FCA enforcement interviews: Tips and best practice

The Financial Conduct Authority (FCA) conducts three forms of enforcement interview: the compelled interview, the purely voluntary interview and the cautioned interview. The type of interview that is conducted will depend on the status of the person being interviewed and the nature of the investigation to which it relates. Whether the interviewee has to attend or answer the questions posed depends on the type of interview.

Compelled interviews

This is the most common interview conducted by the FCA. It involves the regulator exercising a statutory power provided by the Financial Services and Markets Act 2000 (FSMA) to compel the interviewee both to attend the interview and to answer questions.

The compelled interview is generally used to interview:

• suspects in regulatory investigations; and/or
• witnesses who are professionals, or who work for regulated firms, or who are approved persons.

The compelled interview is almost never used in respect of suspects in criminal or market abuse investigations, as s 174 FSMA means that the answers given in this form of interview cannot be used against the interviewee in criminal or market abuse proceedings, save for the exception below.

There are serious consequences for failing to answer questions or giving incorrect answers in a compelled interview. Under s 177 FSMA, failure to comply with a requirement to attend and answer questions without reasonable excuse, or giving information that is false or misleading, either knowingly or recklessly, may lead to an individual being dealt with as though they were in contempt of court and could result in imprisonment.

In 2015, the FCA successfully prosecuted Daniel Forsyth for providing false information to the Financial Services Authority (FSA) in a compelled interview, contrary to s 177 FSMA. He received a custodial sentence of 15 months. In addition to s 177, failure to comply with a requirement to attend and answer questions, or an attempt to mislead the FCA in interview, could result in disciplinary action for a breach of Statement of Principle 4 for Approved Persons.

Purely voluntary interviews

Interviews with nearly all other witnesses or victims are conducted on a purely voluntary basis. The witness does not have to attend the interview, nor do they have to answer the questions asked.

Some witnesses who are approached for a purely voluntary interview prefer to be compelled to attend and answer questions. Normally this is because they have professional obligations that the “compelling” can override (such as client confidentiality obligations), or else they wish to assist but want to inform their employer, for example, that they had no choice but to attend and answer all questions.

Interviews under caution: criminal

Interviews with suspects in criminal investigations are conducted under Police and Criminal Evidence Act (PACE) caution. They are conducted either:

• after arrest (normally at the same time as a warrant is executed to search premises); or
• on a “voluntary” basis – the interviewee is “invited” to attend.

If you are arrested you will be taken to a police station and be entitled to free legal advice for the interview.

If you are invited to attend a PACE interview on a voluntary basis, you do not have to attend. Failure to do so may, however, result in you being arrested to secure your attendance at interview. You are generally not entitled to legal aid to assist with your representation. There has been a notable trend recently of the FCA asking individuals who are being investigated for criminal offences to “volunteer” their attendance for a PACE interview at any early stage of the investigation. This is often coupled with an invitation to provide the regulator with documents on a voluntary basis. It is essential that individuals understand that the use of the word “voluntary” does not mean the offence is somehow not that serious. The interview that you will be attending is still in relation to a criminal offence: one that can carry a custodial sentence.

Whether you are asked to “volunteer” or are arrested, you are under no obligation to answer questions during this interview: you have a qualified right to silence. If, however, you are subsequently charged after remaining silent in interview there is a danger that the court hearing your case at a later date may draw adverse inferences from your decision not to advance your defence at interview.

Deciding whether to attend such an interview and also whether to answer questions is a critical decision and one where a legal adviser can provide invaluable assistance.

Interviews under caution: market abuse

Interviews with suspects in market abuse cases are conducted on a voluntary basis with a market abuse caution. You do not have to attend and cannot be arrested for failing to do so.

As with the PACE cautioned interview, there is no obligation to answer questions and there is a qualified right to silence.

Practical tips for those facing an interview

Get legal advice

If you are asked or compelled to attend an FCA interview, either as a suspect or a witness, you should consider seeking legal advice. Although you are unlikely to receive legal aid (if you are arrested and dealt with at the police station the legal aid scheme will provide for you to have a solicitor to give you legal advice for that interview), it may be that you are covered by insurance or that your employer will be prepared to cover the costs of your legal advice and representation.

Informed legal advice will allow you to prepare properly and therefore to perform at your best in an FCA interview. It will also help you to make decisions, for example, whether to attend or answer questions if not compelled to do so, or whether to ask for a compelled interview rather than a voluntary one.

A legal representative in attendance at an interview will be looking out for your interests, will provide continuing legal advice, and will ensure the interviewers act appropriately and do not stray outside of the remit of the interview.

