All the changes in the FCA's new Enforcement Guide

The FCA has a shiny new Enforcement Guide (ENFG) replacing its old EG.  It's in force immediately.

Here's a link to another post where we dissect the FCA's new investigations publicity policy.

In this post we'll go through the other significant changes.

Legal advisers at interviews

The FCA is retaining changes to its guidance on the attendance of legal advisers at compelled interviews. The ENFG now expressly reserves to enforcement case teams the question whether to refuse the attendance of a legal advisor (other than the interviewee's legal advisor) on the basis of potential prejudice to this or any other ongoing investigation.  

The interviewees' own wishes will be a factor here, but not the only one.  

In practice, we've already seen increasing resistance to the firm’s lawyers attending an employee's interview, where they are represented by the same lawyer or have their own representative. 

The FCA initially justified this guidance change on the basis of a potential for a conflict of interest. Of course, lawyers have their own professional obligations to avoid conflicts and it is not for the FCA to prejudge this.

Now, the FCA is trying a new justification: that it might refuse attendance on the basis that there is the potential for an investigation to be "prejudiced" if a lawyer with a potential conflict or disclosure obligations to an individual’s employer attends. 

Conveniently, the FCA says that this assessment can only be made by the FCA based on information that it "cannot disclose", for example, an awareness of how the investigation might develop in future. 

Firms' internal reports

In a confirmation of current FCA practice, the ENFG now indicates that the FCA will accept firm’s internal reports, over which privilege is claimed, without agreeing to the extent to which they are privileged.

The FCA rejects the suggestion (made by some respondents) that this signals a shift in FCA policy designed to encourage firms to waive privilege.  The FCA points out that it can accept a report on a limited waiver basis without agreeing the extent to which privilege applies. This also does not, in the FCA’s view, prevent a firm resisting disclosing the report to third parties. 

Scoping meetings optional

The ENFG now explicitly confirms that the FCA will have a scoping meeting at the outset of an investigation where the subject of the investigation wants one. This follows feedback that its proposal to move away from presuming that a scoping meeting will take place in every case suggested that it wished to   end the practice altogether. 

Even for firms with enforcement experience, the scoping meeting can be a useful opportunity to explain background and context and offer teach-ins.

Out with the old

The ENFG now retires private warnings and preliminary findings letters and reports - the FCA has not used these for some time.

Cleaning up

The rest of the changes remove aspects of the old EG which duplicated other FCA guidance and statements. In many cases this results in an ENFG which is a summary of the old EG.  In particular:

• It links to the FCA website for details about its approach to case selection and prioritisation (no changes have been made to these existing webpages) and for policy on interactions with other authorities.
• It moves some detail to other FCA Handbook locations (without making material changes), for example guidance on the approach to its use of supervisory intervention powers to SUP 6B; RDC processes to DEPP; and settlement processes and discounts to DEPP.
• Guidance on other powers used in conjunction with the FCA‘s enforcement powers (for example, its use of injunctions) will remain in ENFG, albeit in significantly shorter form.
• Interestingly, the restitution and redress guidance from EG is retained in ENFG. The FCA had proposed removing this on the basis that it was planning to consult on revised guidance in due course. This led to feedback that  its removal would leave firms without any guidance at all on the factors the FCA will  consider when exercising this powers.  The retained guidance has, however, been substantially shortened and summarised.

The FCA will maintain its policy of consulting on all future changes to ENFG, having initially proposed dropping this requirement.