A View From The Exchange: Is the FCA's enforcement strategy defying gravity?

We never expected to find ourselves comparing the FCA's enforcement approach to a musical, however when Therese Chambers compared her return to the City & Financial Global FCA Investigations and Enforcement Summit last week in her speech "Do the right thing: Part II" to the upcoming release of Wicked: For Good, it seemed like an opportunity that could not be missed.

Many may remember Part I of her speech in June 2023, which was Chambers' first speech as Co-Executive Director of Enforcement where she claimed "doing the right thing" is "much easier and far more rewarding in the long run". But have things changed for the better since June 2023?

Part I

Clearly, the FCA was not concerned about being popular when the first speech was delivered two years ago. Chambers' outlined the Co-Heads' of Enforcement visions for the future, referring to Steve Smart as her "partner in crime-fighting" and warned "[t]here really is nowhere to hide with him so I would advise everyone to get their ducks in a row now, particularly given the extensive improvements we have made and continue to make in relation to data, technology and digital tools".

The speech emphasised that tackling financial crime and fraud were clear focus areas of the FCA; firms that are transparent and co-operate with the FCA will be rewarded and the FCA's priority "is to see the maximum possible penalty imposed on the firms and individuals that cause the greatest harm. But it is also essential that we secure the maximum redress for consumers that have been harmed."

Part II

Like all good sequels, whilst "the plot may change", "the through line" remained in this speech and for the FCA that is "the importance of doing the right thing".

"Doing the right thing", "isn't a slogan, but a standard" and "it should underpin every decision, response and relationship in the financial services sector."

Chambers outlined what "doing the right thing" looks like for firms. It means "holding yourselves to high standards", "taking responsibility", "taking the necessary steps to fix things", including "paying redress to those you've harmed" and "[c]o-operating with the FCA to ensure it won't happen again". In the words of Chambers, "put simply" it means "keeping your side of the street clean".

She also claimed that, since her last speech, this standard has proven to be effective which has led to "better outcomes for consumers; healthier markets; and a clearer, stronger enforcement".

Chambers also took the opportunity to provide an update on the FCA's approach to enforcement cases and whilst she noted that "[s]even recent investigations achieved a public outcome in 16 months or less", we know from our recent FOIA statistics that historic cases still appear to be distorting the average case length figures somewhat (with the average case duration remaining 48 months).

Chambers also noted that "fewer investigations are ending with no further action" and once again, this reinforces our belief that within the regulated sector, the FCA's case selection may be more focused on cases where the firm has clearly admitted wrongdoing resulting in no real investigation being required.

Should firms follow the yellow-brick road?

As with Part I of the speech, Chambers' tone throughout the speech reiterated that the FCA is willing to take action against firms where necessary: "at the end of the day, firms have two choices. To work with the FCA. Or against us. Whatever you choose, just know: we will be there regardless."

And whilst Chambers concedes that the FCA is not the "all-knowing Wizard from Oz", the clear line from this speech is that firms should be following the yellow-brick road and, unlike the musical, good deeds will go unpunished.