Financial Services Investigations

"They have extremely good judgement when it comes to criminal matters. They have vast experience in crime at all levels - whether it's financial or something with a regulatory dimension or a civil dimension, they can deal with it and provide all round advice."

Chambers and Partners 2017

In recent years, the Financial Services industry has seen record levels of fines and an increase in prohibitions and restrictions against individuals and companies for regulatory misconduct and disciplinary breaches. Long custodial sentences have been imposed on individuals who have been found guilty of criminal wrongdoing.

Individual responsibility and accountability is at the forefront of the government and regulators’ mission for cultural change in the finance industry.  The finance sector and, in particular, individuals who work within it will continue to be very much the target for regulatory, disciplinary and criminal investigations and prosecutions.

The complexities of financial services regulation and investigation can ensnare even the most cautious company or individual.  The potential consequences of an adverse regulatory finding or criminal proceedings are devastating.  We provide intelligent and tactical representation at this crucial time by defending the accusations and mitigating the risks.

We have an established and highly experienced team of lawyers representing individuals and companies from all aspects of the financial and commercial world. Our clients include senior management in banks, accountants, accountancy firms, hedge fund managers, traders, senior corporate management, independent financial advisers, mortgage brokers, investors and company advisers. We have acted in investigations for criminal or regulatory offences including market abuse, market manipulation, insider dealing, fraud and breaches of the principles for business and approved persons.

Investigations in the financial services sector may be conducted by a number of agencies. These agencies include:

  • The Financial Conduct Authority (FCA)
  • The Serious Fraud Office (SFO)
  • City of London Police (CoLP)
  • HM Revenue and Customs (HMRC)
  • A wealth of other agencies from overseas. 

We also regularly advise accountants and firms who are subject to investigation by their regulatory body, including:

  • The Financial Reporting Council (FRC)
  • The Institute of Chartered Accountants in England and Wales (ICAEW)
  • The Association of Chartered Certified Accountants (ACCA)
  • The Chartered Institute of Management Accountants (ACCA)
  • The Chartered Institute of Public Finance and Accountancy (CIPFA)

The FCA has powers to investigate companies and individuals, whether they are in the financial regulated sector or not.  It has significant investigation, prosecution and regulatory powers.

The FCA works closely with other organisations both at home and abroad to combat market misconduct and financial crime, in particular the SFO, CoLP, the US Department of Justice, the Securities Exchange Commission and the various European and international prosecutors and financial regulators.

Carrying out unauthorised business – Frequently asked questions

What is “unauthorised business”?

Section 19 of the Financial Services and Markets Act 2000 (“FSMA”) sets out that no person or firm can carry on a “regulated activity” in the UK unless it is authorised to do so, or is exempt.  Carrying out a regulated activity without authorisation is a criminal offence, punishable by up to 2 years imprisonment and/or a fine.  Often this type of offence results in money laundering also being committed and a conviction for money laundering can result in a prison sentence of up to 14 years and/or a fine, plus any proceeds of the criminal activity can be confiscated.

What is a “regulated activity”?

For the purposes of FSMA a regulated activity is an activity carried on, as a business, relating to a specified investment. For example, an individual or firm running a business providing financial advice to investors in relation to what investments to make.

What type of unauthorised business is the Financial Conduct Authority interested in?

Boiler room frauds
Share scams are often run from what are known as "boiler rooms" where lots of individuals cold-call investors offering them often worthless, overpriced or non-existent shares. High returns are promised, but investors usually end up losing their money.

Land Banking Scams
Land banking companies divide land into smaller plots to sell to investors, on the basis that once it is available for development it will soar in value. However, the land is often in areas of natural beauty or historic interest, with little chance of planning permission being granted and investors never see a return for their investment.

Ponzi schemes
Ponzi schemes promise investors high returns or dividends that are not usually available through traditional investments. Payments are made to existing investors using money from new investors. This helps to make the scheme seem genuine and profitable to the early investors, and encourages them to attract more people and money.

