Recently, several institutions have been embarrassed after details of their investment holdings were revealed. For example, the Church of England was, after a speech by the Archbishop of Canterbury criticizing payday loans, revealed to have invested in Wonga through a private equity fund. This has led some organisations to consider whether they might, under the Freedom of Information Act, be compelled to reveal a full list of their investment holdings.
Whilst organisations will be sure what securities they hold directly, it is not possible to keep track of the underlying holdings of the funds and investment trusts which often form a very important part of an organisation’s holdings. This may create concerns for trustees and governing bodies that underlying holdings may not be consistent with the public statements of the institution and its leading figures.
Which organisations are covered by the Freedom of Information Act?
The Freedom of Information Act applies to public bodies. This is fairly wide ranging, and indeed the entirety of Schedule 1 of the Act is taken up defining which organisations are covered. However, among those which are specifically identified as covered by the Act are universities and colleges [1].
What does an organisation have to reveal under the Act?
Under the Freedom of Information Act, members of the public can make specific requests. Subject to certain restrictions, the organisation which receives the request has to provide the information [2]: in many cases (such as where cost is the limiting factor), if an organisation has to refuse a request it should guide the requester to refine their request in such a way that it becomes acceptable.
What information regarding investments might an organisation have to reveal?
Whilst the Act does not specifically deal with investments, the following can be understood from it. The initial assumption should be that a body has to reply to a request. However, it can claim a number of exemptions (some of which are absolute and some of which are subject to a public interest test). Of these, the protection for commercial advantage is relevant for investments. An organisation does not have to reveal information which would compromise the commercial advantage of another body [3]. Therefore, an organisation does not have to reveal the underlying holdings of funds in which it invests or any holdings which are selected by a discretionary manager, as this information is commercially sensitive. However, where an organisation selects its own investments (with or without receiving investment advice) it would not be able to claim this exemption.
Risk warnings
This document has been prepared based on our understanding of current UK law and HM Revenue and Customs practice, both of which may be the subject of change in the future. The opinions expressed herein are those of Cantab Asset Management Ltd and should not be construed as investment advice. Cantab Asset Management Ltd is authorised and regulated by the Financial Conduct Authority. As with all equity-based and bond-based investments, the value and the income therefrom can fall as well as rise and you may not get back all the money that you invested. The value of overseas securities will be influenced by the exchange rate used to convert these to sterling. Investments in stocks and shares should therefore be viewed as a medium to long-term investment. Past performance is not a guide to the future. It is important to note that in selecting ESG investments, a screening out process has taken place which eliminates many investments potentially providing good financial returns. By reducing the universe of possible investments, the investment performance of ESG portfolios might be less than that potentially produced by selecting from the larger unscreened universe.
