FCA demands that Firms “Avoid Inadvertent Tipping Off”
16th September 2020 by Brielle Hewitt
The FCA’s latest Marketwatch 65 sets out what it required from a Firm when they are subject to a Regulatory information request or investigation.
The primary focus from the Regulator is that the actions taken by the firm do not prevent or affect the regulatory process.
The situation the FCA requires that firms avoid is the risk of “tipping off” individuals to a Regulatory investigation who may then be able to destroy evidence or resign to avoid sanction.
For example, if a Firm has bad IT hygiene and the compliance team are forced to ask for assistance in order to obtain electronic communications records. Either because they don’t have dedicated regulatory archives or an understanding of their existing IT systems, The Regulator requires that the Compliance staff seek guidance from the FCA before asking other internal departments for assistance.
If they do not the FCA will assess the firm to have been guilty of “inappropriate handling of information requirements” and regard these actions as “…hindering, or even compromising, the FCA in their reviews of, and investigations into, suspected market abuse”.
By implication, the best way for a Compliance department to manage any FCA requests or investigations is to have direct access to a dedicated regulatory archive that contains all electronic communications for all employees.
Following this best practice approach will allow compliance teams access to the information they require directly rather than through the filter of the IT department or other department, for example, line managers such as the Head of Trading.
The FCA set out the consequences if you do not follow the confidentiality requirements of their requests which include running the risk of regulatory scrutiny or action and reputational damage.
With potentially hefty jail sentences for those involved, inadvertently embroiling the Head of IT or the Head of Trading in a “tipping off” case is not something for which the compliance team will be thanked for. A robust supervision and monitoring process with a dedicated Regulatory Archive would have prevented such a situation.
Our Fingerprint Platform is unique in that it is designed for the Compliance department to undertake investigation and supervision without recourse to the IT department. This means that the Compliance department are at no danger of tipping off the individual under investigation as they are self-reliant in the ability to undertake the necessary investigation.
The Fingerprint Platform captures the communications data separately from the corporate/IT backup and archive system so that the risk of inadvertent data loss or destruction is mitigated. Compliance is then in control of the Archive and can persist data specifically for the Regulator.
Having information at the fingertips of your Compliance department with a robust workflow for investigations and discovery demonstrates that you take your obligations to the FCA seriously.
For more information on how we can solve your “Tipping Off” problem, please write to us at firstname.lastname@example.org