FCA approach to investigations 'evolving', says director
Speaking at an industry event in London, FCA investigations director Jamie Symington said that the regulator's approach to investigations was "evolving" in line with its recently-published 'Mission' document. Part of this process was to clarify the role of investigations as an information-gathering exercise, rather than an adversarial one, he said.
Symington said that the FCA was "transitioning to a new phase of its life", shifting away from crisis response mode and towards a "longer term strategy for the response to conduct risk". He said that it was "inevitable" that this approach would lead to more investigations being opened, and that "proportionately fewer" of those investigations would ultimately progress to disciplinary enforcement action against the firms and individuals involved.
However, Symington warned that this shift in emphasis towards cultural change meant that "generally where there are grounds for investigating a matter, there will be a need to investigate the role of senior management in the conduct issues that arise".
"There are multiple responses that might be appropriate other than imposing sanctions on or prosecuting people," he said.
"It could be that the consequences of an investigation are that we do nothing further. It could be that [the FCA's supervision team] take the matter forward with a firm through a programme of measures that they oversee. It could be that there is a policy response whereby we issue revised guidance to the industry to clarify our expectations. Or it could be that some other remedial action is taken forward. One way or another, the response should be one that is proportionate to and appropriately addresses the harm that we gauge has resulted from the matter investigated," he said.
With this in mind, firms and individuals that found themselves within the scope of an FCA investigation should be able to "make better judgements as to how to respond and engage with the process", he said. This would usually mean swift cooperation and support, unless the investigation related to "matters of deliberate, serious and sometimes criminal conduct", he said.
"When something has gone wrong, this should be as much a priority for the firm as it is for the regulator," he said.
Financial regulation and enforcement expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com, said that industry expectations of "enforcement investigation leading to a sanction or penalty" came from "the historic approach of the FCA to carefully select those matters it investigates with the aim being to produce outcomes to deter others from similar misconduct, whilst penalising the subject of investigation".
"Should the future be for large numbers of investigations to be closed with no action taken, this is something the FCA will hopefully publicise to get its message across," he said.
However, he added that if there was no increase in the number of sanctions against individuals then "the senior managers' regime will have failed to meet its objective".
The senior managers' regime (SMR), which came into force on 7 March 2016, was designed to make it easier for the regulators to hold senior individuals within banks personally accountably for failings on their watch. The rules are due to be extended to all regulated financial firms from 2018.