It is a fundamental legal principle in regulatory investigations that "a person be given a fair opportunity to respond to criticism prior to its publication in a report." This leads to a process known colloquially as 'Maxwellisation', whereby those subject to criticism are given this opportunity before the report is published. Maxwellisation can be onerous and time-consuming, and the issue is currently subject to an open inquiry by the Treasury Committee.

'Maxwellisation' has significant implications for Financial Reporting Council ("FRC") investigations. Potential audit failings in particular may cover a number of years and the actions of a large number of people – including directors and staff of the audit client itself.

Not all will have been given the chance to respond to, or comment upon, the published outcome of an FRC investigation. Generally speaking, only the named respondents in an FRC investigation will have been given a proper opportunity to respond to FRC criticism of their actions. Some may not even know that an investigation is ongoing.

The recent decision in Taveta Investments confirms that, if minded to do so, a third party will find it difficult to restrain the FRC's publication of a document in which that third party is criticised. Publication is part of the FRC's mandate, and "exceptional circumstances" are required for the courts to override this. Individuals may wish to bring arguments that publication would infringe their human rights, but even here the individual may not succeed (see R (Lewin v FRC) for instance).

In reality, recent experience tells us that the FRC's current approach to published documents is to anonymise individuals other than the named respondents under investigation. This seems a sensible compromise given the delay and expense of undertaking a full 'Maxwellisation' process. Moreover, 'Maxwellisation' is an exercise which is usually conducted after a document setting out an investigating body's findings has been provisionally finalised, but before it is published. Those involved in an FRC investigation, including the named respondents and the FRC itself, typically want to see prompt publication once a settlement has been reached or a Tribunal Decision is handed down, enabling them to draw a line in the sand and to move on.

As for the future, Maxwellisation, or the FRC's compromise of anonymising references to individuals named in published FRC or Tribunal decisions, should become the norm rather than the exception. We welcome this. The emotional and professional impact of adverse criticism on individuals can be significant and at times severe. This is especially so in our media-mad society which often delights in spreading ill-informed criticism of others, removed from its proper context.

That leaves over the question of whether the FRC's current approach to contacting third parties should be reviewed. Our experience is that in serious cases they cast their net widely, but do not automatically share the results of their enquiries with those under investigation. We suggest a transparent and collaborative approach should be considered. The new FRC Sanctions Guidance, which came into force this year, incentivises respondents to settle very early on in the process, before a Formal Complaint [1] is finalised. It is in everyone's interests for the FRC's case to be accurately particularised and we suggest achieving this at an early stage in the investigation will be aided by collaboration and transparency. The parties to an investigation may have adverse interests, but they frequently share a common desire to establish the facts at an early stage. Time spent on early engagement with third parties with the help and input of the proposed respondents may save time and achieve fairness.

As an aside, we note that the FRC now has powers to compel information from third parties which are not otherwise subject to its jurisdiction. This is very welcome if it leads to facts crystallising at an early stage of investigation. However, this can lead to incongruous outcomes, such as where a Finance Director faces serious FRC sanctions while a fellow director admits to, or discloses conduct that is equally if not more culpable, but faces no sanction from the FRC whatsoever.