Double trouble for D&O insurers as the UK regulators extend the limitation period applicable to disciplinary investigations

By Simon Cooper

Recent legislative changes in the UK are likely to raise concerns for directors and officers (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, 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 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…

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