Welcome to 2009: the year of the regulator

British businesses will have to navigate a “regulatory minefield” in 2009 as global law enforcement agencies and regulators step up activity in response to the economic downturn, leading lawyers warn.

Neil Gerrard, head of the regulatory and litigation practice at DLA Piper, said: “I have no hesitation in calling the developing situation a regulatory minefield – and this is not an exaggeration. We are operating in an unprecedented time of financial pressures and market volatility and the authorities are more determined than ever that everyone will play by the rules.”

Mr Gerrard’s comments, which are echoed across the legal industry, follow an intense burst of regulatory activity in 2008. Last year saw the Financial Services Authority (FSA) launch its maiden criminal prosecutions for insider dealing and forging documents as well as tens of civil cases for market abuse and other offences. It also saw the Office of Fair Trading (OFT) launch its first criminal price-fixing prosecutions and levy record fines on businesses for breaking competition rules. Elsewhere the Serious Fraud Office (SFO), HM Revenue and Customs and the Health and Safety Executive all announced major investigations against British businesses and individuals.

Robert Wardle, former director of the SFO and a consultant at DLA Piper, said the aftermath of the credit crunch would create a particular focus: “We live in a fast changing world and have witnessed drastic and irreversible changes to our financial sector this year with the effects due to continue well into the new year and into the next decade,” he said.

“In the UK, the SFO has already announced a 50 per cent increase in investigations planned for 2009, whilst the FSA and City of London Police are keen to show that London is no soft touch on regulatory enforcement,” Mr Wardle added.

Although experts are divided over whether there is an increase in the actual level of corporate crime committed during an economic downturn, they are united in the belief that the level of such crime which is discovered always surges when times are tough. “When credit dries up and management changes, fraud comes to light,” Mr Wardle said, “There will be lots of material for regulators to look at it in 2009.”

As well as having more material to investigate, regulators and prosecutors will have the benefit of new tools to help pursue wrongdoing. In particular, Mr Wardle points out that the current recession is the first for which the Fraud Act 2006 will be in effect. In addition to simplifying the offence of fraud, the act also criminalises new practices such as making false representations and failing to disclose information, making it easier to prosecute behaviour that previously slipped outside the definition of fraud.

For more see timesonline.com.

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