英国监管部门延长合规调查的时限，从而加大了调查力度，增加董事责任险保险人的赔偿风险。
Double trouble for Directors and Officers insurers as the UK regulators extend the limitation period applicable to disciplinary investigations
Recent legislative changes in the UK are likely raise concerns for D&O insurers and their insureds. The changes will significantly increase the cost and uncertainty of regulatory investigations and disciplinary proceedings not only for the individuals who are subject to scrutiny but also for their employers or companies as well as for their insurers.
Section 28 of the Financial Services (Banking Reform) Act 2013 (the “Act”) which came into force in the UK on 25 July 2014 extends the period within which the Financial Conduct Authority or the Prudential Regulatory Authority (the “UK Regulators”) can issue disciplinary actions against an individual from three years to six years. The extension of the limitation period does not apply retrospectively as it only applies to market abuse and financial misbehaviour occurring on or after 25 July 2014.
This extension of the limitation period seems likely to have a significant impact on regulatory investigations from both a legal and commercial perspective. The doubling of the limitation period will enable the UK Regulators to undertake longer and more thorough investigations before they decide whether to impose a penalty and/or issue disciplinary proceedings against an individual. This is likely to increase the costs of responding to the investigation for both the individual and the financial institution concerned and, potentially, their D&O insurers as well. Commercially, an extended limitation period leaves open the possibility of regulatory action long after the misconduct occurred which will significantly increase the uncertainty engendered by such investigations. The extension could also negatively influence an individual’s career and future employment, particularly in instances where the investigation runs for the full length of the limitation period.
The limitation period begins to run on the day on which the UK Regulators either knew of the misconduct or had information from which the misconduct may reasonably be inferred. Arguably, if during the course of a current investigation it became evident that a distinct and new form of misconduct had occurred, the new limitation period may apply to that particular misconduct. A situation could arise where an individual is subject to two or more different limitation periods in respect of two different investigations, regardless of the fact that the investigations may relate to the same or similar issues.
The fact that the UK Regulators now have longer to investigate any potential disciplinary concerns will lead inevitably to an increase in the cost of the investigation and may mean that any applicable insurance is exhausted before the investigation has concluded or proceedings are commenced. Interestingly the US authorities have not enacted a similar change although discussions have been taking place between the authorities and Congress and we anticipate comparable legislative change in the near future.
The extension of the limitation period comes at a time when the UK Regulators are already scrutinising financial markets closely particularly where the UK Regulators seem to be adopting a practice of leveraging one investigation to instigate another investigation such as the rigging of markets (Libor/precious metals/interest rates). This new legislation will give the UK Regulators more time to review the evidence and consider whether a penalty or disciplinary proceedings are necessary. For financial institutions and their insurers, the extension of the limitation period is a timely reminder that regulatory scrutiny will intensify and that the already high costs of regulatory investigations are likely to increase.
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