Wednesday 24 / April / 2024
London: Banks could fall silent on the question of Britain's continued membership of the European Union this month, or run the risk of fines and even jail time for staff who breach campaign rules for a June 23 referendum.
Britain's electoral law places strict limits on political communication during official campaign periods, which in the case of the referendum on whether to remain in the European Union starts 10 weeks before the vote, on April 15.
The law bars all companies from spending more than £10,000 (about $14,000) on influencing the outcome during the campaign, unless they formally register as campaigners, in which case they can spend up to 700,000.
Only 13 companies have registered so far, and none of the major banks is among them, although many say leaving the EU would hurt their businesses and have spoken out vocally in favour of staying in before the official campaign starts.
Large investment firms such as Goldman Sachs and JPMorgan have made donations to fund the "In" campaign, Reuters has reported. They are now planning a much more conservative strategy, people familiar with their plans said.
Banks are used to wording their communications carefully in Britain during elections to avoid unintended partisanship. But the referendum requires more care than usual, said Charles Brasted, partner at law firm Hogan Lovells and specialist in British and EU public law.
"If you're not a campaigner in the normal sense of that word, the risk is you accidentally fall within the definition by virtue of what you're doing, even if you didn't intend to campaign for one side or another," Brasted told Reuters.
"Businesses are concerned to get it right as this is, in many ways, a bigger question than a General Election where you can change your mind in a few years. There is a higher than usual degree of focus to make sure they're following the rules."
The "Out" campaign is expected to be watching.
"There are clear rules on whether companies and people with money can spend that on the elections and they have to abide by the rules," former Conservative minister and longstanding Eurosceptic John Redwood told Reuters. "The electoral law is very clear and it is laid down for very good reasons."
The British Bankers Association, the main trade body for the industry, has contacted members to highlight the laws governing how institutions should communicate publicly during the campaign period, according to a copy of an email seen by Reuters.
Any research, roundtables, conferences, dinners, debates or polling about the referendum or any information related to the vote published on company websites, blogs or social media could breach electoral rules, the BBA said.
"The activities that amount to campaigning are very broad," the confidential email dated at the end of February said. The BBA declined to make further comment.
Reuters spoke to 10 leading banks based in Britain who said they had taken legal advice on the rules. Some are issuing advice to staff.
Bank of America has issued guidance to senior staff "to help employees and the company ensure compliance with relevant legal requirements during the referendum period," a spokeswoman said, without disclosing details.
The remaining nine banks declined to comment on the record.
While bankers were reluctant to discuss their legal advice publicly, some said privately that they did not believe the rules would stop them from providing clients with regular economic research, but might require them to tone down rhetoric.
"There is going to be a chilling effect," said one employee of a UK-based bank, who asked not be identified while discussing legal advice. "There will be lots of organisations that think it is better to be cautious on this sort of stuff."
"It's difficult to interpret," said another employee at an overseas bank with offices in Britain. "This is different to elections. It's a lot more partisan and both sides are looking to exploit chinks in the other's armour."
Several bankers expected far more scrutiny on the issue than during Britain's last referendum, when Scotland voted against independence in 2014, because the largely pro-EU banking sector has more at stake this time, and the "Out" campaign will be watching more closely.
In theory, breaking election rules could result in hefty cash penalties or up to a year in prison for errant employees. Banks have been hit by massive legal costs and penalties after a number of scandals since the 2008 financial crisis, and are keen to avoid more trouble.
Another lawyer, who declined to be identified citing client confidentiality, said he had warned clients that the cost of writing and publishing research notes that refer to the impact of Brexit could be judged as referendum expenses against the £10,000 limit.
Publishing research that was sent out unsolicited, as opposed to requested by clients, would be more at risk, he said. Briefing clients privately should not be a problem, nor would communications sent to clients abroad who cannot vote.
Among major law firms providing big banks with guidance are Allen & Overy and Clifford Chance. Both declined to comment, citing client confidentiality.
The Electoral Commission said it plans to issue further guidance on what activities will be allowed before the formal election period begins.
