ENF 2.3 The FSA's powers to gather information and investigate

The FSA's powers to gather information and to appoint investigators are contained in sections 165 to 169 and 284 of the Act. They are described in this section of the chapter under the following cross-headings:

1. (1)

   requiring information and documents from firms; (section 165: see ENF 2.3.2 G to ENF 2.3.7 G).

2. (2)

   reports on firms by skilled persons (section 166: see ENF 2.3.8 G to ENF 2.3.11 G);

3. (3)

   general investigations of firms and appointed representatives (section 167:ENF 2.3.12 G and ENF 2.3.13 G);

4. (4)

   Investigations of specific contraventions, offences and other matters (section 168: see ENF 2.3.14 G and ENF 2.3.15 G);

5. (5)

   investigations in support of overseas regulators (section 169: see ENF 2.3.16 G and ENF 2.3.17 G); and

6. (6)

   investigations into collective investment schemes (section 284: see ENF 2.3.18 G to ENF 2.3.21 G).

Section 165 of the Act (FSA's power to require information) relates to the FSA's powers to require information and documents from firms. There are two ways in which the FSA may do this.

1. (1)

   Under section 165(1), the FSA may, by notice in writing, require a firm to:

   1. (a)

      provide specified information or information of a specified description; or

   2. (b)

      produce specified documents or documents of a specified description.

   The firm must do this within a reasonable period of time, which the FSA will specify, at a specified place. The firm must provide the specified information in any form that the FSA may reasonably require.

2. (2)

   Under section 165(3), an officer authorised by the FSA may require a firm without delay to:

   1. (a)

      provide him with specified information or information of a specified description; or

   2. (b)

      produce to him specified documents or documents of a specified description.

Section 165 applies to information or documents that the FSA reasonably requires in connection with the exercise of functions given to it by or under the Act.

The FSA may also require that any information given is verified, and that documents are authenticated, in any way that the FSA may reasonably require.

1. (1)

   Under section 165(7), the FSA may also use the power to impose requirements to provide information or to produce documents on:

   1. (a)

      a person who is connected with a firm;

   2. (b)

      an operator, trustee or depositary of certain types of recognised collective investment schemes who is not an authorised person;

   3. (c)

      a recognised investment exchange or recognised clearing house.

2. (2)

   In this context a 'firm' includes a person who was an authorised person but who has now ceased to be one (section 165(8)).

Under section 165(11) a person is connected with a firm if he is or at any relevant time has been:

1. (1)

   a member of the firm's group;

2. (2)

   a controller of the firm;

3. (3)

   any other member of a partnership of which the firm is a member;

4. (4)

   a person mentioned in Part I of Schedule 15 to the Act (Information and Investigations: Connected Persons), such as the officer or manager of the firm if it is a corporate body.

The FSA may use its section 165 power to require information and documents from firms in support of both its supervisory functions and its enforcement functions. The FSA will often use this power in support of its supervision functions and SUP 2 (Information gathering by the FSA on its own initiative) deals with the FSA's use of the power in that context. For completeness, the use of the power is also referred to in ENF 2.5 in support of the FSA's enforcement functions in relation to firms.

Section 166 (Reports by skilled persons) relates to the FSA's power to require firms to provide a report by a skilled person. Under section 166, the FSA may require any of the following, who are or were at the relevant time carrying on a business, to provide it with a report on any matter about which the FSA has required or could require the provision of information or documents under section 165:

1. (1)

   a firm ('A');

2. (2)

   any other member of A's group;

3. (3)

   a partnership of which A is a member;

4. (4)

   a person who has at any relevant time been one of the above.

The FSA may specify the form in which it requires the report.

Under section 166(4) the person appointed to make the report must:

1. (1)

   be nominated or approved by the FSA; and

2. (2)

   appear to the FSA to have the skills necessary to report on the matter concerned.

1. (1)

   Section 166(5) applies to any person ('X') who is providing or has provided a person whom the FSA has required to provide a report ('Y') with services in relation to a matter about which the FSA has required the report.

