Financial & Other Regulatory Investigations & Proceedings |  |
- The Financial Services Authority is probably the largest regulatory body in the United Kingdom. Following the Financial Services and Markets Act 2000, it took over the responsibility of regulating almost the whole of the financial services industry, from independent financial advisers through to Banks. It is soon to assume responsibility for the mortgage sector.
- It has wide-ranging powers to investigate all manner of problems within financial services ranging from the mis-selling of pensions through insider share trading to regulation and disciplinary matters relating to those “approved persons” or authorised firms.
- The powers and procedures available to the FSA are detailed in the FSA Enforcement Handbook.
Offences
The Financial Services Authority is responsible for the investigation of a variety of different criminal offences in addition to its regulatory role.
These investigations can involve what the FSA term a “perimeter breach” which involves a situation where an unauthorised person has carried out a regulated activity; market rigging, insider share dealing, together with numerous other offences including cases of misleading or obstructing an FSA investigation.
Regulatory Issues
As the main City regulator, the FSA not only investigate and prosecute criminal offences but also regulate the financial services industry. This can involve bringing disciplinary proceedings against authorised persons or permitted firms for regulatory breaches and for the mis-selling of financial products.
The latest example of such an act was the FSA invoking its power to fine an organisation by levying a £1.9m fine against Lloyds TSB for the mis-selling of precipice bonds.
The disciplinary procedure for authorised persons and permitted firms is detailed and involves the Regulatory Decisions Committee. Usually, the first step in the disciplinary procedure is the issuing of a warning notice.
A person subjected to the disciplinary procedure has a number of opportunities to have an input into that process by the making of representations and obtaining of material from the FSA.
Any person or firm who is contacted by the FSA relating to an investigation, whether it be concerning matters that might lead to a criminal liability or in disciplinary proceedings, should seek legal advice immediately.
Interviews
The FSA have been provided with far-reaching legal powers. These allow them to require persons to provide them with information and/or explanations concerning documentary material. In many circumstances, the FSA try to proceed on a consensual basis with those whom they are investigating.
There may, however, be situations where the FSA use their powers to require persons to provide information or documents. A failure to do so can result in a criminal liability either through contempt of Court or through specific offences being committed.
In some circumstances, the interviews that they conduct will be what are known as interviews under caution, governed by the Police and Criminal Evidence Act 1984. The significance of those interviews is that the replies can later be used in a criminal prosecution.
A person being asked to attend an interview under caution should always seek legal advice. A person interviewed under caution has a legal right to be legally represented during it.
Any person or organisation being required to provide information or documentary material by the FSA within their powers under the Financial Services and Markets Act 2000 should seek immediate legal advice as to the effect of the request, whether the request is proper and what action should be taken in response to the request.
Tribunals and Courts
The FSA have a number of powers ranging from the cancellation, or variation of the permission or authorisation as a permitted firm or an approved person through to the imposition of financial penalties and the making of public statements.
The Regulatory Decisions Committee has the overall responsibility for the issuing of warning, supervisory, and decision notices.
The issuing of these notices and subsequent action by the FSA is subject to a referral by those subject to the order to the Financial Services and Markets Tribunal.
Any appeal from a decision of the Tribunal is to the Court of Appeal.
Those matters which are being investigated as criminal offences would result in prosecution in the Criminal Courts just as any other criminal offence.
Penalties
- A distinction needs to be made between the FSA’s role as a regulator and its status as an investigator of criminal offences.
- In relation to regulatory breaches, the FSA has the power to impose fines, to withdraw or vary permission or authorisation to firms and individuals.
- The offences that the FSA prosecutes carry varying penalties which can include substantial prison sentences for those convicted.
- The threat to liberty and livelihood highlights the need to take timely and appropriate legal advice when a person is subject to an FSA investigation.
Appeals
Actions taken by the Regulatory Decisions Committee of the FSA through the issuing of a decision notice can be appealed to the Financial Services and Markets Tribunal. The issue of a supervisory notice by the RDC specifying action to be taken or remedied can also be appealed to the Tribunal.
Any appeal of a decision of the Tribunal lies to the Court of Appeal.
An appeal in criminal proceedings following a conviction or sentence falls within the normal criminal appeal system.
Funding
A person who is being investigated or who needs advice in relation to issues involving the FSA may be eligible for advice and assistance, sometimes called legal aid. This will depend on the means of the person being advised.
Those persons prosecuted in a Criminal Court would ordinarily be eligible for representation under a full Representation Order.
Detailed advice is always given to a client concerning the availability of public funding in their case.