FAQs: FCA “home visits”

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In the context of reminding firms about its expectations for hybrid working models, the UK Financial Conduct Authority (FCA) reminded firms last year that it has the ability to visit “any location where work is performed […] including residential addresses for any regulatory purpose”. This reminder has caused much excitement, with many employees left wondering if they will receive an unexpected knock at their door from the FCA when they are working from home.
 

As many of us will be adopting hybrid working arrangements again from this week onwards, we thought it would be helpful to share some FAQs about the potential for FCA home visits, based on queries we have received from clients on this topic.

Q: Can the FCA visit an employee, at home, unannounced?

A: In certain circumstances the FCA can apply for a warrant to search any premises, in conjunction with the police (eg dawn raids undertaken in connection with criminal insider trading investigations). It can also request access to premises for the purpose of carrying out its statutory duties. However, for the latter, it would usually want to visit a firm or individual’s main place of business (as opposed to their home address), provide reasonable notice and visit during business hours.

Q: How often does the FCA visit individuals, at home, unannounced?

A: Not very often. A recent FCA response to a Freedom of Information Act request confirms that only three dawn raids were executed by the FCA between 1 January and 30 June 2020. We presume each of these dawn raids would have been conducted pursuant to a warrant and in connection with ongoing criminal investigations.

Q: Do my firm’s employees have to let the FCA in if they turn up at their homes unannounced?

A: If the FCA has a warrant, it can insist on entering. Beyond that, firms are simply required to take reasonable steps to ensure that employees, agents and appointed representatives make themselves readily available for meetings and provide the FCA with reasonable access to any records, files, tapes or computer systems, which are within the firm's possession or control.

Employees will also be subject to FCA Individual Conduct Rule 3, which requires them to be open and cooperative with the FCA (as well as other regulators, to the extent applicable), but in our view it would be quite extreme for the FCA to suggest that this obligation permits them to conduct widespread unannounced home visits, without justification that such visits are strictly necessary for it to discharge its statutory duties.

Q: What should I tell employees about the risk of home visits by the FCA?

A: In its list of expectations relating to hybrid working, the FCA expressly said that firms should ensure that their employees understand that the FCA has powers to visit any location where work is performed, including home addresses. As a result, it is clear that the FCA expects firms to communicate this point to their employees in some way. However, such communications need to be measured so as to avoid employees being worried that the FCA is likely to turn up at their home address unannounced.

Applying an objective standard to the exercise of the FCA’s supervisory and enforcement powers, it seems unlikely that firms that maintain some office premises, where the majority of their staff are working the majority of the time, will find employees subject to home-visits from the FCA. Pointing this out to employees is likely to help reassure them that the FCA is unlikely to visit them at their home unannounced.

Q: What should I tell employees to do if the FCA turns up unexpectedly at their home address?

A: Unless the FCA has a warrant and is accompanied by the police, employees should be advised to politely ask any individuals who call at their home address claiming to be from the FCA to identify themselves, produce formal ID and also state the purpose of their visit. We would strongly suggest that firms advise their employees to contact their Legal or Compliance functions immediately with this information before they permit any unknown third parties access to their home or provide any firm or client/customer sensitive information.

Q: What if the FCA asks my firm for the home address of one of our employees?

A: A private home address is personal data and, as a result, firms should only disclose this kind of information to the FCA if they are legally compelled to do so. If a firm is asked to provide the home address of one of its employees, the firm could ask the FCA what it intends to do with that information (it may not be to allow the FCA to conduct a home visit). The firm could also ask the FCA if it can inform the relevant employee that this information is being provided to the FCA – in some circumstances the FCA may object to a firm providing this kind of information to employees, especially if this could frustrate an ongoing investigation.

The FCA can obtain significant quantities of information about individuals from other sources, not only their firms. For example, the FCA may be able to obtain an individual’s home address from the police or the electoral register.

Q: What about employees’ human rights?

A: The FCA would need to be mindful of the interaction of its powers to conduct home-visits with a person’s right to respect for private and family life under Article 8 of the European Convention on Human Rights. An individual’s home is protected from unnecessary or disproportionate searches by state authorities and an individual is entitled to the peaceful enjoyment of their home and property. Any interference with those interests must be justified in accordance with the standard of necessity.

Q: How likely is it that the FCA will visit my firm’s employees at home?

A: Understandably, the FCA’s reminder that it can conduct home visits set hares running, with employees wondering if they should start to expect routine home visits from the FCA. However, a spokesperson for the FCA confirmed that home visits would be a rare occurrence. The vast majority of face-to-face meetings will take place at firms’ office premises or the FCA’s offices and “visits to residential properties would only be conducted where necessary and proportionate”. As a result, it seems unlikely that the FCA is gearing-up to conduct widespread home visits.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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