UK: FW's Top Tips On What To Do When Faced With An FSA Investigation

Last Updated: 23 April 2012
Article by Peter Wright and Deepak Arora

This article was written for and first featured in Bloomberg Law Reports®, UK Financial Services Law, Vol. 3, No. 12

What to Do When the FSA Comes Knocking on the Door

The Financial Services Authority (FSA) is continuing to focus its attention on individuals who work in the London markets. The recent expansion of the FSA's requirement to record telephone conversations and electronic communications made from traders' mobile devices highlights this focus. Its aim is to heighten oversight of and help deter and detect acts of market abuse and/or insider dealing. As recent action shows, the FSA is increasing the number of criminal and regulatory insider dealing and market abuse investigations and individuals are now increasingly likely to find themselves on the receiving end of the FSA's disciplinary powers.

Individuals often fear an investigation by the FSA's enforcement division. It can be a nerve-racking, uncertain, complex and often both a professionally and personally disruptive experience.

However, by planning ahead and adopting a few practical tips, the experience need not be quite so traumatic. The key is in understanding and preparing for the process and knowing what is expected.

Tip 1 – Conduct: Be Ready & Be Helpful

The FSA will only come knocking should it suspect some out of the ordinary activity. If a large number of shares in a company are purchased just before a public takeover announcement, the FSA's market monitoring team may start asking questions of those involved or who have dealt recently in the shares. The way that a person deals with the investigators will set the tone of the investigation from the start. You may be unknown to the FSA, and as in any situation, first impressions are vital. Some important points to remember are:

  • Active involvement at an early stage will help build a "regulatory rapport" with the FSA and help create confidence that the target of the investigation is engaging properly with the regulator. This could impact positively on the development of any enforcement action, or indeed whether it is necessary for an investigation to be conducted.
  • If the investigation's target is an Approved Person he is governed by the Statements of Principle and Code of Practice for Approved Persons (APER) in the FSA Handbook. These require the FSA to be dealt with in an open and co-operative manner, and this obligation continues during an investigation. The worst thing a person can do is to be defensive, disruptive, unhelpful and non-cooperative. In the worst case this could become the basis for regulatory action itself.
  • While unregulated individuals are not subject to APER, if an unregulated person becomes embroiled in an FSA investigation into market issues, it is still important to create the right impression to help minimise the risk of an investigation turning into substantive enforcement action. In the worst case scenario where enforcement action is actually taken, the right approach still could help secure valuable credit at an early stage in the eyes of the investigation team and help to mitigate any future sanction the regulator may seek to impose.

Tip 2 – Understand the Investigation

To fully prepare for, engage in and respond to an investigation, it is vital to identify and understand the possibilities and potential consequences of the investigation. The FSA could be planning a criminal insider dealing investigation, a civil market abuse case or a failure to meet market standards.

In a regulatory case, a scoping discussion ordinarily maps out and sets the tone for the investigation – who is under investigation, why, key issues to be investigated and what documentary evidence the FSA will require. It is an invaluable opportunity to have an
active involvement in and management of the investigation and ensure the investigation team really gets to know the target, his role and his abilities. It follows the issuance of a Notice of Appointment of Investigators to an individual, and will usually be the first physical meeting with the FSA.

An individual must use the scoping discussion to clarify any holes in his understanding of the process or the exact subjects under investigation. It is intended to be a two-way process that can be used to gain a better understanding of the issues involved and to ensure the FSA does not overstep the bounds of its own investigation. The target should not be afraid to ask questions to clarify what the FSA expects or requires.

In FSA investigations where scoping discussions are not conducted, which often happens in matters with a criminal dimension, the process will be different. If there is the potential for a criminal investigation, then early engagement with skilled advisors is critical to ensure that the subject of an investigation responds appropriately.

Tip 3 – Interviews: Fail to Prepare, Prepare to Fail

Interviews represent an important stage in any FSA investigation. They are the first time the FSA enforcement team will meet with key individuals and gather information. The team will assess interviewees' demeanour, and their opinions will form the basis of decisions made further along the investigation process. Therefore, preparation is key to a successful set of interviews.

