The ultimate guide to FCA investigations

The ultimate guide to FCA investigations

The UK’s Financial Conduct Authority (FCA) is responsible for regulating the conduct of financial services firms and protecting the integrity of UK financial markets. When the regulator suspects misconduct or regulatory breaches, it has wide-ranging powers to open investigations into firms and individuals.

For organisations and professionals operating within the financial sector, an FCA investigation can have significant regulatory, financial and reputational consequences. Understanding how these investigations arise, how they are conducted, and what rights and obligations apply is therefore critical.

This guide explains how FCA investigations work, what may trigger regulatory scrutiny, and how individuals and firms can respond effectively.

What is an FCA investigation?

An FCA investigation is a formal process undertaken by the regulator to determine whether a firm or individual has breached regulatory requirements or committed financial misconduct.

The FCA supervises tens of thousands of financial services businesses across the UK. If concerns arise about potential breaches of the FCA rules, market abuse, financial crime or consumer harm, the regulator may open an enforcement investigation.

During an investigation, the FCA gathers evidence to establish the facts and determine whether enforcement action is necessary. The opening of an investigation does not necessarily mean wrongdoing has occurred, but rather that the regulator considers there may be grounds to examine the matter further.

FCA investigations may involve:

• Regulated financial services firms
• Directors and senior managers
• Approved persons and certified individuals
• Market participants and third parties
• In some cases, individuals who are not directly regulated.

 

Investigations often focus on issues such as:

• Market abuse or insider dealing
• Financial crime, including money laundering
• Mis-selling or consumer harm
• Failures in compliance systems and controls
• Breaches of the FCA Principles or Conduct Rules.

Why the FCA opens investigations

The FCA opens investigations when it believes serious misconduct may have occurred, or when enforcement action could deter wrongdoing in financial markets.

When deciding whether to investigate, the regulator considers factors such as the seriousness of the suspected breach, the harm caused to consumers or markets, and whether enforcement action would act as a deterrent to others.

Investigations may be triggered by a range of sources, including:

Whistleblower reports

Employees or insiders may report suspected misconduct directly to the FCA.

Market monitoring

The regulator actively monitors trading activity and market behaviour for signs of manipulation or insider dealing.

Consumer complaints

Patterns of complaints may reveal potential regulatory breaches.

Regulatory reporting issues

Inaccurate reporting or suspicious regulatory data submissions may attract scrutiny.

Intelligence from other authorities

Investigations may arise from referrals from law enforcement agencies, overseas regulators or other UK authorities.

The FCA investigation process

Although every case is different, most FCA investigations follow a broadly similar structure.

1. Initial assessment

The FCA first assesses whether the matter warrants a formal investigation. This stage involves reviewing available information and determining whether enforcement action may be appropriate.

2. Appointment of investigators

If the regulator decides to proceed, it appoints investigators and formally opens the investigation.

Firms or individuals may receive a Notice of Appointment of Investigators, informing them that the FCA has begun a formal investigation.

3. Evidence gathering

Investigators gather evidence using a range of statutory powers. This may include requesting documents, reviewing communications and interviewing relevant individuals.

4. Interviews and testimony

The FCA may conduct interviews with witnesses or individuals under investigation. These interviews can be voluntary or compelled depending on the circumstances.

5. Regulatory decision-making

Once the investigation is complete, the FCA decides whether enforcement action is appropriate. Possible outcomes include warning notices, decision notices or final notices.

The FCA’s investigative powers

The Financial Conduct Authority has extensive powers to obtain information and investigate potential misconduct.

These powers include regulatory, civil and criminal enforcement tools, which may be used to protect consumers and maintain market integrity.

Key investigative powers include:

Information requests (section 165)

Under section 165 of the Financial Services and Markets Act 2000 (FSMA), the FCA can require firms or individuals to provide specific documents or information relevant to its investigation. These statutory requests must be complied with and usually specify the information required and a deadline for submission.

Failure to comply with such requests can itself constitute a regulatory breach.

Compulsory interviews

The FCA can compel individuals to attend interviews and answer questions during an investigation. Statements made in compelled interviews may be used in regulatory proceedings.

Search and seizure

In criminal investigations, the FCA may obtain warrants allowing investigators to enter premises and seize relevant materials.

Skilled person reviews (section 166)

In some situations, the FCA may require a firm to commission an independent report from a third-party expert known as a “skilled person”.