Ponzi schemes collapse when the supply of new investors and money dries up. Investors usually find that most or all of their money is gone, and the fraudsters who set up the scheme have claimed much of the money for themselves.

 

Market Abuse – Frequently asked questions

What is market abuse?

Market abuse concerns two broad types of behaviour: insider dealing and market manipulation. Market abuse occurs where investors in financial markets are disadvantaged due to improper or ‘abusive’ behaviour.  Market abuse in the UK is typically investigated by the Financial Conduct Authority (FCA) and can be dealt with as a criminal or a regulatory action.

What’s the difference between criminal and regulatory action?

The criminal and regulatory regimes run in parallel – insider dealing and market manipulation can be dealt with either as a criminal or regulatory offence.  Where the FCA suspects regulatory and/or criminal misconduct it does not have to decide immediately whether any later proceedings will be criminal or regulatory. 

The criminal regime can impose sanctions of up to 7 years imprisonment and/or a fine. The regulatory regime can impose sanctions such as a fine and a prohibition from working in the financial services sector. 

What criminal & regulatory offences does the FCA investigate and prosecute?

The FCA can investigate and prosecute a wide range of criminal and regulatory offences or misconduct.  Below is a table of the key offences it can investigate and the current maximum penalties:

Criminal Offence Maximum Penalty Regulatory Offence Penalty
Insider dealing (including unlawfully disclosing inside information) 7 years imprisonment and/or a fine on conviction on indictment Insider dealing (including unlawfully disclosing inside information) A fine; a public warning; a ban from working in financial services
Making misleading statements 7 years imprisonment and/or a fine on conviction on indictment Making misleading statements  A fine; a public warning; a ban from working in financial services
Creating misleading impressions 7 years imprisonment and/or a fine on conviction on indictment Creating misleading impressions A fine; a public warning; a ban from working in financial services
Making of misleading statements and impressions relating to benchmarks 7 years imprisonment and/or a fine on conviction on indictment Making of misleading statements and impressions relating to benchmarks A fine; a public warning; a ban from working in financial services
Breaches of the Money Laundering Regulations 2007 2 years imprisonment and/or a fine on indictment Breaches of the Money Laundering Regulations 2007 A fine; a public warning; a ban from working in financial services
Breaches of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 2 years imprisonment and/or a fine on indictment Breaches of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 A fine; a public warning; a ban from working in financial services
Carrying out unauthorised business 2 years imprisonment and/or a fine on indictment Carrying out unauthorised business Public warning
False claims to be authorised or exempt  6 months imprisonment and/or a fine N/A N/A
Unauthorised financial promotions 2 years imprisonment and/or a fine on indictment N/A N/A

How does the FCA decide whether to take criminal or regulatory action?

The FCA Enforcement Guide sets out the factors which the FCA may consider when deciding whether to begin criminal proceedings for market abuse rather than taking regulatory action.  The FCA will consider (among other things):

  • How serious is the misconduct? The more serious, the more likely a criminal prosecution;
  • Are there victims who have suffered loss?;
  • What is the extent of the loss? The greater the loss the more likely a criminal prosecution;
  • What effect did the misconduct have on the market? If there was significant disruption to the market, the more likely it will be criminal;
  • The level of profit made or loss avoided;
  • The likelihood of it happening again or if it has happened in the past;
  • Whether any compensation has been paid to the victims (although the payment of compensation does not of itself mean that criminal prosecution will be avoided);
  • Whether the person has been voluntarily cooperative with the FCA (although co-operation does not of itself mean that criminal prosecution will be avoided);
  • Whether an individual’s misconduct involves dishonesty or an abuse of a position of authority or trust;
  • The assistance the individual has given the FCA in proceedings against other individuals in a group; 
  • The personal circumstances of the individual (age, vulnerability etc).