  • Interviews can be conducted on a voluntary, compelled or under caution basis. Whichever type of interview is conducted, the target must prepare diligently. When preparing for interviews, one should review all necessary information that is relevant to the investigation and/or has been provided to the FSA, and familiarise oneself with the facts and what the target has direct knowledge of. From the outset, he should start to compile a pack of documents that supports the case should it be required or would be beneficial to have to hand at a later date at short notice.
  • The exact topics and supposed breaches under investigation should be understood, so that interviewees are able to understand what is being asked of them and able to provide focussed and tailored answers. The subject of an investigation into a supposed case of insider dealing should make sure he has full knowledge and details of when he bought the shares in question, why he bought them, how he gained the knowledge that led to the purchase and, if advice was sought from an internal compliance officer, when that advice was taken and what the advice consisted of. Be clear as to what is denied or accepted in terms of the alleged misconduct – very rarely do investigations take place that are completely unwarranted.
  • An interview is formal and tape-recorded, and may take place over several hours or several days in large investigations. There is nothing wrong with asking for time to think about the questions being asked or the answer given, or for time to review documents again to refresh one's memory. Such requests will not be viewed negatively. It is important to review the post-interview transcript thoroughly to ensure it reflects accurately what was asked and answered during the interview. Any undetected inconsistencies that transpire at a later date could be held against the target at later stages.

Tip 4 – Challenging the Regulator: Reasonable and Sensible Challenges

It is all too easy to adopt an overly litigious approach to any FSA investigation. This often creates a poor impression with the FSA and can have a detrimental impact on any eventual decisions taken. However, while the target must be open and co-operative, that does not mean that he should "roll over," and he may challenge and engage with the FSA without being obstructive. If the FSA's questions or document requests are unreasonable or unfair, the target should not hesitate to ask constructive questions or respectfully "push back" for fear of not satisfying his positive obligations under APER. Should the FSA take a view of standard market behaviour that is incorrect or unreasonable, explain this to the FSA and present them with supporting evidence.

  • By assisting and engaging with the FSA in the enforcement process, the target could help alleviate any detrimental outcomes for his future career. For example, very few enforcement cases proceed to the end of the process and the FSA provides strong incentives to settle cases. It is possible to obtain a discount off financial penalties of up to 30 percent should the case reach an early settlement.

The more active, helpful and co-operative the target is, the more useful he will be, and the more likely the FSA will want to settle the case at an early stage. In June 2011, the FSA banned Barnett Alexander from working in the City for five years and imposed a financial penalty of £700,000 for market abuse for manipulation of the price of spreadbets linked to shares on the LSE; this figure took into account a discount of 30 percent for early settlement.1 Had Mr Alexander not co-operated with the FSA at an early stage and admitted his wrongdoing, he would have faced a fine of £1 million, in addition to the restitution of profits that the FSA ordered.

Tip 5 – Reflect, Learn and Educate

If a person becomes involved in a regulatory investigation, then as with any experience, the process and outcomes can provide valuable lessons.

An unusual example of such reflection has been shown by Mr Alexander. Following the disciplinary sanction imposed on him he has expressed a desire to train would-be traders about his shortcomings, how to avoid the loopholes in many firms and how to avoid making the same mistakes he did. He has proclaimed a need for greater clarity and guidance to assist self-employed traders to work out what is and what is not permitted by law.

Whilst this is an unusual approach for someone who has been banned from the industry, there are lessons that can be learnt by all parties to an FSA investigation. For example, if you or your client became involved in an FSA investigation you should consider whether you adopted best practice and whether you could have addressed regulatory concerns at an earlier stage or in an alternate manner to mitigate the adverse impact of an investigation.


An individual under investigation will never be the driving force of an FSA investigation. That said, it is possible to influence its outcome and achieve a desirable result. The key to maximum impact is to be open, honest and properly engaged with the FSA.

Eventual fines imposed or public messages released can be controlled by how the investigation goes. Enforcement cases that are widely publicised often involve the most serious of breaches and are intended to demonstrate the consequences of not meeting regulatory standards. What the public do not read about are the majority of cases which are not pursued by the FSA or which reach settlement at an early stage. This can happen if a person plays his cards correctly.

As soon as a regulatory problem arises, detected by the FSA or otherwise, individuals should seek legal and expert advice from those with the knowledge and expertise of such investigations, to formulate a clear strategy and provide guidance through the regulatory framework.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.