Preparation

The FCA will nearly always provide pre-interview disclosure in advance of any interview it carries out. This is normally provided at least two weeks in advance of the interview (unless you are arrested and then interviewed ). It is essential to take plenty of time to read all of the material properly. Surprisingly, some of the most professional and senior individuals still fail to do this and are then left floundering in the interview.

Remember that the FCA has chosen the selection of documents provided to you in the pre-interview disclosure extremely carefully. The items you receive will be essential to its investigation. Do not just flick through the pages; study each item carefully. Whether it is an email you sent or were cc-d on, a phone call you made or a document you authored or to which you had access, ask yourself, “What is it about this that makes the FCA interested in it? Why are they asking me about it?”

Often your interview will be concerned with events that occurred some considerable time ago. Do your research. For example, if you are facing an insider dealing investigation and are provided with a list of telephone calls from your mobile, take your time to check who those numbers belong to. Think what other telephonic devices you had access to at the time. If “x” is ringing you repeatedly about something, check your diary or emails (if you have access to them) to try to remember what the calls may have been about. You will not necessarily decide to share that information with the FCA, but forewarned is forearmed.

In respect of email chains, do not rely solely on the last email of the chain. Read each individual email in a chain carefully. Try to remember where you were and what you were thinking when you wrote it. Ask yourself, “Does this represent fully what happened?”

If you are acting as a witness in a systems and controls failings case, acquaint yourself with the relevant policies, procedures and reporting lines.

The day/night before

It is entirely normal to be nervous both in advance of, and on attending, the interview. Make sure you know exactly where, and at what time, the interview is taking place. Plan your route in advance and ensure it includes plenty of time for unexpected contingencies. If you have a legal adviser make sure you have a means to contact them on the day in case you run into any problems on the way. Try to relax the night before and get a good night’s sleep. Do not turn up with a hangover or wearing last night’s clothes.

The interview

Talk clearly from the outset. Try not to be defensive, confrontational, obstructive or sarcastic. Also, do not try to be humorous. Remember, the interview is being recorded and a transcript will be drawn up after the event. You do not want to find any dismissive or glib remarks that were made in the heat of the interview quoted back at you during any subsequent proceedings, or used to justify decisions made by the regulator.

The interviewers will not necessarily deal with the documents in the order that they are in the file, so do not be surprised if the first document to which you are referred is not the one behind Tab 1. You will normally be referred to the specific document and asked to read it either in full, or be taken to a particular section of it. Take your time. It is not a race and no adverse inference will be drawn if you choose to take your time to re-familiarise yourself with a document.

Similarly, take time to gather your thoughts before answering any questions. A slight pause before replying is entirely permissible.

Do not lie or give false or misleading answers.  For compelled interviews remember s177 FSMA (see above).

Do not presume that what you say will be taken at face value.  Have in mind that the version of events you give will normally be checked by the FCA.  They may have withheld documents from you in the pre-interview disclosure to allow them to test the veracity of your account and/or make further enquiries, either after or indeed during the interview to substantiate what you have said.   In a recent interview I was present at, the interview team clearly reported back to the case team in the lunch break as to what my client had said.  Part way through the afternoon session, further documents were delivered to them which they then put to my client.

If documents you have not seen as part of the pre-interview disclosure are provided to you in the interview, the FCA will expect you to ask for time to look at them.  Do not be afraid to do so.  The interviewers will stop the recording and allow you as much time as is necessary for you to review the new material.

On the issue of breaks, the general FCA protocol is to split the interview into sections of 45 minutes to an hour, and to take a short break of 10 – 15 minutes between each section.  At lunch there will be a proper lunch break.  If at any time during the interview you need a break, ask for one.  The interviewers are normally very accommodating in respect of this.  If you have a legal adviser present you are entitled to stop the interview at any point to receive legal advice.  With this in mind, if your legal representative suggests to you that you may like to take a break, agree with them and tell the interviewer you want a break. Do not ignore the representative and plough on. You are being asked because your lawyer wants to discuss something with you, or can sense that you need a break. Trust them.

You should do your best to answer the questions asked, but if you are unable to do so, tell the interviewer and explain the reasons why you cannot.  Do not expect the question to be abandoned however.  The interviewer will undoubtedly try to drill down into the surrounding circumstances.  Do not just snap back that you do not know – consider what you are being asked. Similarly, if you do not understand the question, tell the interviewer who posed it that you are uncertain as to what they are asking.  They will normally try and rephrase it.  It is better to ask and then answer correctly, rather than to hazard a reply which is incorrect or gives information that was not requested.

Do not speculate and try not to be drawn into speculating.  You should only be asked about matters or events that are within your knowledge.  If you are drawn into speculating, make it clear that you do not have actual knowledge of the matter.

This article was originally published in Thomson Reuters Accelus.