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The Financial Conduct Authority (FCA) is the UK’s financial services regulator. Its stated aim is to serve the public interest by improving the way the UK financial system works, and the way firms conduct their business. It has three operational objectives:
The FCA has been granted wide-ranging powers to achieve these objectives. One of these powers is the ability to conduct investigations into any suspected ‘contravention’ that constitutes misconduct. There are many different type of ‘contravention’ but they include:
The FCA has its own financial crime, intelligence and whistle-blowing teams to detect suspected misconduct. The agency also works closely with other regulators and law enforcement agencies in the UK and abroad.
The FCA has significant powers under FSMA to obtain information and to conduct investigations.
It can use these powers to compel individuals and firms to attend an interview and answer questions. The agency can also compel individuals and firms to produce specific documents and other information the investigator requires.
The FCA can also apply to a Magistrates’ Court for a search warrant enabling it to enter premises and seize documents or information.
The FCA’s investigation process starts when its Enforcement and Market Oversight division appoints investigators to a particular case.
In most cases the FCA will send a Notice of Appointment of Investigators to the relevant firm or individual formally notifying them that they are under investigation. However, it may not do this if it considers doing so may prejudice its ability to conduct the investigation effectively.
Following the appointment of investigators, there will, in most cases, be a “scoping meeting” between the FCA investigators and the relevant firm or individual, setting out the following factors (among other things):
Once the investigation stage has concluded, the FCA usually sends a preliminary findings letter with a preliminary investigation report (PIR) to the relevant firm or individual.
The PIR will set out the facts which the investigators consider relevant to the matter under investigation and will invite the firm/individual to confirm that those facts are accurate, or to provide further comment, usually within 28 days.
The FCA may, having received a response to its PIR, decide to take no further action. Alternatively, it may conclude that its investigation has made a case for serious misconduct and will make a recommendation that enforcement action be taken.
If the FCA recommends action (and the matter is contested) the case will then be referred to the “decision maker” for determination. The decision maker must be separate to, and not directly involved in, the investigation itself. It is most commonly the Regulatory Decisions Committee (RDC).
The RDC’s decision-making process effectively has two stages. The first stage is issuing a warning notice accompanied by the case papers to the RDC. The second stage is the RDC’s determination that the case should proceed or not. If it is to proceed then a warning notice is usually sent to the subject.
Once the subject of intended action has received this warning, the steps that follow are:
The RDC then makes a determination. Potential sanctions cover a broad spectrum and include public censures, suspensions or restrictions on the carrying out of business, financial penalties or fines, and prohibition from carrying out regulated activities either indefinitely or for a fixed period.
Finally the RDC must decide whether or not to issue a decision notice recording its final determination, which is also published to the FCA’s website.
Hickman & Rose has extensive experience and success in this area. The firm has represented traders, senior management in banks, hedge fund managers, investors in some of the most complex and significant investigations being conducted by the FCA to date. We have a particular specialism in advising on investigations that have a multi-jurisdictional element.
Hickman & Rose’s expert lawyers understand the personal and professional impact of being embroiled in an FCA investigation, and work swiftly and knowledgably to assess the scope of the investigation, the complexities of the underlying facts and to provide technical and strategic advice with the aim of bringing the matter to the best possible outcome in all of the circumstances.
4 Oct 2021
After the Upper Tribunal’s ruling in Frensham v FCA, Hickman & Rose’s head of professional regulation Andrew Katzen examines how FCA regulation of non-financial misconduct is evolving.
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5 Jul 2021
Corporate crime partner Ross Dixon has written an article for the New Law Journal charting the evolution of Deferred Prosecution Agreements (DPAs), and analysing their effectiveness.
Ross’s…
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