The FCA has the power under section 168 of the Financial Services and Markets Act 2000 (FSMA) to investigate individuals, including Approved Persons, where there are circumstances which suggest that specified offences have been committed or FCA rule breaches have occurred. Section 66 FSMA provides that the FCA may take action against an Approved Person if it appears they are guilty of misconduct. The FCA may also investigate senior management’s conduct in the context of an investigation it is carrying out into a firm and if senior managers are responsible for misconduct, the FCA may bring a case against the individual/s. The FCA mainly confines its investigations into individuals to those who hold significant influence functions these are controlled functions which broadly fall into categories:
- Governing functions (controlled functions 1 – 6)
- Required functions (controlled functions 8 – 12B)
- Systems and controls function (controlled function 28)
- Significant management function (controlled function 29)
Ten of the above controlled functions are also PRA designated controlled functions for dual-regulated firms (specifically CF1, CF2, CF3, CF4, CF5, CF6, CF12, CF12A, CH12B and CF28).
However, the FCA also investigates and takes disciplinary action against individuals performing the customer controlled function (controlled function 30/CF30).
The standard practice for a regulatory investigation is for the FCA to send the individual(s) under investigation notice that investigators have been appointed, identifying the scope of the investigation and the relevant period, and indicating the basis on which any interview may be conducted. This can be voluntarily or compulsory or under police caution: the FCA has power to compel a person to attend interview, (sections 171, 172 or 173 of FSMA). If suspected of a criminal offence, the individual may be interviewed on a voluntary basis, or under caution where an individual would be provided with a caution under the Police and Criminal Evidence Act 1984 to the effect that he/she is not required to answer any questions but that failure at the interview to provide details of a defence later relied on in court may give rise to adverse inferences being drawn. Individuals who are being investigated may need independent legal representation, particularly if there has been any evidence of misconduct.
Cooperation with the FCA is essential to ensure that an investigation proceeds efficiently.
Cooperation is taken into account by the FCA as a mitigating factor and may reduce the level of any fine or other sanction.
It is a criminal offence knowingly or recklessly to provide false information to the FCA. The obligation not to mislead the FCA extends to documents submitted in connection with authorisations and other applications, as well as those provided during investigations (section 177(4) FSMA).
All interviews are recorded and the interviewee may be asked to review the transcript for typographical errors in the transcribing of the interviewee’s voice. No additional factual information may be added to the transcript, however the interviewee may submit further evidence at any stage.