Lawyers have warned of a looming clash between the City regulator and legal professions after the watchdog’s new enforcement chief fired barbs at the sector’s conduct when defending financial firms.
In a speech last week, the FCA’s new joint executive director of enforcement and market oversight, Therese Chambers told City lawyers that while they “like to see themselves as risk managers”, those defending firms should “ask themselves what poses the greatest risk in the long term”.
Chambers, a former private practice lawyer, warned legal professionals “you can use your skills to block an inquiry, to claim privilege for every piece of paper and generally get in our way but what is that going to achieve?”
The comments have triggered warnings of a new hard-headed approach from the FCA towards lawyers defending City firms that are being investigated by the regulator.
“The pointed reference to defence lawyers using ‘aggressive diversionary tactics to prolong the timeline of FCA enforcement investigations’, may shape future engagement between FCA enforcement and lawyers defending firms and senior executives under investigation,” said Richard Burger, a partner in the UK investigations practice at law firm WilmerHale.
“When the co-director of FCA enforcement refers to getting your ducks in a row now, the message is clear that more enforcement action will follow,” Burger added.
Matthew Nunan, partner at Gibson Dunn and a former senior official at the FCA, told City A.M. that Chambers’ warnings “feel like a very clear warning for regulated firms” and they would would “have to think carefully about whether they genuinely want to cooperate with investigations or not”.
“There is also a real marker put down to firms about the conduct of their advisers – the FCA will be wary of firms that say they wish to cooperate but then hide behind obstructive lawyers,” Nunan added.
“Advisers must however continue to give robust advice and cannot be afraid to challenge the regulator.
“Case law shows the regulator is not always right and rolling over to demonstrate cooperation isn’t always the best long term approach.”