On a recent monitoring visit to the offices of a regulated firm, the private discussions of an FSA team in a room set aside for the visit, were covertly recorded by the firm. The tape recordings were then passed to a magazine which published extracts from the team’s discussions.

Our view is that such conduct is not only unacceptable but also, having taken legal advice, unlawful. Unacceptable because when carrying out visits, our staff need to have open discussions among themselves about their findings, how the firm compares with other similar firms1 and what the possible regulatory consequences and strategies might be. The effectiveness of monitoring visits and other less formal contacts with firms, will be undermined if our staff’s privacy is not respected. The results of a visit are, of course, fed back at the appropriate time.

Covert taping is also unlawful. The FSA and our staff are entitled to expect that the confidentiality of discussions within a team will be respected. Covert taping and disclosure of the discussions is a breach of that confidence, and may give rise to a civil legal claim against the discloser, the remedies for which are damages or an injunction. We will be prepared to use these remedies should there be any further incidents.

A firm (and its senior management) is required by Principle 11 to deal with the FSA in an open and cooperative way. Covert taping and publication of the results are the exact opposite of such behaviour. It is inconsistent with us having an open relationship with firms - which the rule is intended to promote - and undermines that relationship which is necessary for regulation to work. It also raises serious questions about the integrity of the individuals responsible for it. Firms and approved persons should be aware that any incidences of covert taping are likely to lead to enforcement action.

In the course of a visit our staff will be likely to have personal discussions. Covert taping and disclosure of these discussions may therefore be a breach of the Principles under the Data Protection Act 1998. Remedies include making a complaint to the Information Commissioner or applying to the Court for damages. We will support our staff if they wish to pursue these remedies.

 

Footnote

1 Information about other similar firms is protected by section 348 Financial Services and Markets Act 2000. Covert taping, transcription of tapes and/or disclosure of the information protected by that section will be a breach of section 352, which is a criminal offence. We will consult the prosecuting authorities should there be any further incidents.