Legal development

A View From The Exchange: FCA naming and shaming proposals – the stakes are ramping up

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    It has been a turbulent ten days in the world of regulatory enforcement. This week marked the end of the FCA's consultation on its proposed enforcement policy to name firms under investigation. Trade bodies, lawyers, and now politicians – including the House of Lords Committee that oversees the FCA, and the Chancellor Jeremy Hunt – have loudly voiced their disagreement with what they perceive to be an ill-conceived strategy which risks destroying firms and damaging reputations.

    What led the FCA to make these proposals?

    The FCA's recent response to the House of Lords Committee highlights that the regulator feels that it is between a rock and a hard place. In 2022, the regulator was pushed hard by a House of Commons Committee to name the firms under investigation in the context of the British Steel Pension Scheme advice debacle, but was unable to do so. Similarly, Parliament frequently asks the FCA for details on specific cases and the regulator receives large numbers of MPs' letters, the majority of which are seeking information from consumers on supervisory and enforcement matters, which the FCA cannot meaningfully respond to. The FCA therefore felt that this was something that politicians had wanted and had hoped its proposals would allow it to show MPs and the public that it was "on the case" (and not "asleep at the wheel") in maintaining standards across the industry.  

    Collateral damage

    Yet the political backlash that has been very evident over recent days shows that greater access to information about ongoing FCA investigations is far from straightforward.  When pressing for information for their constituents, MPs want to know all the facts and are quick to criticise the FCA for perceived inaction.  But when the FCA proposes to identify subjects and provide more detail about its investigations, other politicians are – quite rightly - concerned about the consequences of such a policy on the UK's growth and competitiveness. 

    What has emerged clearly from these mixed messages from the political world is that regulated firms should not and must not be viewed as legitimate 'collateral damage' in this transparency tussle between Whitehall and Endeavour Square.

    What happens next?

    In the face of such strong negative sentiment at the top of government it would seem a highly risky move for the FCA to assert its independence and press ahead with its plans regardless.  It is, after all, a sign of a mature and responsible regulator to show it is capable of listening and change its course accordingly.  And yet the current leadership of the Enforcement Division have shown they are up for a fight and actively embrace their "bad cop bad cop" tag.  The FCA's next move could have a significance that runs well beyond the scope of these proposals.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


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