Business Law & Compliance

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How should companies respond to increasing aggression shown by FCA and SFO?

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This echoes the stance currently taken by the Serious Fraud Office (SFO), and highlights the difficulty bosses face in attempting to balance protecting their right to assert privilege against achieving the best outcome possible when liaising with the FCA or SFO in relation to alleged wrongdoing.

By contrast, the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) in the US have policies prohibiting authorities from even making requests for waivers of privilege except in extraordinary circumstances, and cooperation credit cannot depend upon any privilege waiver or lack thereof. In the UK, communications and/or documents produced during the course of an internal investigation can be protected by one or more of two types of privilege: Legal Advice Privilege and Litigation Privilege.

Legal Advice Privilege

This covers communications between lawyers and clients for the purpose of giving or obtaining legal advice and documents created by lawyers during the course of giving legal advice although not actually delivered to the client. Only those employees actually charged with responsibility for instructing the lawyers are considered to be the “client” for purposes of legal advice privilege. 

On the same day as the FCA’s comments on privilege, the High Court of England and Wales confirmed in the Property Alliance Group case that, for the purpose of legal advice privilege, legal advice can also include factual briefings where these are given in a relevant legal context. It was noted “that public interest will be advanced if the regulators can deal with experienced lawyers who can accurately advise their clients how to respond and cooperate. 

Read more about the FCA:

“Such lawyers must be able to give their client candid factual briefings as well as legal advice, secure in the knowledge that any such communications and any record of their discussions and the decisions taken will not subsequently be disclosed without the client’s consent.” The case related to the disclosure of documents prepared during the course of an FCA investigation.

Litigation Privilege 

This covers (i) confidential communications between either the lawyer or the client and a third party, or (ii) confidential documents created by or on behalf of the lawyer or his client. These communications or documents must be made for the sole or dominant purpose of litigation, where litigation is pending, existing, or reasonably contemplated. Legal teams acting for corporates conducting an internal investigation will generally take the view that interview notes, investigation reports and other types of “source” material are protected by one or both of the above types of privilege.

The FCA’s recent comments on privilege 

In its speech in November, Jamie Symington of the FCA stated his disapproval: “How an investigation is carried out and recorded can impact on whether the output, or parts of it, are amenable to claims of privileged. If the output of a report and supporting evidence are not available to the FCA, it devalues the usefulness of the whole exercise. This might require the FCA to undertake additional enquiries. So, we expect to agree in early discussions what will be provided to us. If not, firms are missing an opportunity to gain the full benefits.” 

He continued: “A practice we sometimes see is for the investigation to produce only lawyers’ notes of interviews. No recordings, no notes by others including the interviewee. Then firms will sometimes argue that notes of the interview are privileged. This sort of approach looks to us like a ‘gaming’ of the process in order to shroud the output of an investigation in privilege. Similarly, it has sometimes been suggested to us that firms would like to read aloud the output from investigations to us in a meeting, rather than to commit material into document form. It seems to me that this is an absurd way to suggest that public authority should operate. Let me be clear: we expect firms to share the core product of investigation with us.” 

Read on to mind out what the impact will be on UK companies under investigation in the US.

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