Financial Services: Investigations and Enforcement, 2nd edition

Freshfields’ “Review of Financial Services: Investigations & Enforcement” is an excellent and impressive book. It is comprehensive, practical, and as up-to-date as can reasonably be expected, given publishing deadlines. Who should read it? The preface states that the book is written with the lay user in mind. Certainly, no prior knowledge is assumed, but it would be a devoted lay reader who could plough through the 800 odd pages in this book, many of which contain some dense legal material.

This, of course, is no fault of the authors, who are merely reflecting the complex legislation and accompanying body of rules and guidance that constitute the Financial Services Authority’s regulatory regime. The FSA is likely to work on pruning its Handbook, mindful of the burden of regulation. This book is likely to appeal most to, and actually be read by, practitioners and legal and compliance professionals. It would not surprise me if a few copies also appeared on the desks of regulators in Canary Wharf.

Relying on the earlier edition (published four years ago) will not be good enough. There have been a large number of significant developments since then, including: some major enforcement cases (Shell, Citigroup, Legal & General to name a few); new regulatory responsibilities for the FSA (principally in insurance and mortgage regulation); several reviews of enforcement processes and procedures (the end to end review in 2004 and the enforcement process review in 2005); and a changing cast list of enforcement senior managers at the FSA. As a further incentive to prospective readers, the authors have also added a new, topical chapter on mis-selling.

So what does the book tell us? As one would expect, there are chapters describing in some detail the FSA’s investigation powers, the various disciplinary sanctions available to the regulator, and the Regulatory Decisions Committee and tribunal processes and procedures. There are also specialised chapters on topics such as market misconduct and listed companies, civil liability to third parties and the ombudsman scheme. It is helpful to have all this material assembled in one place.

A practical approach

Where the book will be of greatest value, however, is in the sections that deal with the practical application of the various provisions and provide practical advice on FSA investigations. From this perspective, chapter two, which addresses the steps to take when regulatory problems arise, is extremely important. The various issues raised in the chapter (for example, reporting problems to the FSA, dealing with customers, dealing with employees involved in the contravention, document destruction and creation) could act as a checklist of key points that need to be considered when facing an FSA investigation.