UK law enforcement is not immune to the unprecedented levels of business disruption caused by COVID-19. While not all agencies have published specific guidance on how they propose to operate and conduct enforcement investigations during this crisis (including, for example, Her Majesty’s Revenue & Customs, the Serious Fraud Office, and the National Crime Agency), a number have. These include:
The Financial Conduct Authority (the FCA)
The FCA has issued a number of guidance notes to firms. The FCA has stressed that it expects firms to take ‘reasonable steps’ to ensure they can meet the current challenges thrown up by the COVID-19 crisis including by providing support and service to their customers (such as facilitating access to cash). The FCA also reiterated firms’ obligations under the FCA’s Principles, including Principle 11, which provides that “a firm…must disclose to the FCA appropriately anything relating to the firm of which that regulator would reasonably expect notice.” In particular, firms must disclose to the FCA if they are in financial difficulty. Other guidance from the FCA includes:
- Guidance as to which staff are “key workers” and essential to the continued functioning of the UK financial system, relevant to which children can continue in-class schooling;
- Guidance as to who may be considered to be essential for the purposes of work-related travel / physical meetings; and
- Guidance about the certification and operation of senior managers under the Senior Managers Regime (including that firms should allocate responsibilities that enable them to best deal with the risks being faced, and does not require a single senior manager to be responsible for the firm’s COVID-19 response).
Listed companies have also been afforded extra time –two months – to complete their financial statements. The FCA also issued guidance for consumers, as well as specific information for general insurance firms. Click here for further information. While there has been some slowdown in the pace of investigations, the FCA enforcement teams appear to be moving forward with their investigations, albeit with some sympathy to requests for additional time to respond to letters and document requests.
The Prudential Regulation Authority (the PRA)
The PRA has published a statement in which it set out the delays it will accept in respect of Solvency II harmonized regulatory reporting. It also published a separate statement on its revised approach to value at risk (VAR) back-testing, confirming that “…in order to mitigate the possibility of procyclical market risk capital requirements through the automatic application of a higher VAR multiplier we will allow firms – on a temporary basis – to offset increases due to new exceptions through a commensurate reduction in risks-not-in-VAR (RNIV) capital requirements.”
The Financial Reporting Council (the FRC)
The FRC has issued a range of COVID-19- specific guidance, including how auditors should ensure that they continue to meet the applicable audit standards and how AGMs can be arranged and conducted during the crisis. Other guidance is aimed at corporate governance and reporting issues, including: (i) how boards can maintain and complement management information; (ii) the introduction, and monitoring, of changes due to relocation of staff and the inaccessibility of some business premises; and (iii) decisions as to whether, and when, to pay dividends. As with the FCA, the FRC enforcement teams appear to be moving forward with extant investigations, albeit at a slower pace.
The Information Commissioner’s Office (the ICO)
The ICO launched a hub that draws together various data protection related statements and documents it has published related to COVID-19. Its guidance includes general data protection advice for data controllers and how to respond to Freedom of Information Requests. The ICO confirmed: “Regarding compliance with information rights work when assessing a complaint brought to us during this period, we will take into account the compelling public interest in the current health emergency.”
The Competition and Markets Authority (the CMA)
On March 25, the CMA – relying on the exemption that businesses can coordinate where it is sufficiently beneficial to the public – published guidance that sets out the circumstances under which the CMA will not take enforcement action. Businesses can coordinate to address critical COVID-19 issues for (only) as long as it is necessary to address these critical issues where (i) it is appropriate and necessary to the supply chain, (ii) such coordination is clearly in the public interest, and (iii) the coordination benefits consumers. The CMA has, however, made it clear that it will continue to take enforcement action, including where businesses: exchange commercially sensitive information on future pricing or business strategies that is not critical to the current COVID-19 crisis; deny access to competitors in the market place; abuse their dominant position; or keep prices artificially high to the detriment of consumers. Indeed, it appears clear enforcement action will be taken against businesses that coordinate where such coordination is wider than that needed to respond to the current crisis. Click here for more details on the impact on the UK competition law regime during COVID-19.
As noted above, the Serious Fraud Office and National Crime Agency have not yet published any COVID-19 specific guidance. While investigations appear to be progressing slowly (although, perhaps not those where the next stage is interviews), prosecutions will be significantly delayed as a result of the fact the Lord Chief Justice ordered that no new jury trials may commence until further notice.
The current situation poses various challenges for conducting internal investigations, in particular for those businesses operating in the regulated sectors who may be required to progress, and report on, any investigations during the crisis. We set out some of the considerations that business may need to consider when conducting investigations remotely in our alert Considerations for Conducting Internal Investigations Remotely.