Jamie Symington, a Director in Enforcement (Wholesale, Unauthorised Business and Intelligence) at the FCA, has confirmed the importance of firms’ early engagement with the FCA, and the need for transparency regarding the methodology used when firms conduct internal investigations.
The practice of firms undertaking their own internal investigations can be problematic if firms want to conduct internal investigations of matters where there is also a possibility of enforcement action by the regulator, as care needs to be taken not to prejudice such action.
In order for firms’ internal investigations to be useful, firms should engage with the FCA at an early stage, notifying and self-reporting in an open and cooperative manner. Firms should discuss the scope of any investigations with the FCA as soon as possible. If the FCA have no say in scoping internal investigations, it may later conclude that it cannot rely on any reports produced.
Firms should also be alert to the key value of transparency, both in terms of their methodology for internal investigations, and in sharing any relevant documents with the FCA. Where firms propose to carry out or commission an internal investigation themselves, the starting point is that the FCA expects them to share the core product of the investigation, i.e. the evidence. The FCA appreciates the confidentiality concerns of firms, but stress that reports and underlying materials provided voluntarily to the FCA by a firm, whether or not they are covered by legal privilege, are confidential for these investigatory purposes, and benefit from statutory protection. Firms should not let legal privilege become an unnecessary barrier to sharing the output of an internal investigation with the FCA.
If the scoping, output and supporting evidence of an internal investigation are not shared with the FCA at an early stage and in a transparent manner, it devalues the usefulness of the exercise. However, a properly conducted internal investigation can improve the efficiency and speed of an outcome, and the FCA wishes for firms to be proactive in continuing internal investigations.