UK friends decry ‘abject failure’ in FCA’s plan to call and disgrace extra corporations | USAEMALL.com

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Britain’s financial watchdog should abandon its plan to “name and shame” more companies it investigates unless it resolves industry concerns about the proposal, a House of Lords committee has said.

The Financial Conduct Authority’s controversial plan to publicly disclose more of its investigations into companies, announced last year, was slammed as “an abject failure” by the House of Lords Financial Regulation Committee.

The findings are a blow for the FCA when it is already under fire from ministers for stifling economic growth with excessive regulation amid calls from ministers for “cultural change” at the watchdog. 

The peers’ conclusions, including a call for the regulator to review and publish a report into its own failings, show FCA officials have not eased fears about their plans, despite announcing changes in November.

“If the FCA is unable to find an acceptable balance in these proposals between increasing transparency to help prevent consumer harm, and managing the potential risks to firms, individuals, and market stability, it should not proceed with these proposed changes,” said the report, from the cross-party committee.

The regulator already had the power to name the companies it was investigating in “exceptional circumstances”, but last February it announced plans to shift to a public interest test that would allow it to disclose more of them.

Peers said the regulator did not give prior warning of its plans.

“It was incumbent on the FCA to make a strong and unequivocal case for why such a fundamental change was needed and it has failed to do that,” said Lord Michael Forsyth of Drumlean, Conservative chair of the committee.

“Its consultation on the changes has been an abject failure, and even the FCA chairman acknowledged this has not been the FCA’s ‘finest hour’.”

The regulator told the committee that its investigations, on average, last three to four years, with 56 per cent ending with no further enforcement action.

“If it presses ahead with its proposals on past performance it could mean that half of the firms it investigates, and the people involved in them, will have their reputations unnecessarily and unfairly damaged,” Forsyth said. “This is not acceptable.”

The committee, created last year, includes peers who have declared non-executive roles or other interests with City banks and asset managers, such as Forsyth, a shareholder in UK lender Secure Trust Bank, and Lord John Eatwell, a partner at Palamon Capital Partners, a British private equity group. 

In the report, peers said the “basic aims” of the FCA proposals — increasing transparency and preventing consumer harm — “should of course be pursued” but they said the regulator should carry out a cost-benefit analysis of its plan.

The FCA said it would “consider the committee’s report carefully, alongside the other feedback to our consultation, as we decide on the next steps on the proposals”.

The regulator conceded it “should have handled the initial consultation better, for example engaging on the proposals in advance”, while adding it had “engaged extensively with industry and revised our proposals”.

Responding to criticism from the financial services sector and politicians, the FCA said in November that it would tell companies 12 days before publicly disclosing they were being investigated, instead of its initial plan to inform them only a day before.

Emma Reynolds, the new City minister, told the same House of Lords committee on Wednesday that the government was “not proposing that we change the architecture” of the regulators, while promising to “keep up the pressure” on them to support growth. 

“That requires cultural change all the way through the organisations that we’re talking about, not just at the top,” she added.