#15715 - Regulatory Disputes - Advanced Commercial Litigation

Advanced Commercial Litigation

Regulatory Disputes

Reporting to the FCA

Firms have an obligation to report in Principle 11 FCA Principles of Business and SUP 15.3. Additionally individuals have an obligation to disclose under Principle 4.

After the report has been disclosed the firm should:

• Contact their customers and make them aware of the report and disclosure under Principle 6

• The firm must also take steps to stop any breaches and deal with any underlying problems

• Employees may also need to be suspended and be investigated

• The firms should be careful about document creation and destruction (be careful of s.177 FSMA)

• Insurers should be notified

FCA Powers

Sanctions

If the investigate then the following sanctions can be imposed:

1. Fines - the amount is unpredictable although can be reduced if they reach a settlement at an early stage, up to 30% off is available

2. Restitution Orders - made by the firm to pay back the money lost

3. Injunctions - preventing acts or omissions of the firm or individuals

4. Insolvency proceedings

5. Revoke authority - the firm and individual’s authority to carry out regulated activities

6. Criminal prosecutions

Third Party Claims

Firms may face claims under s.138D FSMA which allows those who have suffered loss as a result of an unauthorised person to make a claim.

Claims can be made by third parties such as employees and customers (such as breach of contract, misrepresentation and negligence). Claims can also be referred to the Financial Ombudsman.

Publicity

Under s.391(1) FSMA the FCA can freely print information about a warning notice as long as the firm has been consulted. In relation to Decision and Final Notices the FCA must publish information that it considers appropriate (s.391(4) FSMA).

However, the FCA cannot publish information that would be unfair, prejudicial to consumers or detrimental to the financial system in the UK (s.391(6) FMSA).

Privilege & the FCA

FCA

If the FCA is applying for documents then apply the rules under s.413 FSMA in which firms are not required to disclose ‘protected documents’ that fall into the following definition:

• Communications between a lawyer and their client (or a third person) - s.413(2)(a)-(b)

• In connection with legal advice or legal proceedings - s.413(3)(a)-(b)

Common Law Rules

If a party to litigation is applying for disclosure of documents then apply the common law privilege rules: litigation privilege, legal advice privilege, without prejudice privilege and common interest privilege.

FCA & Judicial Review

The FCA is amenable to judicial review, however judicial review is a remedy of last resort and should only be used when the comprehensive statutory scheme provided by FSMA has been exhausted or if it is inappropriate.

The court may not grant permission to pursue a judicial review case if the decision would not be different even if the correct procedures or formalities have been complied with.

CMA ‘Dawn Raids’

A ‘dawn raid’ is where the CMA (and/or EC) enters business premises to gather information for their investigations. They can exercise their powers under the following provisions:

• s.27 CA: the CMA has the power to enter premises but is not allowed to search the property. However, they can request documents, take copies etc.

• s.28 CA: the CMA has the power to enter premises and search WITH A WARRANT. In doing this they can use reasonable force and can take originals documents away, take copies of documents and search the premises.

Failing to comply with the CMA’s requests can lead to criminal sanctions if someone intentionally obstructs the investigation.

CMA Investigations

When the CMA are investigating then documents can be withheld from the CMA under s.30 CA and s.65A CA which covers the usual common law privilege.

European Commission Investigations

If the EC is conducting an investigation (on their own or with the assistance of the CMA) then certain documents (i.e. those which are between lawyers and the client and...