What should I do if I am told I am being investigated?

Find out more about investigations and what to do if you are under investigation.

 

FCA Enforcement Investigations - FREQUENTLY ASKED QUESTIONS

I have received a notice of appointment of investigators from the FCA. What does this mean?

Where the Financial Conduct Authority (“FCA”) is investigating an individual for misconduct offences or for criminal offences, it will appoint investigators. Sometimes the FCA will notify the individual that they are under investigation by providing a Memorandum of Appointment of investigators (MoA).

What powers do the FCA investigators have?

An FCA investigator may require a person under investigation or any connected person to be interviewed or provide information or documents.

I have been asked to attend a scoping meeting, what is it?

For cases involving approved persons, the FCA will generally hold scoping discussions with the individual concerned at the start of the investigation. The purpose of these discussions is for the FCA to give an indication of the reason for their investigation; the scope of their investigation; an indication of the likely timing and next steps including if you are likely to be interviewed and when; and which documents are required. Your lawyer can attend and participate in the scoping meeting.

What is a ‘compelled’ interview?

The FCA can use its investigation powers to compel a person to answer questions in an interview.  These powers are generally used where the FCA is investigating misconduct that does not amount to criminal conduct or market abuse or when they are interviewing witnesses.   When a person is compelled, they must answer questions and do not have an automatic right to silence (see ‘interview under caution’ section below).  If a person fails to answer questions without a reasonable excuse they can be dealt with as though they were in contempt of court for which a prison sentence or fine can be given.

Where the FCA interviews a person, they are allowed to have a lawyer present. The potential consequences for an adverse finding for market misconduct are serious, including a potentially hefty fine and a prohibition from working in the financial services industry, therefore it is important to get specialist legal advice before attending an FCA Interview.  Your lawyer will be able to explain the process, your rights and options and what is likely to happen in the interview, discuss matters with the FCA and ensure you obtain disclosure of information and documents prior to the interview and help you to prepare for the interview.

What is an interview under caution by the FCA?

For criminal offences, including criminal market abuse, a person who is suspected of having committed a criminal offence can be interviewed by the FCA under caution either voluntarily or under arrest.

The caution is the same one that the police use when they are investigating criminal offences: ‘You do not have to say anything. But it may harm your defence if you do not mention when questioned something which you later rely on in court.  Anything you do say may be given in evidence.’ This is often known as the ‘right to silence’ and preserves a suspect’s right not to incriminate themselves.

The person being interviewed can have a lawyer present. It is crucial to take advice about whether or not to answer questions as there may be serious repercussions at a later stage whether you answer questions or not. Criminal market abuse offences carry a prison sentence of up to seven years.

Your lawyer will be able to explain the process, your rights and options and what is likely to happen in the interview, discuss matters with the FCA and ensure you obtain disclosure of information and documents prior to the interview and help you to prepare for the interview.

Financial Services Investigations: Frequently asked questions

 

Market Manipulation – Frequently asked questions

What is market manipulation?

Market manipulation is made up of three different types of behaviour and can be prosecuted criminally or as a regulatory offence:

  • making misleading statements to the market;
  • creating misleading impressions to the market; and
  • making misleading statements or impressions in relation to benchmarks

What are misleading statements to the market?

This is where a person makes a statement (usually through some form of media), knowing that it is false or misleading, which encourages someone to enter into an agreement or investment.  For example, Mr Bloggs states on Twitter that ABC plc has just won a significant new contract that will be very good for business, with the intention that other people will buy shares in ABC plc, therefore increasing the price of ABC plc shares.  Mr Bloggs knows that there is no contract, therefore he is making a misleading statement  to the market.

Misleading statements can be prosecuted under s89 of the Financial Services Act 2012, the maximum penalty is 7 years imprisonment and/or a fine.  It can also be dealt with as a regulatory matter under article 15 of the Market Abuse Regulation for which the penalties include a fine and/or a ban from working in financial services.

