/>iFollowing a two-part consultation, which began in February 2024 (i.e., CP 24/2 and CP 24/2: Part 2) and was accompanied by a Policy Statement (PS25/5) setting out the UK Financial Conduct Authority’s (FCA) consultation response, the FCA has revised its Enforcement Guide (now referred to in the FCA Handbook as ENFG).
This is of particular interest to all firms that are regulated by the FCA and individuals working within such firms, consumers and investor groups, industry groups, trade bodies, advisers, experts and commentators.
Key Takeaways
A Revised Policy on Publicising Investigations
In acknowledging the widespread concern and significant criticism during the previous consultation, the FCA has abandoned its proposal to name regulated firms under investigation based on a wide and subjective “public interest” test. This is near to a complete reversal of the FCA’s proposed policy first announced in the FCA’s letter to the Treasury Select Committee in March 2025.
However, the FCA’s ENFG continues to enforce the pre-existing “exceptional circumstance test”, albeit with three new limited circumstances in which investigations may be announced. This will enable the FCA to:
Announce and Name the Subjects of Investigations
The FCA will only announce the name of subjects of ongoing investigations into suspected unauthorised activity or criminal offences related to unregulated activity if the FCA considers an announcement desirable to warn or alert consumers or investors, or to help the investigation itself, for instance, by bringing forward witnesses.
Reactively Confirm the Subject and Nature of an Investigation
ENFG gives the FCA the ability to confirm the actions the FCA is taking if the investigation has become part of the public domain due to an associated firm or a regulatory, government or public body making the investigation public.
Anonymised Announcements
The FCA will consider making public that it is investigating a particular matter without naming or otherwise identifying the subject of the investigation where it is desirable for the purpose of educating people as to the types of conduct the FCA is investigating or to encourage firms to comply with the rules or other requirements set by the FCA.
The Impact
In practice, these publicity policy changes will directly affect only firms engaging in unauthorised activity, as unauthorised firms or authorised firms carrying out unauthorised business may now find themselves in the headlines when investigated.
A wider impact is likely to be an increase in anonymised investigation announcements designed to serve as a deterrent or for educational purpose. It will be important for firms and individuals to pay close attention to these announcements and record any assessments and consequential changes.
Accepting Reports on a Limited Waiver Basis
The ENFG seeks to clarify (rather than amend) the FCA’s approach to legally privileged materials disclosed by firms. The FCA will accept disclosure on a limited waiver basis.
However, the FCA will not:
- Agree the fact or extent to which they are legally privileged, or
- Accept any condition or stipulation that purports to restrict the FCA’s ability to use the information in exercising its statutory functions (e.g., a requirement that the report be used only for the purposes of supervision and not enforcement).
The Impact
Whilst the FCA states specifically there is no obligation to share legally privileged material with the FCA and that it does not consider that the ENFG undermines a firm’s ability to resist disclosure of a report to a third party, the FCA’s approach will almost inevitably lead to increased pressure on firms to disclose such materials to the FCA.
It should be noted that the FCA has statutory restrictions on the disclosure of confidential information, which if breached, constitutes a criminal offence. These restrictions will continue to be in place.
Discretion to Prevent Lawyers Attending Compelling Interviews
Despite the respondents to the two-part consultation pushing back on this amendment to the policy, the FCA has decided that it will seek to exercise what it believes is its discretion to refuse permission where the FCA determines that a legal adviser’s attendance may create a potential conflict of interest or otherwise prejudice any FCA investigation. It is clear from the ENFG that one of the situations the FCA has in mind is where the lawyer owes a duty of disclosure to another person (e.g., an interviewee’s employer). The FCA has further clarified that the determination as to whether such concerns arise rests solely with the FCA. However, the policy statement suggests this use of discretion by the FCA will be a rare occurrence.
The Impact
The FCA is seeking to regularise what it considers to be its existing approach—the regulator has increasingly pushed back on joint legal advisers’ attendance at interviews. This has resulted in many firms being accustomed to providing for employees to have independent legal counsel ahead of compelled interviews and making appropriate arrangements for joint or common-interest privilege. However, there is potential for significant conflict between the FCA and legal representatives given that legal advisers have their own professional duties to manage conflicts of interest.
Optional Scoping Meetings and Additional Decision-Makers
Scoping meetings will now be subject to a case-by-case assessment. These initial meetings have sometimes offered a valuable opportunity to ask questions, clarify points and address the areas of the upcoming investigation. However, over time, they have become less useful given the inability or unwillingness of FCA enforcement teams to provide any such answers or additional information. The FCA’s intention appears to be to always have a scoping meeting where the subject requests or indicates they would like to have one. However, the FCA has stated that it will remain flexible when firms who have already had extensive discussions with the FCA do not wish to have a scoping meeting.
Further, the FCA has expanded which senior personnel can decide on whether to start civil and criminal enforcement proceedings. Whilst previously limited to executive directors, now directors in enforcement will also have that power.
The Impact
The flexible approach to scoping meetings and the extension of powers to directors in enforcement is hopefully an indication that the FCA has listened to the long-standing criticism of its approach to those subject to investigation and the speed of its decision-making.
No More Private Warnings, Preliminary Investigation Reports or Preliminary Findings Letters
The FCA has deleted previous references included in the original Enforcement Guide (EG), the precursor to ENFG, to private warnings and confirmed that, having not used them for some time, they will not be used as an enforcement tool in the future. Instead, the FCA will raise the issues with the firm or individual in direct communications.
The FCA stated that it has trimmed over 250 pages from the EG in the process, removing content that was duplicative or outdated.
The Impact
The removal of private warnings demonstrates the FCA’s preference for formal enforcement outcomes as a means of deterrence. This can be further evidenced by the fact that the FCA has confirmed that it now has fewer open investigations, with the number having fallen by over 35% since April 2023, and investigations are reaching outcomes more quickly, according to the FCA’s data. This appears to be a double-edged sword for firms in that they are less likely to be investigated but more likely to face an outcome if they are (with increased public attention).
Conclusion
Whilst the FCA states that it is committed to transparency, it is questionable how impactful the new ENFG will be given that many if the changes appear to simply be a reflection of either powers the FCA already had (but weren’t necessarily using) or the approach it has already been taking. We can only wait and see if any of the changes made have a material impact on those who find themselves under scrutiny by FCA enforcement.
