FCA to boost bar for when it ‘names and shames’ firms | USAEMALL.com

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Britain’s financial regulator has said it will raise the bar before it “names and shames” more of the companies it investigates by stiffening a public interest test after the proposals provoked a backlash in the City of London. 

The Financial Conduct Authority said it would only announce an investigation after weighing the impact on the company being probed — including on its share price, customers and wider financial stability — under reworked proposals presented on Thursday.

The regulator also said it would consider a company’s size and its stage of development, as well as whether an announcement could “seriously disrupt public confidence in the financial system or the market” as part of a stricter public interest test.

The revised proposals mark a further attempt by the FCA to ease widespread concern among financial institutions and politicians about its plans to publicly disclose its investigations into companies since it first unveiled them in February.

Therese Chambers, co-head of enforcement and market oversight at the FCA, told reporters the initial proposals “could have been communicated better”. Steve Smart, the unit’s other co-head, said: “We have listened to a lot of the feedback we got, especially from the City.”

However, the regulator is not backing down completely from the plan, as many in the City have called for. It said the new approach was expected to lead to a doubling of the number of investigations it publicly discloses, up from the current rate of about one or two a year.

The FCA has already said it would give companies at least 10 working days’ notice before disclosing they were being investigated, instead of only one day as initially proposed. On Thursday, it said it would also give companies an additional two days after a final decision is made to bring a legal challenge.

Existing investigations would not be disclosed, the FCA said, proposing that the new approach would only apply to new probes. Its consultation will close on February 17 and its board plans to make a final decision later in the first quarter.

The FCA already had the power to name the companies it was investigating, but only in “exceptional circumstances”. On Thursday it gave examples of past investigations that it could have disclosed under its new approach, such as those into 15 advisers to pensioners at British Steel or into the UK arm of cryptocurrency exchange Coinbase.

The FCA has previously been pushed by MPs to be more transparent about its enforcement work, including a call two years ago from the House of Commons public accounts committee to announce its investigation into the British Steel workers’ pensions mis-selling scandal. 

Two-thirds of FCA investigations in the past have ended without any enforcement action, raising concerns that it could damage the reputation of companies by disclosing their identity even if the probe ended up not finding any wrongdoing. 

However, the regulator said it was reducing the number of probes that ended without action after changing its approach to enforcement from using it as a way to look for wrongdoing to focusing on areas where there were clear signs of misconduct.

It has cut the number of open investigations from 220 in April 2023 to 147, but the number of enforcement actions taken still rose from 27 last year to 38 so far this year. 

The FCA said it planned to report annually on the number of investigations that are closed with no action to “allow for full scrutiny of our approach”. Its new approach will not apply to investigations into individual people, which it will continue to keep secret in almost all cases.

David Postings, head of UK Finance, the UK’s main banking lobby group, welcomed the proposals, saying: “They have made a number of significant changes, including the increased notice period and the more rigorous approach to assessing the potential impact of an announcement within their public interest test.”

Imogen Makin, a senior regulation lawyer at WilmerHale, said the new proposals were “a significant improvement on the original version” and welcomed the acknowledgment that the plan would only lead to announcements in a very small number of cases.