What constitutes creating misleading impressions to the market?

This is where a person undertakes some form of activity which creates a misleading impression to the market about the price or value of an investment. For example, Mr Bloggs makes a number of  large purchases of shares in XYZ plc above the market price with the intention of creating an impression that there is a lot of market interest in the company, which induces other investors to purchase shares which further increases the price, creating a profit for Mr Bloggs.
Misleading impressions can be prosecuted under s90 of the Financial Services Act 2012, the maximum penalty is 7 years imprisonment and/or a fine.  It can also be dealt with as a regulatory matter under article 15 of the Market Abuse Regulation for which the penalties include a fine and/or a ban from working in financial services.

What are misleading statements or impressions in relation to benchmarks?

This offence was created following the ‘LIBOR’ scandal which related to the improper rigging of an interest rate benchmark known as the London Interbank Offered Rate (LIBOR).  It is now an offence to make a misleading statement intended to influence the setting of a benchmark or creates a misleading impression in relation to the value of an investment with the intention of affecting the setting of a benchmark.   
Misleading statements or impressions in relation to benchmarks can be prosecuted under s91 of the Financial Services Act 2012, the maximum penalty is 7 years imprisonment and/or a fine.  It can also be dealt with as a regulatory matter under article 15 of the Market Abuse Regulation for which the penalties include a fine and/or a ban from working in financial services.

 

Financial services investigation solicitors

With a proven track record in litigation and regulation, and a wealth of experience representing those accused of criminal, regulatory or disciplinary misconduct (and sometimes all three at the same time), we are uniquely placed to advise in relation to such investigations and prosecutions.

We are experienced in representing individuals who find themselves arrested and interviewed in a police station, subject to search warrants or have their funds frozen by restraint orders.  Our lawyers provide strategic and pragmatic advice in financial regulatory and criminal investigations, in circumstances where there is often a complex dynamic between dealing with the FCA and/or overseas authorities and professional regulatory or employment issues.

We are used to understanding and analysing highly complex financial transactions, working in conjunction with others where necessary, including experts, accountants and international lawyers.

Our unique combination of expertise in criminal, regulatory, professional disciplinary and employment investigations enables us to give clear and pragmatic advice in complex matters in often urgent and stressful circumstances.

News

Quote: New law forces big firms to come clean on gender pay gap, April 2017, The Times

Enforcement procedures remodelled by Louise Hodges and Jonathan Blunden, Compliance Monitor, April 0217

 

 

"They pick up some fantastic work, they have some fantastic clients and they have a skill of trying to get rid of matters before they go too far."

Chambers High Net Worth Guide 2018

"Thank you for your flawless handling of the FCA and your kind support. I think it’s greatly thanks to you that I still work in finance today. "

Client

"They have extremely good judgement when it comes to criminal matters. They have vast experience in crime at all levels - whether it's financial or something with a regulatory dimension or a civil dimension, they can deal with it and provide all round advice."

Chambers and Partners, 2017

"The country's premier niche white-collar firm. They're very savvy and understand how the corporate world works."

Chambers UK, 2017

"Real expertise across all levels, well led and offering practical advice with no histrionics or game playing."

Chambers UK, 2017

“Kingsley Napley LLP does an ‘excellent job representing individuals involved in financial services disputes and regulatory investigations'."

Legal 500 UK, 2014

...'Widely regarded as a go-to team for contentious financial services matters involving a criminal litigation element. Excels at representing individuals and corporates in FSA and SFO investigations'...

Chambers UK 2014, A Clients Guide to the UK Legal Profession

Kingsley Napley LLP does an ‘excellent job representing individuals involved in financial services disputes and regulatory investigations'. The firm excels at handling enforcement matters where there is a potential criminal law element such as insider dealing and market abuse. Louise Hodges and Eve Giles bring ‘intelligence and first-class client skills to everything they do'.

