FCA moves to ease bankers’ home visit fears after lawyers slam ‘drastic’ threat

The Financial Conduct Authority has confirmed that inspections of City workers’ home offices will be a rare occurrence, after Financial News reported that City bosses had called lawyers over the watchdog’s latest guidance on the matter. 

The FCA asked City bosses how they intended to communicate with staff “that FCA visits could take place in their homes” in an 11 October note which also asked finance executives to demonstrate how a pandemic-era shift in working patterns would not damage the market, increase financial crime, or harm customers.

The threat of unsolicited home visits from the FCA caused widespread “consternation” and worry amongst financial services workers, FN reported earlier today. Emma Sutcliffe, a partner within the contentious regulatory, crime and competition group of law firm Simmons and Simmons said she had had “at least several inquiries a day” since the memo’s publication and was not the only lawyer in her firm dealing with queries on it. 

Rob Moulton, the global co-chair of law firm Latham & Watkins’ financial institutions group and financial regulatory practice said he had also received queries from financial services clients. The FCA note was “saying things that are quite drastic,” he told FN. “We’ve got a couple of questions,” he added.

A spokesperson for the regulator subsequently told FN that despite its recent guidance, the FCA anticipated that “the vast majority of face-to-face meetings with authorised firms will take place at firms’ office premises or the FCA’s offices in Stratford or Edinburgh”.

“We consider all of the relevant circumstances in deciding which of our powers are most appropriate to use,” the spokesperson said. “Visits to residential properties would only be conducted where necessary and proportionate, and be either done with consent or in full compliance with our powers and the law”.

READ  Bosses call lawyers over FCA’s ‘drastic’ threat to visit bankers’ homes

A person familiar with the matter said the rules allowing FCA home visits had not changed; the regulator can conduct searches of business’ and individuals’ premises under warrant and in the presence of a police officer. Such activity is typically carried out in the early hours of the morning, and is designed to capture as much potential evidence as possible. But it has also always been rare.

The FCA, which regulates the conduct of around 60,000 financial services businesses in the UK, carried out 25 so-called dawn raids in 2018, eight in 2019, and three in the first six months of 2020, according to a Freedom of Information Act requests posted to the watchdog’s website.

The watchdog’s reassurances will be welcome news for City firms starting to tentatively put in place their hybrid working plans, where employees would spend at least some of their time in the office and the rest of the time at home, after many months of enforced home-working. 

The FCA’s 11 October note said that firms that want to introduce hybrid working arrangements permanently could have their plans vetted by the regulator. These plans will also need to be “reviewed periodically to identify new risks,” the watchdog added. 

City firms need to demonstrate that they are complying with rules on recording calls, surveilling trades and keeping records while staff work from home, and must also show that they have “considered any data, cyber and security risks, particularly as staff may transport confidential material and laptops more frequently in a hybrid arrangement,” the FCA said.  

FN reported in July that the FCA had found examples of possible insider dealing in 21.9% of the activity it monitored in 2020, up from 17.5% in the previous year.

It followed warnings from Mark Steward, the FCA’s executive director of enforcement and market oversight, that there had been a dramatic increase in online scams and fraud during the pandemic as people spent more time online. 

To contact the author of this story with feedback or news, email Lucy McNulty

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