FCA investigation and prosecutions
The Financial Services and Markets Act 2000 (FSMA) provides the statutory authority for the regulation of financial services in the United Kingdom. It now provides the remit for the regulation of financial services to be divided between two regulators, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). The FCA has strategic and operational objectives which include consumer protection, preserving integrity and creating efficiency and effective competition. It is responsible for upholding the regulatory principles in the Act and also preventing financial crime. It acts as both a regulator and, if necessary, a prosecutor. The PRA has a different rule which is to effectively police the financial safety of major institutions by monitoring capital and liquidity.
FSMA regulates activity in financial services which include: advising on investments, dealing in securities, advising on mortgages, insurance policies, banking, commodities and collective investment schemes. It is a criminal offence to carry on regulated activity without authorisation or exemption. Agreements made in breach of the prohibition are unenforceable. The question of whether activity is regulated, and where exemptions apply, is governed both by FSMA itself and also the Financial Services and Markets Act 2000 (Regulated Activities Order) 2001 [RAO].
FSMA also prohibits the promotion of investment activity without authorisation or approval. Financial promotion includes certain invitations and communications made to investors. Again, it is a criminal offence to breach the restriction on financial promotion. Agreements made as a result of unlawful communications are also unenforceable. The FSMA 2000 (Financial Promotion Order) 2005 provides for a number of very specific exemptions including rules regarding high net worth and sophisticated investors.
The FCA remit to preserve integrity means the regulation of market conduct which can lead to enforcement against individuals and firms, criminal and civil penalties. ‘Market abuse’ is defined in section 118 FSMA 2000 which includes insider dealing and market manipulation. Insider dealing itself is a criminal offence under Criminal Justice Act 1993.There are further offences relating to misleading statements under Financial Services Act 2012.
What can we do for you?
- Provide advice and representation for individuals being investigated or prosecuted for offences under FSMA
- Advise on what constitutes regulated activity (including, for example, collective investment schemes)
- Advise on the application of defences to allegations of breaching the general prohibition
- Advise on what constitutes financial promotion by giving effective guidance about interpreting the FPO
- Advise on the application of defences to allegations of breaching the restriction on financial promotion
- Correspond with the FCA where it has raised issues about ‘regulated activity’ and/or ‘financial promotion’
- Advise on the enforceability of contracts
- Advise on the application of market abuse principles and applicable defences
- Provide advice and representation for individuals and businesses which are subject to proceedings in the High Court including applications for injunctive relief and winding up
- Assist with the navigation of the FCA handbook and perimeter guidance [PERG]