with which it has entered into agreements related to the risk transfer process from the amounts receivable.

The latest provisions confirm that the sharing of information on the terms and in the manner set out in the Agreement between the Government of the Republic of Poland and the Government of the United States of America on Improving the Fulfilment of International Tax Obligations does not breach the obligation of professional secrecy.

Interestingly, under the latest provisions, the mere transfer of information constituting a professional secret constitutes secrecy. An obligation of secrecy has been introduced for the transmission of data to the ABW, CBA, Border Guard, Military Police, Police and the Internal Supervision Inspector.

The investment fund, when performing its AML and terrorist financing obligations, may process and share information, including information that constitutes professional secrets, with individual institutions.

The law also sets out the powers of the PFSA. The Commission and its authorised representatives have the right of access to confidential information and to information constituting professional secrecy held by entities committed to maintain such secrecy.

It is worth pointing out that it does not violate the obligation of professional secrecy to communicate information constituting such secrecy: with the consent of the person to whom the information relates; in the notification of an offence and in the documents provided in addition to the notification; to the heads of individual public institutions, or to the tax authorities,

Nor does it break secrecy for the AIC manager to provide information to the lead entity, that is the parent, the supervisor exercising supplementary supervision and the entity committed to report information on beneficial owners to the CRBR.

The amended Act also emphasizes that it does not violate the obligation of professional secrecy for the AIC manager to provide information constituting such secrecy concerning the AIC manager or the managed alternative investment company: to entities holding the participation rights of the alternative investment company, and to other entities in the pursuit of business involving the introduction to trading or implementation of the alternative investment company’s investment policy, taking over the management of the alternative investment company, or undertaking activities related to the merger, division and transformation of the AIC.

The obligation of professional secrecy also extends to persons to whom information constituting by law has been disclosed.

SANCTIONS

The topic of professional secrecy is important as, according to the Act, the AIC manager is required to ensure the protection of confidential and professional secret information.

The legislator provides for high penalties for disclosing information that constitutes a professional secret and using it for an improper purpose. This is an offence punishable by a fine of up to PLN 1,000,000 or imprisonment for up to three years, and if the perpetrator discloses the information for the purpose of gaining a financial or personal benefit, the perpetrator is subject to a fine of up to PLN 5,000,000 or imprisonment for up to five years, or both these penalties jointly.

Authors:

Bartosz Niewiadomski, legal assistant

Jarosław Rudy, Attorney at Law

[1] M. Michalski, in: M. Michalski, L. Sobolewski, Prawo o funduszach…, p. 293