Many thanks to our expert panel of Leo Davidson, barrister at 11KBW, and Harriet Parsons, founder of HSP Legal who joined Fox & Partners’ Catriona Watt and Dean Fuller at the recent Fox Breakfast Briefing: Conducting internal investigations in financial services.
Below we have summarised the key advice from our expert panel and you can watch the recording of the full webinar here.
- At the outset of an investigation it is crucial for a firm to decide whom to keep in the loop with information and to whom the investigation should remain a closed book. It will be preferable to keep the inside group relatively small and ensure that it represents the right skillset to handle the investigation proficiently. It is also important to manage conflicts and ensure no one is ‘in the know’ who might be implicated or a witness.
- Terms of Reference for the investigation should be kept at a high level. The more detail there is, the more risk of them being picked apart so that the process can be criticised later on.
- Employment relations personnel should be mindful of any whistle-blower suffering detriment which may give rise to a claim. The term ‘detriment’ is not defined by the legislation and does not just encapsulate dismissal or demotion. Detriment is widely construed and can include closer monitoring, ostracism, suspension, disciplinary sanction, victimisation, failure to provide an appropriate reference and failure to investigate a subsequent concern.
- The subject of an investigation may well need to be suspended in order to prevent serious wrongdoing. Consideration must be given to the risk of tipping off and the contractual and employment position of the individual. An express power to suspend is an important aspect to include in a senior manager’s contract to trump any implied right to work which the subject may assert. The fact and terms of suspension should be recorded in writing and provided to the subject.
- A suspension during an investigation is not a disciplinary outcome which must be reported to the FCA according to guidance on 64C of the Financial Services and Markets Act 2000. This wording within the statute refers to a sanction imposed after a disciplinary process.
- Since 2018, the FCA has had a renewed focus on non-financial misconduct in addition to its traditional area of regulation.
- D&O liability insurance should be in place for directors and this may cover legal advice costs for the subject of the investigation. It is a good idea to examine the terms of the policy and check this at an early stage. The policy would not extend to cover a fine if the individual is found guilty of a criminal offence.
- Form A is not the candidate’s form to fill out. The applicant is in fact the relevant firm and they have an obligation to carry out due diligence, e.g. to ask for a criminal records check. They must be satisfied that the individual is fit and proper for the role they are applying to perform.
- Reporting to the FCA does not necessarily mean an individual will be barred from working again within the financial services industry. The Form A allows space to explain the circumstances of an investigation and why it does not preclude the individual from working.
- Where allegations turn out to be unfounded, a disciplinary process may be considered for the person who made them. If allegations are made maliciously, conduct breaches may need to be reported to the FCA, depending on the person’s status. Due regard must be had to the whistleblowing policy.
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