FCA Investigations – the evolving approach

20 June 2017

Jamie Symington, director of investigations at the Financial Conduct Authority (FCA) gave the keynote address at the recent Banking Litigation & Regulation Forum, in which he talked about the evolving approach to FCA investigations.

Mr Symington referenced two reports that were published in the wake of the financial crisis, the December 2014  HM Treasury Review of enforcement decision-making at the financial services regulators and  the  November 2015 report by Andrew Green QC into the FSA’s enforcement actions following the failure of HBOS. Both highlighted that the FCA’s approach to investigation was problematic as the decision to investigate was largely determined on the likelihood of achieving a successful Enforcement outcome.  This created a situation where the FCA were only investigating cases they thought they would win.

In light of this the FCA is now taking a new approach to investigations, with an investigation being seen as one of a range of ‘diagnostic tools’ designed to find out where harm is occurring.  Mr Symington said that an investigation should not be viewed simply as a precursor to formal enforcement action being taken, but a tool to allow the FCA to understand what has happened.

The purpose of an investigation, Mr Symington explained, was to get to the heart of the matter as quickly as possible; that investigation teams would be objective and conduct their investigations with rigour whilst being proportionate and fair.

Mr Symington said that the number of investigations instigated by the Enforcement division would continue to increase, but anticipated that proportionately fewer investigations would progress to a formal Enforcement outcome.  Mr Symington explained that there were a range of outcomes from an investigation, including no action being taken, action being taken by the FCA Supervision division, a policy response to address certain behaviour, or taking ‘other remedial action’ all of which stopped short of Enforcement action.

We have already seen a rise in the number of investigations the FCA is conducting, 70 insider-dealing investigations started in 2016, more than double any other year in the last decade, according to data obtained through a freedom of information request by Bloomberg News. The largest number of cases previously opened in a 12-month period was 29 in 2012.

It remains to be seen how the FCA Enforcement division will cope with such an influx of new investigations and whether the quality of its investigative work will suffer as a result of the increase in volume. 

For anyone subject to an Enforcement investigation, whatever the outcome, the process can be stressful, time consuming and potentially career damaging, therefore it is hoped that the FCA is mindful of this in its evolving approach.

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