2. (2)

   Under section 166(5), X has a duty to give the skilled person appointed to provide such a report ('Z') any assistance as Z may reasonably require. The FSA may apply for an injunction or, in Scotland, for an order for specific performance, to enforce this obligation.

As with its power to require information and documents, the FSA may use its section 166 power to require reports by skilled persons in support of both its supervision and enforcement functions. SUP 5 (Reports by skilled persons) contains rules and guidance that will apply whenever the FSA uses the power. ENF 2.5 refers briefly to the FSA's use of the power in support of its enforcement functions in relation to firms. As a result of article 9G of the Regulated Activities Order, the FSA has certain powers to require specified information and documents from a small e-money issuer and a power under section 166 to require a small e-money issuer to provide a report by a skilled person. These powers are described in ELM 8.7.1

Section 167 of the Act (Appointment of persons to carry out general investigations) relates to the appointment of investigators to conduct general investigations into firms and appointed representatives.

1. (1)

   Under section 167(1), if it appears to the FSA (or the Secretary of State) that there is good reason to do so, then the FSA (or the Secretary of State) may appoint one or more competent persons to conduct an investigation into:

   1. (a)

      The nature, conduct or state of the business of a firm or of an appointed representative; or

   2. (b)

      a particular aspect of that business; or

   3. (c)

      The ownership or control of a firm.

2. (2)

   Under Section 167(2), if the person appointed to investigate thinks it necessary for his investigation, he may also investigate the business of a person who is or has at any relevant time been:

   1. (a)

      a member of the group of which the person under investigation ('A') is part; or

   2. (b)

      a partnership of which A is a member.

3. (3)

   Under section 167(4) the FSA may also use this power in relation to a former firm or former appointed representative, concerning:

   1. (a)

      Business carried on at any time when it or he was an authorised person or appointed representative; or

   2. (b)

      The ownership or control of a former authorised person when it or he was an authorised person.

4. (4)

   In section 167 'business' includes any part of a business even if it does not consist of regulated activities.

2Under the ECD Regulations, the FSA may exercise the powers in sections 165 and 166 of the Act in relation to an incoming ECA provider, whether the provider is a firm or not. The FSA's policy on how it will use this power (and other information gathering investigation powers) in support of its enforcement function is set out in ENF 2.5 (The FSA's policy on exercising its powers: firms, approved persons, and others). In addition, under these regulations, the FSA may exercise the power under section 167 in relation to an unauthorised incoming ECA provider (the Act enables the FSA to appoint an investigator under section 167 to investigate any part of the business of an incoming ECA provider which is a firm).

Section 168 of the Act (Appointment of persons to carry out investigations in particular cases) relates to the conduct of investigations into certain specified contraventions, offences or other matters. The FSA's powers to appoint investigators are contained in section 168(3) and (5) and the circumstances in which it can do so are listed in section 168(1), (2) and (4) of the Act.

1. (1)

   Under section 168(1) and (3) the FSA may appoint one or more competent persons to carry out an investigation on its behalf if it appears to the FSA that there are circumstances suggesting that:

   1. (a)

      a person may have breached regulations made under section 142 of the Act (Insurance business: regulations supplementing FSA's rules); or

   2. (b)

      a person may be guilty of an offence under section 177 (Offences), 191 (Offences under Part XII), 346 (Provision of false or misleading information to auditor or actuary) or 398(1) (Misleading the FSA: residual cases) of the Act or under Schedule 4 to the Act (Treaty Rights).

2. (2)

   Under section 168(2) and (3) the FSA may appoint one or more competent persons to carry out an investigation on its behalf if it appears to the FSA that there are circumstances suggesting that:

   1. (a)

      an offence under section 24(1) (False claims to be authorised or exempt) or 397 (Misleading statements and practices) of the Act or under Part V of the Criminal Justice Act 1993 may have been committed; or

   2. (b)

      there may have been a breach of the general prohibition; or

   3. (c)

      there may have been a contravention of section 21 (Restrictions on financial promotion) or 238 (Restrictions on promotion of collective investment schemes) of the Act; or

   4. (d)

      market abuse may have taken place.

