Regulation  

Will those accused of insider dealing have the "right to silence"?

  • Describe the implications of the DB vs consob ECJ ruling
  • Explain the FCA's approach to 'right to silence'
  • Identify the potential impact of the ruling on UK courts
CPD
Approx.30min
Will those accused of insider dealing have the "right to silence"?
 Julien Warnand/EPA-EFE/Shutterstock

In February, the European Court of Justice issued an important ruling in the case of DB v Consob that recognised – as a matter of EU law – an individual's right to silence during an investigation into alleged insider dealing under the European Market Abuse Regulation.

This decision – issued after the UK's withdrawal from the EU – is relevant to understanding EU law's approach to the right to silence in regulatory investigations. It is also relevant to those involved in cross-border trading between the UK and EU Member States.

The UK position

In the UK, the FCA is responsible for conducting investigations into alleged insider dealing, of the kind that was in issue in DB v Consob. 

Under English law, insider dealing can be dealt with on either a civil/regulatory basis (under MAR) or as a criminal offence. It is common for the FCA to investigate these kinds of cases on what is often called a 'twin track' basis. 

The FCA runs a single investigation into the trader's conduct that could lead either to an administrative action (where the FCA hears the trader's arguments and decides on any sanction), or a full criminal prosecution (where the trader undergoes a jury trial, and any sanction is imposed by the Crown Court). 

The FCA typically makes a final decision once its investigation is well advanced. In practice, criminal prosecution is reserved for the most serious matters.

In such an investigation, the FCA can conduct different types of interview. Understanding which it is using is critical to understanding how the 'right to silence' works.

The FCA has broad powers to conduct what are often called 'compelled' interviews. Where it uses these, it can require an interviewee to answer its questions (with some exceptions, for example the FCA cannot require a person to produce legal advice they have received).

A person's failure to answer is serious and can ultimately be dealt with as contempt of court (or, sometimes, by way of regulatory proceedings for failing to be open and cooperative with the FCA).

However, in recognition of the fact that the interviewee is compelled to give the information, the law places some restrictions on what the FCA can subsequently do with it.

In particular, the FCA cannot usually use information from a compelled interview in subsequent proceedings for insider dealing brought against the interviewee. As a result, the FCA does not commonly use 'compelled' interviews of defendants in suspected insider dealing investigations.

Instead, in such 'twin track' investigations, the FCA more commonly interviews defendants under caution. This is quite different.

At the start of the interview, the FCA should deliver a standard form caution (of the same kind used by the Police in other cases) that makes it clear the person being interviewed does not have to say anything, but it may harm their defence if they do not mention when questioned something on which they later rely in Court.