Under section 166 of FSMA, the regulator can require such a review when it has concerns about aspects of a firm’s activities or compliance framework.

These reviews typically examine areas such as:

• Governance and risk management
• Financial crime controls
• Systems and internal compliance procedures
• Regulatory reporting processes.

The findings of a skilled person review can inform further supervisory action or enforcement proceedings.

Interviews in FCA investigations

Interviews are a key element of many FCA investigations.

The regulator may conduct:

Voluntary interviews

Individuals may be invited to attend an interview voluntarily to provide information.

Compelled interviews

Under its statutory powers, the FCA can require individuals to attend and answer questions.

The distinction between voluntary and compelled interviews is important because it affects the legal protections available to the individual.

Given the potential implications of statements made during interviews, individuals are strongly advised to seek legal advice before participating in any regulatory interview.

Possible outcomes of an FCA investigation

If the FCA concludes that misconduct has occurred, it may take enforcement action.

The regulator has a broad range of sanctions available, including:

• Financial penalties
• Public censure
• Prohibition orders preventing individuals from working in regulated roles
• Withdrawal of authorisation for firms
• Criminal prosecution in serious cases.

Enforcement decisions are typically announced publicly through FCA notices and press releases.

The impact of an FCA investigation

Being the subject of an FCA investigation can have far-reaching consequences beyond regulatory penalties.

Potential impacts include:

• Significant legal and compliance costs
• Reputational damage
• Disruption to business operations
• Increased regulatory supervision
• Restrictions on regulated activities.

For senior managers and directors, investigations may also raise issues relating to individual accountability under the UK’s regulatory regime.

How to respond to an FCA investigation

If a firm or individual becomes the subject of an FCA investigation, early and strategic engagement is essential.

Key steps may include:

Seeking specialist legal advice

Experienced legal advisers can assist in managing regulatory risk and protecting the interests of individuals and firms.

Preserving documents and evidence

Ensuring relevant records are retained and properly managed is critical during an investigation.

Managing regulatory communications

Responses to FCA information requests should be accurate, carefully reviewed and strategically considered.

Conducting internal reviews

Internal investigations may help identify potential issues and allow organisations to address regulatory concerns proactively.

When to seek legal advice

FCA investigations can be complex and highly technical, involving both regulatory and criminal law considerations.

Specialist legal advice may be necessary where:

• A firm receives a regulatory information request
• An individual is asked to attend an FCA interview
• A skilled person review is imposed
• The FCA indicates potential enforcement action.

Early advice can help manage regulatory risk, protect legal rights and ensure the most effective response to the investigation.

Frequently asked questions about FCA investigations

What is an FCA investigation?
An FCA investigation is a formal inquiry conducted by the Financial Conduct Authority to determine whether a firm or individual has breached financial regulations, engaged in market misconduct or failed to comply with regulatory obligations.

What can trigger an FCA investigation?
Investigations may be triggered by whistleblower reports, suspicious trading activity, consumer complaints, regulatory reporting issues or intelligence shared by other UK or international authorities.

How long do FCA investigations take?
FCA investigations can take several months to several years depending on the complexity of the case, the amount of evidence involved, and whether multiple parties or jurisdictions are affected.

What powers does the FCA have during an investigation?
The FCA has broad statutory powers, including the ability to request documents and information, compel individuals to attend interviews, appoint skilled persons to review firms and in some cases conduct searches under warrant.

What is a Section 165 information request?
A Section 165 request allows the FCA to require firms or individuals to provide documents or information relevant to an investigation under the Financial Services and Markets Act 2000. Recipients must comply within the timeframe specified.

What is a Section 166 skilled person review?
A Section 166 review requires a firm to appoint an independent expert, approved by the FCA, to investigate specific concerns such as governance, compliance systems or financial crime controls.

Can individuals be interviewed by the FCA?
Yes. The FCA may conduct both voluntary and compelled interviews. Compelled interviews require individuals to answer questions under statutory powers.

What are the possible outcomes of an FCA investigation?
Outcomes can include financial penalties, public censure, prohibition orders preventing individuals from working in regulated roles, restrictions on firms or in serious cases criminal prosecution.

Should I seek legal advice if contacted by the FCA?
Yes. If you receive a request for information, are asked to attend an interview or become aware of an FCA investigation, seeking specialist legal advice at an early stage can help protect your rights and manage regulatory risk.

 

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The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please do not hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

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