When is my Firm likely to be Investigated?

By the Regulators

Once regulated, the likelihood of the FCA investigating a Firm specifically for Archiving and Supervision directly, is unusual.  However here are three common scenarios;

  1. Caught in the net
    A request from the Regulator about a Market Move or a person of interest who once happened to meet with a Firm.  If unable to supply the information promptly, or there is an incomplete record, then the FCA may issue the dreaded ‘Section 166′.
  2. Regular Contact
    If, as part of the regular supervisory cycle of engagement with the FCA, if a Firm is unable to demonstrate an adequate control framework for the business, the FCA will often use Electronic Messaging, Control, Archiving and Monitoring as an area to investigate as they know firms typically underinvest in this area of the business.
  3. Review Time
    Finally, a Firm may be unlucky enough to be subject to an Individual or Thematic Review by the regulator who will take a deep dive and require a broad range of information about how the Firm is operated and governed.   This deep-dive relies on the Archiving and monitoring to provide the information required to satisfy the review.

By Investors and Critical Vendors.

It used to be the case that as long as Alpha generation was positive, Sharpe ratios were high, and the firm’s principals had a good provenance, then fundraising and establishing key suppliers was a relatively straightforward process.

Now Investors and Vendors critical to the business (Administrators, Custodial Services, Trading Counterparties and Prime Brokers) require that their clients meet the regulatory standards that are in force and have a robust governance framework in place before any investment is made or business conducted.

The due diligence of both investors and vendors often involves extensive review of CyberSecurity, Archiving, Monitoring, IT Policies & Procedures and Outsourced services.  It is also becoming commonplace to undertake ongoing annual reviews to ensure compliance with all the latest structural requirements from the Regulator and any other market themes to retain the investment.