FCA increasingly targeting corporate wrongdoing in its investigations, according to latest figures

Figures obtained by Pinsent Masons, the law firm behind Out-Law.com, suggested that the FCA was shifting its focus away from individuals and towards corporate wrongdoing, according to financial enforcement expert Michael Ruck. The number of investigations opened into individuals rose by 11%, from 54 to 60, over 2014; while those opened into firms rose by 36%, from 36 to 49, according to the figures.

"Given the FCA's increased focus on regulatory and criminal investigations, it's not surprising that the number of investigations have increased over the last year," said Ruck. "What is surprising is that the number of individual investigations opened has declined overall in comparison with the number opened during the final years of its predecessor, the FSA. This is particularly striking given the FCA's rhetoric around taking action against those individuals responsible for misconduct, suggesting that the focus is now more targeted, focussing on a smaller group of senior individuals in addition to organisations."

"As with any new organisation it takes time to find your feet, identify priorities and take action. Although the number of investigations isn't as high as one might have expected, this is tempered by the indication that disciplinary action is being taken against almost all of those individuals placed under investigation. The FCA has made great strides when it comes to identifying individuals guilty of wrongdoing and now has financial institutions in its sights at an organisational and senior management level," he said.

According to the figures, the number of investigations opened into individuals has dropped by 31% since the last year of the Financial Service Authority (FSA), which opened 87 investigations into individuals in 2012. However, the number of investigations opened into firms has recovered to pre-FCA levels, at 49 investigations against 47 in 2012.

The number of regulatory investigations that closed without a public outcome has doubled in the last three years, rising from seven in 2012 to 14 last year, according to the figures. Michael Ruck said that although this would "raise eyebrows" amongst the public, the increase reflected both the rise in the number of these investigations and the "increasing sophistication" of firms' compliance processes.

The FCA can take a number of actions against firms that it finds to have breached regulatory requirements that are not publicised, including sending private warnings to individuals and ordering firms to stop selling certain products. Investigations can also be closed when the regulator finds no evidence of wrongdoing. The FCA also has stronger remedies available to it than its predecessor including the power to bring criminal prosecutions, to fine firms or individuals and to ban individuals from practice and withdraw permission to conduct regulated business from firms.

"Investigations can be hugely disruptive for both businesses and individuals: they can lead to huge reputational damage and loss of clients so the FCA's approach of 'shoot first, ask questions later' needs to be used with caution," said Michael Ruck. "This is something it appears to have taken under advisement more recently."

"It is in everyone's best interest that firms work towards a culture of compliance as the consequences of non-compliance can be career-ending. However, if the FCA's enforcement team comes knocking at a firm or individual's door it is vital that they understand their own regulatory requirements and the extensive powers of the investigation team," he said.