How to survive a regulatory interview

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Summary: I spent a year on secondment with the FCA's Enforcement and Market Oversight Division, working as an investigator on FCA and PRA investigations into both firms and individuals. Having carried out regulatory interviews myself, I’m able to share some expert advice on getting through the interview process with minimal stress.

Daunting, pressurised and time-consuming are just some of the words that are used to describe regulatory interviews.

After spending a year working on the front line of FCA and PRA investigations, I’m able to share some insider tips on how you can not only survive an interview, but perform to the best of your abilities.

In today’s aggressive regulatory climate, with the focus squarely on individual accountability, being summoned to attend an interview with FCA enforcement is far more common than it once was and the stakes are higher than ever. It's not something anyone would look forward to, but as long as you're well prepared, there's no reason to dread an interview with the regulator.

What is the purpose of a FCA / PRA regulatory interview?

The FCA and PRA use interviews as a crucial part of the evidence-gathering process for their civil enforcement regimes. Before commencing interviews the regulator will have outlined the scope of the investigation and will often have obtained large volumes of relevant documentation. They will then begin to work their way through a carefully selected list of interviewees.

Given the regulators' increasing focus on individual accountability, your performance could be decisive in whether enforcement proceedings are brought against you personally, your colleagues or your employer. It is an important opportunity to tell your side of the story.

What powers do the regulators have?

Almost all interviews are carried out on a compelled basis using the regulators’ extensive statutory investigation powers under FSMA. As a result, there are serious consequences for failing to co-operate with the regulators. You could be charged with contempt of court for failing to attend or failing to answer questions during the interview, which is punishable by imprisonment, a fine, or both. Providing deliberately false or misleading information is also a criminal offence. A failure to be open and co-operate could also result in civil proceedings against an individual (pursuant to APER 4) or the firm (pursuant to the FCA’s Principle 11 and/or PRA Fundamental Rule 7).

Preparing for a regulatory interview: how to be at your best

Consider taking independent legal advice as soon as you receive notice of the interview. The cost of such advice may be covered by your employer or by Directors and Officers Liability (D&O) insurance (note that you may need to notify your insurer). As your legal advisor will tell you, careful preparation is the key to confident regulatory interview performance.

You can expect to receive advanced disclosure of the documents to be discussed during the interview a week or two before it is due to take place. Go over these thoroughly, reminding yourself of the circumstances of each document/communication, why particular decisions were made and what systems and controls were in place to mitigate against any risks. Try to anticipate what the regulators will ask and prepare accordingly, but avoid scripting your answers. For example, if the scope of the investigation is focussed on alleged weaknesses in systems and controls, be ready to explain your understanding of company policies and procedures.

Interviews can last anything from a few hours to a few days; it can feel like an endurance event. As a result, basic things can make a big difference to interview performance. In particular, a good night’s sleep and eating well on the day are important in order to maintain concentration levels.

During a regulatory interview

Typically there are three interviewers who, in my experience, are courteous and professional: this is a fact-finding exercise, not an interrogation.  They will be armed with a pre-prepared interview plan consisting of a scripted list of questions, including an order for taking you through the pre-disclosed documents. The interview will be recorded and any evidence you give could be used in future regulatory proceedings.

Listen to the questions carefully. Take your time to think before answering and don’t be afraid to ask for clarification or say you don’t know the answer. If you are unable to give a full answer on the spot then explain the reasons why. For example, if you need to review a document which you do not have with you. It is likely that the investigators will be asking about a single moment in the past, so try to focus on what you knew and thought at the time, rather than answering with the benefit of hindsight. Try to avoid speculating in your answers as it can easily be confused with actual knowledge of the facts. If invited to speculate, start your answer by saying that it is not based on actual knowledge. When you finish giving your answer, stop speaking. Don’t feel the need to fill the silence at that point as you may provide irrelevant or, worse still, unhelpful evidence.

Perhaps the best advice I can give is to remain calm and polite. Maybe that sounds obvious, but it’s surprising how many seasoned professionals get defensive or rattled under interview conditions. Building a professional rapport with the investigators based on openness and co-operation is likely to help you in the long run. Remember that flippant comments or throwaway remarks will be recorded and could be used against you in a Final Notice, so be careful.

Keep in mind that the regulator is not looking for perfection and understands that things can go wrong and that mistakes happen. It is likely that they will be focussing on whether reasonable steps were taken in specific circumstances. This is your side of the story, so explain any relevant factors such as difficult market conditions, any lack of resource and don't be afraid to highlight positive aspects of your performance even when the end result may have been far from ideal.

Finally, it’s surprising how tiring interviews can be, so make sure you stay sharp by taking advantage of the regular breaks and a full lunch hour.

Legal advice during a regulatory interview

The regulator will allow you to have a legal advisor during the interview, whether this is your personal independent legal advisor or in-house resource. Often independent legal advice will be preferable, particularly as a conflict may arise between the position of the individual being interviewed and the firm. This is often the case when the individual is under personal investigation.

Your legal advisor is there to protect your interests and you should consult with them whenever you need to during the interview. The regulator will not hold this against you. If you are shown a document you have not seen previously (which is not uncommon), always ask for time to look at it with your legal advisor before giving a response.

After a regulatory interview

At the end of the interview you will be given a recording and sent a written transcript four to six weeks later. Typographical errors could change the meaning of the record, so identify and correct them.  If you think information is missing or unclear in the transcript, or you forgot to make an important point, don’t worry, this is easily done in the pressurised environment of the interview. Your legal advisor can help you write a statement to submit to the regulator in order to supplement the transcript.

My Top Five Do’s and Don’ts

  1. Take independent legal advice straight away (and notify D&O insurers if necessary)
  2. Prepare by going over documents carefully and try to recall past events in detail
  3. Anticipate questions and have confident answers
  4. Stay calm and polite in the interview
  5. Listen to the question and take your time before answering

Don'ts

  1. Be defensive or aggressive
  2. Speculate, without stating that your view isn’t based on actual knowledge
  3. Make jokes or flippant comments
  4. Imagine the regulators expect perfection
  5. Underestimate fatigue – ensure you take regular breaks

Report: How should you respond to developments in financial regulation this year?

Our team of financial regulation experts have produced a comprehensive report examining the key developments this year.

• Includes over 30 practical articles and a calendar setting out the key dates for your diary.

• Key topics covered include MiFID II, SMCR / SIMR, cyber risk and how to survive a regulatory interview.

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