Respond to FCA enforcement action or investigation

The FCA uses different tools depending on the severity of concerns. Check your correspondence carefully to identify which applies to your firm.

Types of FCA action (least to most severe)

• Supervisory visit or desk-based review: Routine or thematic review of your compliance. Not enforcement, but findings can escalate. You are expected to cooperate and provide requested information within stated deadlines
• Skilled person review (section 166 FSMA): The FCA appoints an independent reviewer to examine specific areas of your business. You bear the cost. Findings may lead to required changes or further action
• Formal investigation (section 167 or 168 FSMA): The FCA is investigating potential regulatory breaches. You may be compelled to provide documents and answer questions. Lying or misleading investigators is a criminal offence
• Enforcement action: Public censure, financial penalty, requirement to pay consumer redress, variation or cancellation of permissions, or prohibition of individuals. The FCA publishes a Warning Notice and then a Decision Notice

Your response in the first 48 hours is critical. Regardless of the type of FCA action, these steps protect your position and demonstrate responsible management.

Immediate priorities

• Obtain specialist legal advice: Instruct a solicitor experienced in FCA enforcement. Many firms with regulatory legal expenses insurance can claim this cost. Do this before responding substantively to the FCA
• Preserve all records: Do not alter, destroy, or delete any documents, emails, call recordings, or system data. Document destruction during an investigation is a criminal offence under section 177 FSMA
• Note all deadlines: FCA correspondence contains response deadlines. Missing them worsens your position significantly
• Notify your compliance officer: If you have an appointed compliance function (CF10/CF11), brief them immediately
• Contact your professional indemnity insurer: Most PI policies require prompt notification of regulatory proceedings. Late notification can void cover

Before responding to the FCA, assess which areas of your business may be non-compliant. Common FCA enforcement priorities in consumer credit include affordability failures, misleading financial promotions, unfair treatment of customers in financial difficulty, and inadequate complaints handling. Review each area against current requirements.

How you respond affects the outcome. The FCA's enforcement guide (EG) sets out how cooperation, early settlement, and proactive remediation are taken into account when determining penalties. A firm that cooperates fully, identifies the root cause, and remediates affected customers promptly will typically face a lower penalty than one that is defensive or uncooperative.

Key considerations

• Settlement discount: Under the standard scheme in DEPP 6.7.3G the discount is all-or-nothing: 30% if the settlement agreement is concluded during stage 1, and 0% in any other case. The old 20% and 10% tiers are a transitional provision that applies only to cases where stage 1 began before 1 March 2017
• Voluntary remediation: Proactively identifying and compensating affected customers before the FCA requires it demonstrates good faith and may reduce enforcement severity
• Root cause analysis: The FCA expects you to explain how the breach occurred and what systemic changes will prevent recurrence
• Customer redress: If customers suffered loss, prepare a redress scheme. The FCA may require a section 404 consumer redress scheme for widespread harm