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What Happens When Acting as an Expert and Investigator
- Apr 3, 2025
- Latest Journal
Paul Grainger writes about expert witness assignment, investigations and acting as a S166 skilled person.
What happened when you are instructed as an Expert Witness?
The role of an Expert Witness, whether in a civil case or a criminal case, is to advise the Court on matters where the Court does not have the required level of expertise to determine key aspects of the matters under consideration. The rules and procedure for the instruction of an Expert Witness in civil legal proceedings is set out in the Civil Procedure Rules.
An Expert Witness assignment will always begin with an enquiry from a law firm or in-house legal counsel representing either the complainant or the respondent/defendant. At the enquiry stage, the instructing legal counsel will clarify the nature of the case, the expertise required, the scope of the report required, the timetable for the report and whether the instruction will be to report to one party or whether it is to act as a Single Joint Expert.
We will then carry out an internal check to see whether the firm or anyone in the firm has previously acted for or provided services to either the complainant or defendant (a conflict of interest assessment). Assuming there is no conflict of interest, we will confirm the same to instructing legal counsel and prepare a cost estimate. Based upon this legal counsel will normally then issue formal instruction and provide relevant documents to us (known as an evidence bundle).
The letter of instruction will normally set out exactly what the Court has agreed it requires the Expert Witness to investigate and report on.This will normally be quite specific and is designed to assist the parties and the Court to resolve the case.
The Expert will then read the evidence bundle and analyse the evidence it contains in the light of the specific matters and issues that the Expert has been instructed to report upon. This can be quite time consuming.
Once the evidence has been analysed and taken into account, the Expert can then form a view relating to the specific matters and issues as requested in the instruction letter. The Expert will then prepare a report setting out his or her opinion.
Unless the Court has appointed a Single Joint Expert, it is normally the case that both the complainant and the defendant will have instructed Ex- pert Witnesses. Where this is the case, the Expert Reports are exchanged between the complainant’s and the defendant’s legal teams. The relevant experts are then required to review the other expert’s report and identify areas of agreement and disagreement.
The experts will then normally hold a meeting to formally devise a statement of agreement and disagreement. This is a formal written report setting out the points in each of the experts’ reports on which they agree and those points on which they do not agree. This Statement of Agreement and Disagreement is provided as evidence to the parties and the Court.
If a case proceeds as far as a trial, it is possible that the expert witness will be called upon to give evidence in Court and to be subject to cross-examination by legal counsel acting for either the complainant or the defendant.
In my experience, most cases have been resolved before they get to trial. The expert witness reports are often helpful in reaching an agreement between the parties on areas of dispute,thus enabling settlement of the case without the need for a lengthy and expensive trial.
The process referred to above is that which is applicable to legal proceedings in the civil courts (usually the High Court). The process for the instruction of an Expert Witness in a Tribunal is very similar.
An Expert Witness may also be instructed to advise the Court in criminal cases. The procedure is set out in the Criminal Procedure Rules. The procedure is very similar to that for civil cases.
Sometimes, in order to provide expert opinion, an expert may be asked to carry out some investigation work. This may be instructed in civil litigation cases as part of building evidence in a case. Similarly, it may be instructed for similar reasons, by a police force or other investigating body, in criminal cases.
What usually occurs during an FCA visit and how should firms prepare for it?
The FCA normally only carries out supervisory visits to the vast majority of regulated firms as part of a thematic review of a part of the financial services sector or in response to regulatory concerns raised via desk based monitoring or similar information that has come to the attention of the FCA. The FCA will already have a lot of information about the firm and its senior managers because of the regular regulatory and financial reporting that FCA regulated firms have to make during each year.
When it carries out a Supervisory Review Visit,the FCA will normally request information and documents from the firm concerned. This could include details of clients, advice provided (where relevant) transactions carried out or other records relating to the firm for the time period under investigation. The FCA will normally also interview relevant people including a firm’s directors, senior managers and advisers or investment managers.
If the information provided to the FCA does not clearly demonstrate compliance with the rules, then the FCA may require the firm to take remedial action. Where the FCA identifies actual or suspected breaches of their rules, it may refer the firm to the Enforcement Department who may then undertake an enforcement investigation and take disciplinary action against the firm and/or its directors.
