The UK Financial Conduct Authority (FCA) has updated its Enforcement Guide, including its revised policy on when it will announce details of enforcement investigations. Following a consultation process that was subject to substantial scrutiny and discussion, the FCA has moderated most of its more controversial proposals.
The new Enforcement Guide is intended to reflect the FCA’s continued commitment to enhancing transparency, responsiveness, and effectiveness as a regulator, by streamlining the information relating to enforcement proceedings. However, firms should be alive to a few shifts in policy and practice that are hidden away in the detail.
Revised policy on publicising investigations
The FCA received almost 200 responses to its two-part consultation on proposals to radically amend its approach to publicising investigations, including plans to announce which firms were under investigation where the FCA considered this was in the public interest. The regulator took this, and a significant volume of broader feedback and public critique on-board, and announced earlier this year that it would not be proceeding with the more controversial aspects of its proposals.
The new Enforcement Guide retains the existing “exceptional circumstances” policy as the principal test to decide whether the FCA should publicise an investigation into regulated firms. However, the circumstances in which the FCA will announce details of an enforcement investigation have been extended to also include three new circumstances where public announcements may be made.
- Where the FCA is investigating suspected unauthorised activity or a suspected criminal offence in relation to an unregulated activity. The FCA may announce and name subjects under investigation where there is suspicion of unauthorised financial activity or criminal offences linked to unregulated services. This measure is particularly aimed at protecting consumers and supporting the investigative process, reflecting the FCA’s focus on safeguarding market integrity.
- Information already in the public domain. If the fact of the investigation has already been made public by the person under investigation, an affiliated company or a regulatory body, government or public body, in the UK or overseas, then the FCA may also confirm this fact. The FCA’s announcement may also confirm the subject matter of the investigation to the extent that this has also already been made public.
- Anonymised announcements. The FCA may make public that it is investigating a particular matter without naming or otherwise identifying the subject of the investigation. It states that it will only do this where it is desirable to educate people generally about the types of conduct that the FCA is investigating or to encourage compliance with the FCA’s rules or other requirements. If and when published, firms should review this information with a view to assessing their arrangements in relevant areas highlighted by the FCA.
The second of these exceptions will likely amplify the effect of disclosures made by firms in corporate documents and public filings, or by an overseas regulator or law enforcement agency. In the case of overseas proceedings, this may also extend any period of negative publicity and firms will need to take this into account when identifying and mitigating associated risks, especially if the firm is publicly listed.
At first glance, the third exception seems relatively harmless, designed to enable the FCA to better share thematic information about issues that have led to firms being referred to Enforcement. However, the FCA has also said that it might make anonymised announcements about particular investigations. In such circumstances, the FCA says it would take all reasonable steps to ensure the investigation subject cannot be identified, but it does not commit to consulting the firm ahead of making the announcement. Firms may therefore want to ask the FCA if it intends to publish any anonymised announcements about investigations they are subject to, so that they can prepare for any speculative press enquiries that may be received.
The FCA’s new policy on publicity will apply to investigations commencing on or after 3 June 2025.
Discretion to prevent lawyers attending compelled interviews
Despite significant push-back, the FCA has decided to explicitly amend its policy on lawyers attending interviews. Its previous policy simply allowed an interviewee to be accompanied by a legal adviser if they wished. The new policy grants the FCA’s enforcement case teams discretion to refuse attendance of a particular lawyer if the FCA reasonably considers this would prejudice the investigation.
The FCA says that this discretion might be exercised where a lawyer acts for multiple parties and the FCA is concerned that the interviewee may be less able to be candid in their answers or where the FCA sees the potential for the interests of parties to diverge. It is clear from the drafting of the new paragraph in the Enforcement Guide, that one of the situations the FCA has in mind is where the lawyer owes a duty of disclosure to another person (e.g. an interviewee’s employer). The FCA has further clarified that the determination as to whether such concerns arise rests solely with the FCA. This assessment may be informed by information that the FCA is unable to disclose, thereby rendering the decision-making process somewhat opaque.
It is not yet clear whether this amendment marks a step-change in the FCA’s approach to the attendance of lawyers at compelled interviews or is simply an attempt to crystalise the FCA’s existing policy, which has become more stringent in recent years. The policy statement suggests that the FCA intends to exercise this discretion rarely.
Accepting reports on a limited waiver basis
Several recent enforcement notices have credited firms who provided the FCA with copies of reports into issues, either prepared internally or in conjunction with a third party. Such reports are often legally privileged, and firms seek to disclose them to the FCA subject to a limited waiver of that privilege. The FCA has always acknowledged that English law permits disclosure of a report to it subject to a limited waiver of privilege, but it has not generally been willing to expressly confirm the basis (privileged or not) on which it receives the report.
The revised Enforcement Guide expressly states that the FCA will accept reports and other materials from firms on a limited waiver of privilege basis, but that it will not agree the fact or extent to which they are legally privileged. The FCA says that this revised wording does not mark a change in approach and that it simply clarifies its general approach to the issue.
Optional scoping meetings
Scoping meetings, conducted at the very beginning of an investigation, will now be optional. The new Enforcement Guide explains that the FCA will determine on a case-by-case basis whether to hold scoping discussions.
There had been some concern that this amended wording might reflect an intention to conduct fewer scoping meetings. However, this does not seem to be the case. The FCA has confirmed that it will generally conduct a scoping meeting where the subject of an investigation requests one but that it is also flexible about how and when matters relating to the scope of an investigation are discussed with the subject.
Scoping meetings still occur in most cases and firms are likely to still ask for them, given the insights that the FCA can share during these meetings about likely areas of focus for the investigation, as well as forthcoming information requirements and interviews. These meetings also provide valuable opportunities to ask questions and clarify points about the scope of an investigation.
Streamlining and alignment with assertive supervision strategy
Many of the updates are uncontroversial and serve to align the Enforcement Guide with the FCA’s current approach to enforcement, such as the removal of private warnings as an enforcement tool. As part of the FCA’s strategy of “impactful deterrence”, the FCA is carrying out fewer but more targeted investigations which have greater impact, as it has sought to make far more effective use of its broader interventions toolkit. The removal of private warnings further demonstrates the FCA’s growing preference for formal enforcement outcomes as a means for deterrence.
The majority of the other amendments to the Enforcement Guide represent a general streamlining intended to sharpen its focus on enforcement matters. In achieving this, the FCA has relocated certain details to other sections of the FCA Handbook. For example, guidance regarding the FCA’s approach to the use of supervisory intervention powers has been transferred to SUP 6B (reflecting the FCA’s commitment to assertive supervision), provisions relating to settlement processes and discounts have been moved to DEPP, and the FCA’s investigation opening criteria are now published on a dedicated page of the FCA’s website. This restructuring is designed to facilitate easier reference to the FCA’s broader enforcement toolkit, thereby enabling firms and individuals to gain a clearer understanding of the full spectrum of FCA powers. However, while this approach enhances the Enforcement Guide’s focus on enforcement activity, firms and their advisers now need to review multiple sources of information to fully understand the FCA’s enforcement and interventions policy.
Promise to consult on future amendments
Crucially, the FCA has pledged to maintain a commitment to transparency and accountability by subjecting all future amendments to the Enforcement Guide to public consultation. This move is designed to address longstanding concerns from stakeholders regarding the need for greater openness in the evolution of regulatory policy.
The FCA has said that it is considering whether it might record on its Register, warning lists and the recently launched Firm Checker, any announcements it has made in relation to open investigations. Given the strength of industry pushback to the FCA’s initial proposals on publicising investigations, it is reassuring to know that such a change in policy would be consulted on.