Legal 500 UK, 2014

...'Kingsley Napley is pre-eminent at what it does: high-end, complex criminal work for high-profile individuals'...

Chambers UK 2014, A Clients Guide to the UK Legal Profession

Financial Services Investigations Insights

View all

Blogs

FCA: Criminal prosecutions for AML systems and controls failings – a step too far?

FCA Dear CEO letter on cryptoassets – a warning to firms

How to write a reference – Hincks v Sense Network Ltd

Transforming culture in financial services – keeping up with the debate

FCA consults on adding Market Abuse to the Financial Crime Guide - might firms now face criminal prosecution?

Share scheme fraudster pleads guilty to perverting course of justice in proceeds of crime case brought by Financial Conduct Authority

MiFID II – an introduction

FCA sounds warning on retail CFD market

FCA fines experienced bond trader for negligent market abuse

FCA fine AIM-listed company for failure to disclose inside information in line with Market Abuse Regulations

FCA: New Focus on Market Manipulation and Non-Equities Market Abuse

Transaction Reporting fine highlights the importance FCA places on correct data

Financial Conduct Authority: The level of suspicious transaction reports soars, and is set to keep on rising with new EU rules

FCA Enforcement: The calm before the storm?

#Brexit: Lords examine financial regulation and supervision

FCA proposes extension of senior managers regime

The extension of the Senior Managers and Certification Regime

OPBAS – FCA consults on the “supervisor of supervisors”

Privilege, Confidentiality and the Challenge of Modern Technology

PEPs and anti-money laundering: The FCA issues guidance

Highlights from the FCA Enforcement annual performance account 2016/17

FCA Annual Report 2016/17: conducting regulation with confidence

Anti-Money Laundering: new rules and regulations in play

FCA Investigations – the evolving approach

FCA prepares for Fourth Money Laundering Directive

Tough action against solicitor who laundered proceeds of bogus investment scheme

Brexit and the general election – UK misses implementation deadline for European Investigations Order Directive

FCA guidance on how firms should deal with PEPs: a proportionate approach

OPBAS: A supervisor of supervisors?

Budget 2017 – 35 “New” ways to tackle tax avoidance and evasion

FCA’s use of private warnings under scrutiny

New amendments to FCA/PRA decision-making practice and procedure from 1 March 2017: partly contested cases and abolition of stage 2 and 3 settlement penalty discounts

Senior Managers Regime – the FCA predicts more enforcement litigation in the new regime

FCA uses criminal powers for first time against alleged unlicensed lender

Corporate Criminal Liability – Consultation opened over need for reform

Q & A – What do FCA regulated firms need to know about Financial Crime Return reporting?

UK Task Force investigating the Panama Papers: update focuses on criminal and civil investigations on HNW individuals, tax evasion and money laundering

New FCA Chief seeks to redefine mission of the organisation

How will the Financial Conduct Authority adapt to the post-Brexit landscape?

Insider trading: the new market abuse regime

FCA annual report 2015/16: overview of Enforcement, improving standards and the strategic priority to combat Financial Crime

Shining a spotlight on the culture of financial services firms

EU Benchmark Regulation

2016-17: Tackling financial crime and ensuring AML compliance a UK and FCA top priority

Senior Managers Regime: first stage now in force

‘The Senior Managers’ Regime: the end of the ‘regulate/de-regulate’ cycle?

Contracts for difference: FCA issues open letter re compliance with financial crime prevention procedures

SFO’s policy on dealing with seized material potentially subject to legal professional privilege deemed lawful

FCA is to consult over whether the head of legal role falls within the Senior Managers’ Regime

The PRA’s disapproval of a short-termist approach

Strengthening accountability in banking: FCA issues final rules for UK branches of foreign banks

Close Load more

Let us take it from here.

+44 (0)20 7814 1200

enquiries@kingsleynapley.co.uk

Skip to content Home About Us Insights Services Contact Accessibility