Asserting privilege in FSA Investigations

Organisations subject to an FSA investigation are often nervous about refusing to provide privileged information to the regulator as they do not wish to be seen as uncooperative. The judge in the first successful judicial review of FSA brought by Keydata executives, however, confirmed the right to assert privilege and importantly, highlights that directors and other executives may assert legal privilege over communications with their lawyers as to their personal liability when receiving legal advice jointly with the company (R (on the application of Stewart Ford) v FSA [2011] EWHC 2583 (Admin)). This is so even if the personal affairs of the executives are inextricably intertwined with that of the company, and the company itself wishes to be co-operative. As a result, the FSA was not permitted to rely on such communications in regulatory proceedings against Keydata or certain executives.

Practical points

Corporations and their executives should be aware of the issues surrounding assertions of privilege when dealing with the FSA. Executives must have complete clarity as to whether their dealings with the lawyer will attract the protection of legal professional privilege. To that end:

• Throughout the process of the investigation, serious consideration must be given as to whether it is appropriate for the law firm to advise both the firm and the executives in their personal capacity.
  
  
• Where solicitors are instructed jointly, for example, to represent not only the company in an FSA investigation, but also named individual directors or employees against whom proceedings may be brought in their personal capacity, this should be made clear in a retainer letter. If lawyers initially engaged by the company to act on its behalf only, then also advise the directors or employees individually, engagement letters should be updated immediately to reflect the change in position. This will make it clear at the outset that privilege over communications may only be waived with the permission of both parties.
  
  
• If there is no formal joint retainer, in order to assert joint legal advice privilege over a document and, therefore, prevent waiver of that document by the company alone, each individual executive will have to establish:
  
  
• That he communicated with the lawyer for the purpose of seeking advice in an individual capacity;
• That those with whom the joint privilege was claimed i.e. the company, knew or ought to have appreciated the legal position;
• That the lawyer knew or ought to have appreciated that he was communicated with the individual in that individual capacity; and
• That the communication with the lawyer was confidential.

• If the decision is taken to waive privilege for purposes of co-operation with the FSA, undertakings should be put in place with the FSA to ensure that privilege is not waived against any party other than the FSA.

Click for brief details of the basis of the FSA’s powers of information gathering and the case

Lawyers Shane Gleghorn, Julie Simpson Day