This article considers five commonly asked questions about the extent of the FCA’s general information gathering powers and how best to approach them. It focuses on obligations owed by regulated firms to the FCA, although similar issues will arise for firms that are also regulated by the PRA.
- We haven’t received any formal notice from the FCA requiring us to provide documents or answer questions – they have just sent an email request. Do we have to comply?
Short answer: Usually, yes - firms must be open and cooperative with the FCA (and other regulators).
Long answer: Regardless of whether the FCA issues a formal requirement notice, a firm must be mindful of its overarching obligation to “deal with its regulators in an open and cooperative way, and [to] disclose to the FCA appropriately anything relating to the firm of which that regulator would reasonably expect notice.” Supporting this broad obligation is more detailed guidance, which in summary provides that a firm should: (i) make itself readily available for meetings with the FCA, (ii) provide access to/produce any records, files, computer systems in the firm’s possession or control if requested and (iii) answer truthfully, fully and promptly all questions reasonably put by the FCA. The broad nature of these obligations means that firms regularly provide information to the FCA, even where not strictly compelled to do so because failure to provide it may risk breaching regulatory obligations.
- My firm has received a requirement notice from the FCA. Does that mean it’s under investigation?
Short answer: No, but depending on the nature of the information requested, you may need to tread carefully.
Long answer: The FCA’s general powers to require information under section 165 of FSMA apply even where no formal investigation has been commenced. There are all sorts of reasons why a firm might receive a non-routine requirement notice from the FCA. For example, the firm might be a relevant third party holding documents related to another matter, or the FCA may be making general thematic enquiries.
That’s not to say, however, that the request will certainly not lead to further (possibly more intrusive) action. It will remain open to the FCA to take additional steps (including commencing an investigation if it considers it appropriate) depending on the nature of the request and the information provided in response. Given this, firms should consider carefully the scope of the requirement notice and the potential pitfalls involved and, where appropriate, seek legal advice at an early stage.
- The FCA has issued a requirement notice seeking specified information and documents. Is there room for discussion about the scope of what is being sought?
Short answer: Potentially, yes.
Long answer: There may well be room for a dialogue with the FCA, especially if its requests appear excessive or burdensome. Remember, the FCA won’t know your firm the way you do. It may not appreciate if, for example, certain information isn’t readily available. There may be a more efficient way or format in which to provide the information that has been requested. It may assist the FCA if you can provide explanations and commentary rather than pure data. These types of discussions can often help to reduce the time spent on both sides.
A word of caution though – an open dialogue may not be available in all scenarios: firms should assume that they will not be able to reduce the work involved in providing the information and documents and should plan accordingly at an early stage. Once the FCA has issued a final formal notice requiring documents and information to be provided within a specific timeframe, it will need genuinely compelling evidence if it is to agree an extension of time. Failure to comply with a requirement notice may be treated as contempt of court.
- Do we have to deliver up absolutely everything that the FCA has requested?
Short answer: No, there are (limited) bases on which documents can be withheld from the FCA, typically because the documents are privileged.
Long answer: A person is not required to provide “protected items” to the FCA. These are essentially documents which are subject to legal advice or litigation privilege. Before providing information to the FCA, a thorough review should be undertaken to ensure that any privileged documents have been withheld. Care should also be taken to prevent privilege being lost in documents firms might otherwise have been entitled to withhold.
There are other bases on which firms are able to (or should) withhold documents or information (for example, data protection or banking confidentiality) but these can often be overcome by the FCA specifically requiring the information or documents’ disclosure.
- What can the FCA do with the information once it has been provided?
Short answer: Broadly, the FCA must keep the information provided confidential.
Long answer: The FCA is under a duty of confidentiality in respect of information relating to the business of a firm where such information is confidential and has been received by the FCA for the purposes of its functions. While the unauthorised use or disclosure of that information is a criminal offence, there are a number of exceptions to these obligations which allow the FCA to disclose information to third parties in certain circumstances (for example, to overseas regulators to assist them to carry out their functions).
We will cover these questions (and others) in more detail in our upcoming webinar on 4 October 2022. Sign up here.
The next article in this series will cover common myths and questions about the FCA investigation and enforcement process.