Investigating Non-Financial Misconduct: Getting it Right

When allegations of non-financial misconduct (NFM) conduct come to light, which may impact an employee’s suitability to carry out regulated activities or to remain in employment, it is critical for employers to handle the situation fairly and transparently. 

A thorough investigation should be conducted before any disciplinary action is taken to avoid claims of unfair dismissal or discrimination. Here we consider how to use the investigation stage to lay a solid foundation for any next steps.

Preparation

As a very first step, ask yourself whether the potential NFM identified really warrants a formal investigation, or whether a ‘quiet word’ or informal action might be enough. This might involve some preliminary investigation or enquiries. It is important not to jump too quickly into a formal process, especially given the career implications any finding of NFM may have in regulated industries.

Where the misconduct is serious enough to warrant a formal investigation, carefully consider its precise purpose and scope. Consider drafting up some ‘terms of reference’ and/or an ‘investigation plan’ to keep the process on track and establish an approximate timeframe.

Decide at the outset who will be involved in dealing with the investigation and any subsequent stages. Where possible, different people should handle each stage of a matter. You are likely to need:

• An investigator to undertake a fact-finding exercise to establish the relevant facts;
• A disciplinary decision maker, where the case warrants further action. Where possible, this should usually be someone more senior than the investigator; and
• Someone to hear any subsequent appeal (who again, where possible, should be more senior than the decision-maker).

Those involved in the investigation should have no conflict of interest or personal involvement in the matter being investigated. It is important that they collect copies of any policies and procedures that may be relevant to the matter to refresh their knowledge and ensure that correct procedures are followed, wherever required. 

Many investigations can be handled internally from start to finish. However, in some circumstances, it may be appropriate to appoint someone who is demonstrably detached from the matter, such as an external consultant, whilst balancing the need for fairness against a cost-effective and efficient investigation.

Gathering Evidence

When gathering evidence, an investigator should remember that their role is to establish the facts of the matter objectively and impartially. Therefore, they should be looking out for both evidence that supports and contradicts the allegations. The amount of investigation you need to do will depend on the nature of the complaint.  It will generally include interviewing witnesses, accessing IT systems, collating documentation or a combination of the three. It is important not to take short-cuts, but balance this against the fact the matter needs to be resolved in a timely fashion.

An investigator should objectively analyse each piece of evidence and consider:

• What does the evidence reveal?
• Are there any doubts about the credibility and reliability of the evidence?
• Is the evidence supported or contradicted by any other evidence?

• Does it suggest any further evidence should be collected?

Investigation Meetings

Investigation meetings provide a useful opportunity for an investigator to evaluate the credibility of those who are either involved in, or who have information about, the matter under investigation (including the alleged perpetrator). However, an investigation meeting must never turn into a disciplinary meeting: where disciplinary action may be necessary then a separate meeting must be arranged.

A comprehensive note should be made of any investigation meeting, although it’s not normally expected to be a verbatim record. The key is to adopt a format that aids clarity and an understanding of the points discussed during the interview. It may help to prepare a rough ‘script’ beforehand to sketch out the questions you want to ask and ensure nothing is missed. Try to use ‘open’ questions wherever you can to encourage the interviewee to speak freely and provide a full account of events.

The interviewee should be asked to sign the note to confirm it is an accurate record of the conversation; this is important in case its accuracy is challenged later.

Make sure that if a new issue is raised, or if the individual raises a new potential avenue of inquiry at an investigation meeting, that this is dealt with.  Adjourn the meeting if necessary to look into the matter further.

It is not uncommon for an individual who is subject to a disciplinary process to raise a grievance or complaint part way through an investigation, either because they feel aggrieved, or as a form of retaliation to de-rail the process. The general position is that there is no requirement to halt a disciplinary process because the individual involved has raised a grievance.  However, at the same time, you need to move both processes forward without undue delay. The best way forward will depend on the substance of the grievance and how closely it is connected to the facts and circumstances that underpin the disciplinary case. Seek legal advice if you are unsure.

Reporting the Investigation Findings

Once an investigator believes they have established the facts of the matter as far as is reasonably possible then they will normally be required to produce a written investigation report which explains their findings. An investigation report should cover all the facts that were and were not established, and whether there were any mitigating circumstances that also require consideration. Excluding any information may leave an investigator open to accusations of bias and filtering evidence to suit their findings.

 It is important that the report reflects the investigator’s own conclusions: whilst an investigator may seek advice from a third party such as HR, the conclusions must be their own.

It is important to remember that, as well as being read by the employee involved, and by the managers responsible for taking any subsequent steps, the report may eventually end up being scrutinised by an external party, such as an Employment Tribunal Judge or an FCA Investigator. The report should therefore be written in an objective, concise style; avoid jargon and explain any acronyms/technical terms used; and make reference to all of the evidence collected.

An investigator will typically be expected to make a recommendation about next steps. However, they should not suggest a possible sanction or pre-judge what the outcome to the disciplinary hearing should be, but should instead simply suggest whether any further action may be necessary or beneficial. For example, an investigator may recommend that formal disciplinary proceedings be progressed by the disciplinary decision maker.

Follow-up

Whatever the investigator’s recommendation, any decision about what next steps should be undertaken will be for the disciplinary decision maker. This includes consideration of whether referral to the FCA or other relevant authority is required, following consideration of any internal policies and procedures or official guidance. 

If the disciplinary decision maker’s decision differs from the investigator’s recommendation, then the reasons for this should be written down and included as an addendum to the investigator’s report. Once an investigator completes their investigation and hands in their report then they will usually not be involved in any further action.

How can we help?

Weightmans expert employment lawyers frequently advise employers considering disciplinary action for non-financial misconduct, providing tailored guidance that aligns with FCA standards. We have extensive experience of handling disciplinary investigations on behalf of employers including efficient and impartial fact-finding work; clear and comprehensive reports; and recommendations as to next steps. Please do not hesitate to get in touch.