3. (3)

   Under section 168(4) and (5) the FSA may appoint one or more competent persons to carry out an investigation on its behalf if it appears to the FSA that there are circumstances suggesting that:

   1. (a)

      a firm may have breached the requirement for permission in section 20 of the Act (Authorised persons acting without permission); or

   2. (b)

      a person may be guilty of an offence under the Money Laundering Regulations; or

   3. (c)

      a firm may have breached a rule made by the FSA; or

   4. (d)

      an individual may not be a fit and proper person to perform functions in relation to a regulated activity carried on by an authorised or exempt person; or

   5. (e)

      an individual may have performed or agreed to perform a function in breach of a prohibition order; or

   6. (f)

      a firm or an exempt person may have failed to comply with section 56(6) of the Act (Prohibition orders); or

   7. (g)

      a firm may have failed to comply with section 59(1) or (2) of the Act (Approval for particular arrangements); or

   8. (h)

      a person to whom the FSA has given its approval under section 59 may not be a fit and proper person to perform the function to which that approval relates; or

   9. (i)

      a person may be guilty of misconduct for the purposes of section 66 of the Act.

4. (4)

   As a result of regulation 12 of the ECD Regulations, the FSA may also appoint investigators under section 168(4)(c) and (5) where it appears to the FSA that there are circumstances suggesting that an incoming ECA provider, whether a firm or not, may have breached a requirement imposed by the FSA under those regulations.21

The FSA may use these powers to investigate firms, approved persons, individuals employed by firms, and small e-money issuers as well as cases of market misconduct and breaches of the general prohibition. The FSA's policies on the use of this power are therefore set out in three different sections of this chapter:

1. (1)

   ENF 2.5 deals with the use of this power and other powers in relation to firms, approved persons, individuals employed by firms, appointed representatives, small e-money issuers, and unauthorised incoming ECA providers;2

2. (2)

   ENF 2.6 deals with the use of this power in relation to cases of market misconduct; and

3. (3)

   ENF 2.7 deals with the use of this power in relation to unauthorised business.1

Investigations in support of overseas regulatorsSection 169 of the Act (Investigations etc. in support of overseas regulators) relates to investigations conducted to assist an overseas regulator. It states that at the request of an overseas regulator, the FSA may use its powers to require documents or information under section 165 or to appoint a person to investigate any matter. ENF 2.8.4 G to ENF 2.8.6 G set out the matters that the FSA must, or may, take into account when considering whether to use these powers in support of an overseas regulator.

The FSA's policy on how it will use this power is set out in section ENF 2.8.

Section 284(1) of the Act (Power to investigate) relates to the FSA's powers to investigate the affairs of collective investment schemes. Under section 284, if it appears to the FSA that it is in the interests of the participants or potential participants, or that the matter is of public concern, it may appoint one or more competent persons to investigate and report on:

1. (1)

   the affairs of, or of the manager or trustee of, any authorised unit trust scheme;

2. (2)

   the affairs of, or of the operator, trustee or depositary of, any recognised scheme that relate to its activities carried on in the UK; or

3. (3)

   the affairs of, or of the operator, trustee or depositary of, any other collective investment scheme except a body incorporated by virtue of regulations under section 262 of the Act (that is, an open-ended investment company).

Section 284(2) states that an investigator appointed under section 284(1) to investigate the affairs of, or of the manager, trustee, operator or depositary of, any scheme may also, if he thinks it necessary for the purposes of that investigation, investigate:

1. (1)

   the affairs of, or of the manager, trustee, operator or depositary of, any other scheme that is mentioned in section 284(1) whose manager, trustee, operator or depositary is the same person as the manager, trustee, operator or depositary of the scheme;

2. (2)

   the affairs of other schemes and persons (including bodies incorporated by virtue of regulations under section 262 of the Act (Open-ended investment companies) and the directors and depositaries of those bodies) as may be prescribed.

Regulations to be made by the Treasury will also give the FSA powers to appoint investigators to investigate and report on the affairs of ICVCs, or directors or depositaries of ICVCs.

The FSA's policy on how it will use its power under section 284 of the Act is set out in ENF 2.9.