Symington ended his speech by stating the FCA has no interest in deliberately undermining confidentiality or legal privilege . It is difficult to see how this tallies with his expectation that all of the evidence produced in an internal investigation be shared with the FCA, especially given the recent ruling in the Property Alliance Group case. The fact the ruling was given on the same day as the FCAs speech highlights the gulf between the current law and the attitude of the FCA.
Increased pressure on corporates
The FCAs comments on privilege in internal investigations are in line with the SFOs current stance on the matter. Disclosure of witness accounts appears to be a pre-requisite to qualifying for an invitation to enter into negotiations for a Deferred Prosecution Agreement (DPA). In the Deferred Prosecution Agreements Code of Practice, co-operation is listed as a public interest factor against prosecution (and therefore in favour of a DPA).
“The Code states that considerable weight may be given to a genuinely proactive approach. Cooperation will include identifying relevant witnesses, disclosing their accounts and the documents shown to them. It will further include providing a report in respect of any internal investigation including source documents .
Representatives of the SFO have spoken publicly a number of times on the issue of privilege over documents produced during an internal investigation, but most recently Ben Morgan stated in relation to witness interviews: You had a choice about whether to conduct those interviews in such a way as to create claims to privilege, but also having done so, a choice whether to assert those claims over the factual content. The way you deal with both of these decisions is something we will consider carefully in the context of your cooperation.
The difficulty for bosses is that both the FCA and the SFO are requiring them to take a leap of faith and hand over privileged documents with no assurance that this will improve their prospects of obtaining a satisfactory resolution in the circumstances. An additional challenge is posed for corporates under investigation in both the US and the UK, as privilege restrictions that are respected for a co-operating company in the US might not be respected in the UK. Where the two countries are cooperating in an investigation, this could lead to an end run around the US privilege, as the SFO and FCA can share information derived from their investigation with US counterparts in the DOJ and SEC, if it is deemed in the public interest to do so.
This can pose significant difficulties not only for US companies who rely on stringent protections of privilege, but also for counsel, who may be facing demands from UK authorities for information that ethically they cannot provide.
The FCAs recent comments seem to reflect a general shift by UK regulators towards either challenging or using their positions of power to side-step claims of privilege over source documents in internal investigations. Waiving privilege over such documents is a difficult decision to make, and one that needs to be considered carefully, particularly where an investigation may touch on multiple jurisdictions where privilege protections differ significantly. It is important to seek specialist advice right from the outset of an internal investigation to ensure that privilege rights are preserved and protected, and only waived after a careful and considered analysis of the potential benefits and pitfalls.
As the FCA’s former CEO fell by the wayside in 2015, it has been suggested that the government needs to pause and think long and hard about a decision that will have a profound impact on the world of finance in the coming decade remembering to marry regulation with innovation.
Jonathan Pickworth is partner and white collar crime expert from global law firm White & Case.