The best way for a firm to prepare for an FCA visit is for it to have a robust risk assessment and risk control framework within the firm. This will include having detailed and robust compliance policies and procedures. It will also include having a robust and up to date system of accurate and timely record keeping and of regular and frequent compliance monitoring checks to make sure the firm complies fully with FCA rules requirements at all times.
What is a S166 Skilled Person’s Investigation and Report?
A Skilled Person’s Report is a report prepared at the FCA’s request under Section 166 of the Financial Services and Markets Act (FSMA) 2000.
A S166 Skilled Person’s Report (often referred to as a “Section 166” or as a “Skilled Person’s Report”, is a supervisory tool used by the FCA to investigate matters where FCA does not have or does not wish to deploy FCA staff with the relevant knowledge, skills and experience to carry out the investigation required.
The FCA maintains a Skilled Person Panel of firms that it has vetted through a selection process. The vetting and appointment process is normally carried out every four years. However, other organisations, such as, the Association of Professional Compliance Consultants (APCC), also maintain lists of firms they have accredited to carry out Skilled Person work.
When FCA decides it wishes to instruct a S166 Skilled Person’s Report, it will write to the regulated firm that will be subject of the report and set out the scope and other requirements for the investigation and report. The firm is then invited to obtain proposals from three Skilled Person firms and submit them to FCA for review indicating the firm they would like to use. Subject to FCA approving the preferred firm, the regulated firm and skilled person firm then enter into terms of engagement. The fees of the Skilled Person firm are normally paid by the regulated firm.
Complyport often carries out Skilled Person investigation and report for firms in a variety of financial services sectors and across a variety of Skilled Person “Lots” (subject areas).
Compliance Healthcheck & Internal Audit
A Compliance Healthcheck and an Internal Audit are very similar. Both are investigations initiated by a firm to assess the strengths and/or weaknesses in its policies, processes and procedures and/or in the behaviour and compliance of its people.
A Compliance Healthcheck is often instructed on a one off basis, whereas an Internal Audit is often carried out on a regular basis (usually annually). As well as reviewing a firm’s operations more widely, an internal audit may have a rolling and in-depth focus on one or more specific areas of a firm’s operations.
In both an Internal Audit or a Compliance Healthcheck, it is normal to assess governance and board oversight of the firm, risk assessment and risk management, whether policies, processes and procedures are current and up to date, financial resources, operational resilience and conduct of business.
The logic of carrying out an Internal Audit or a Compliance Healthcheck is for the firm to proactively identify any weaknesses and have a chance to correct them. In the worst case, it may deliver positive news and confirm that there are no current weaknesses to address.
Special Investigations
A special investigation is usually instructed by a client firm that needs evidence relating to a suspected issue or problem.
A good example is a firm that suspected some financial crime and fraud within its business. A Special Investigation identified that fraud and financial crime was indeed taking place and the firm then had the evidence to take decisive action.
If the firm suspects it may have a serious issue or problem that may need to be reported to a regulator, the firm may seek to instruct a Special Investigation via its legal advisers.
The logic of asking its legal advisers to commission and arrange a Special Investigation by experts or specialists, is to permit the findings to be disclosed to the legal adviser as part of the legal advice provided to the client firm. In this way it may be the case that Legal Professional Privilege may apply and that certain information may not need to be disclosed.
Where do you come in, if a firm has been subjected to legal proceedings?
Where a firm is subject to legal proceedings, it may well be the case that the firm and its directors or employees or their legal advisers may lack the necessary expertise or experience to progress key aspects of a claim or to defend key aspects of a claim. It is at this point that they may seek an expert witness to provide expert opinion on key aspects of the case.
A firm’s legal advisers will agree with the Court what the key issues are for which expert opinion is re- quired and whether each party will appoint its own expert or whether a Single Joint Expert will be appointed. At that stage, the legal advisers will select and instruct an appropriate expert.
What would you say are top three things your clients should acknowledge in order to avoid disputes?
1. Keep accurate and timely written records of meetings or phone calls that involve a client or that relate to a client.
2. Ensure that policies, processes and procedures are regularly reviewed to ensure they meet current regulatory requirements.
3. Ensure that directors, managers and employees know and understand what is expected of them and that they behave accordingly.
Author
Paul Grainger is Chairman of Complyport Limited, a leading Governance, Risk and Compliance (GRC) consulting firm in the UK. Complyport specialises in providing advice and assistance on regulatory and compliance matters to firms in the financial services sector. Paul leads Complyport’s Expert Witness, Special Investigations and S166 Skilled Person services.
