Structuring a Section 167/168 Investigation Response Strategy

A Section 167 or 168 notice changes the operating posture of a firm overnight. The instinct to either over-disclose out of fear or to retreat into legalistic defensiveness are both wrong, and both tend to produce worse outcomes than a disciplined, cooperative strategy built on genuine candour. The firms that come through these investigations best are those that treat the FCA's statutory powers as legitimate, prepare thoroughly, and maintain internal discipline across months of scrutiny.

Understand what you have actually received

Section 167 appointments are general supervisory investigations into the nature, conduct or state of a firm's business. Section 168 is more pointed: a specific suspicion of a contravention or offence, often involving individuals. The distinction matters because it shapes the likely scope, the appetite for enforcement referral, and the degree to which named individuals should have separate representation from the outset.

Read the notice carefully with external counsel. Clarify scope, period, and the identities of the investigators. If the scope is ambiguous, ask. The FCA generally responds well to early, constructive scoping conversations. Firms that try to narrow scope aggressively at this stage tend to damage credibility for little gain.

Stand up the right governance immediately

Appoint a single senior accountable executive, usually the General Counsel or Chief Risk Officer, to own the response. Create a small steering group including the SMF holder most proximate to the subject matter, external counsel, and a nominated board contact, typically the Chair of the Audit or Risk Committee. The CEO should be informed but not operationally embedded unless personally in scope.

Decide early how the board will be kept informed and minuted. Board papers on live investigations require careful drafting: they must be accurate and sufficient for directors to discharge their duties, while recognising they may become disclosable.

Preserve, don't just collect

Issue a document preservation notice across the firm the same day the notice arrives. This covers email, messaging platforms, personal devices used for business, chat logs, and physical files. Any deletion, even routine, after this point creates risk. The FCA treats document destruction as a serious aggravating factor.

Work with counsel to establish a review protocol that identifies privileged material properly. Over-claiming privilege is a common failure mode and corrodes trust with investigators. Under-claiming waives protections you are entitled to maintain. Neither is cooperation.

Witness preparation is about accuracy, not performance

Compelled interviews under Section 171 are not opportunities to tell a story. They are opportunities to give accurate, considered answers to specific questions. Prepare witnesses by walking them through their own contemporaneous documents, not by rehearsing narratives. If a witness does not remember, they should say so. If documents contradict recollection, address this openly rather than reconciling it artificially.

Individuals who may be at personal risk, particularly SMF holders, need separate legal representation. Fund this. The appearance of pressuring individuals to align with the firm's position is corrosive and may itself become a conduct issue.

Manage the relationship actively

Agree a single point of contact with the investigators. Respond to requests within the agreed timeframes, or negotiate extensions early with reasons. Volunteer material that is clearly within scope even if not specifically requested. If new facts emerge that change earlier submissions, correct the record promptly and in writing.

When the firm disagrees with a provisional finding, say so clearly with reasoning and evidence. Disagreement expressed properly is not uncooperative. Silence or evasion is.

What good looks like at the end

A well-run response produces an investigation file in which the firm's conduct during the investigation itself is unimpeachable, even where the underlying findings are difficult. That is the position from which settlement discussions, enforcement referrals, or supervisory outcomes can be managed credibly.

Your immediate decision: within 48 hours of receipt, confirm your governance structure, external counsel, and preservation notice. Everything else follows from those three.

Frequently Asked Questions

Should we notify our auditors and insurers?

Yes, in most cases, and promptly. Delayed notification to D&O insurers can prejudice cover. Auditors need to understand matters that may affect the financial statements or going concern. Take advice on the form and timing of notification, but the default should be disclosure.

How do we handle media or market disclosure?

Assess MAR obligations immediately if listed. For private firms, the default is no proactive disclosure, but prepare holding statements in case of leaks. Never discuss the investigation outside the defined governance group.

Can we conduct our own internal investigation in parallel?

Yes, and often you should, particularly to inform the board and to identify remediation. Coordinate scope with the FCA to avoid duplication or the appearance of interference with witnesses. Share findings where appropriate.

What happens if an SMF holder is personally at risk?

They need independent legal advice funded by the firm, separation from decision-making on the firm's response, and a clear protocol on information sharing. Handled badly, this becomes a second conduct issue on top of the first.

How long will this take?

Plan for 18 to 36 months from notice to conclusion. Resource and governance structures need to be sustainable over that period, not just the first quarter.