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Enforcement Watch

Symington Outlines the FCA's Approach to Investigations
Enforcement Watch

Enforcement WatchIssue 23 | September 2017

Date
26 September 2017

On 15 June 2017, Jamie Symington (Director of Investigations at the Financial Conduct Authority) delivered a speech about the FCA's evolving approach to investigations.


Symington outlines the FCA's approach to investigations

On 15 June 2017, Jamie Symington (Director of Investigations at the Financial Conduct Authority) delivered a speech about the FCA's evolving approach to investigations.

As he explained, in the years following the 2008 financial crisis, the then FSA commenced numerous and lengthy regulatory investigations resulting in not only unprecedented types of Enforcement action, but also record-breaking fines.  What this has led to is a perception that, once the regulator begins an investigation, there is no turning back.

In the new world, and under substantially new leadership, Symington explained, the FCA has been reflecting on its approach to commencing investigations.  Its transition to a new approach has been informed in part by the review by HM Treasury in 2014 and by the Andrew Green QC report on the FSA’s handling of the HBOS collapse.  Both commented on the FCA’s decision making around when to commence an investigation. In the context of whether to commence investigations into senior individuals at HBOS, the Green Report suggested that the FSA had been influenced by an assessment of whether any subsequent disciplinary case was likely to succeed, something which was difficult to assess before an investigation was even begun.

Symington was at pains to stress that this will no longer be the case. The FCA’s emphasis will not be, he said, on passing matters to Enforcement only so that Enforcement can do its best to bring an enforcement case. Instead, it will seek to use its investigatory powers much earlier to find out what has happened and decide what to do next.

What then are the key consequences of this that we have already seen and are likely to see in future?

  • More investigations will be opened.  Whilst the statutory threshold for opening an investigation remains the same, the FCA recognises that, where that threshold is met and where the public importance of investigation is high, it has a responsibility to investigate.
  • Culture is a key priority for the FCA.  Accordingly, generally where there are grounds for investigating a matter, Symington said that there would generally be a need to investigate the role of senior management in the conduct issues that arise. Accordingly, senior management will no doubt be the subject of investigations even more frequently than they have been up until now.
  • Whilst it is likely that more investigations will be opened, proportionately fewer are then likely to lead to enforcement action.  Some may for example be discontinued with no further action being taken, whilst others may see the matter taken forward with Supervision.

In one sense, Symington's speech was designed to try to acclimatise the industry to the idea that being under investigation should not necessarily be considered to be such a draconian step. As part of that, the FCA will want investigations to be less quasi litigious. The problem of course with downplaying the significance of investigations is that the mere fact of being under investigation bears a real stigma and carries with it all kinds of prejudicial consequences, especially for individuals. We shall have to see where the FCA's journey ultimately lands up and what the regulated community ultimately makes of it.

Readers may also be interested in Mark Steward's speech elsewhere in this issue "Mark Steward speech reflects on FCA enforcement trends".