Senior figures from the Financial Conduct Authority (FCA) have once again found themselves backtracking on controversial proposals to “name and shame” firms under investigation, and candidly discussing how the initial launch of the proposals was mishandled.
“Probably not” the FCA’s finest hour
On 13 November 2024, both FCA chief executive Nikhil Rathi and chair Ashley Alder appeared before the House of Lords financial services regulation committee, fielding questions relating to the controversial proposals set out in February that the regulator would begin to name firms under investigation.
Rathi set out that the regulator has undergone efforts to “fundamentally reshape” its plan, and will present “revised proposals” in “the next week or so” before making a final decision in early 2025. Rathi admitted that the initial announcement of the proposals had led to “some misunderstandings”, and took steps to address concerns and provide clarifications after substantial industry backlash:
- Rathi clarified that the regulator would “absolutely not be announcing every investigation,” and that it would not be “a case of opening up the entire book of investigations, that was never our intention”
- The revisions to the plan include giving firms “at least 10 days” of notice before disclosing that they are being investigated, as opposed to one day’s notice in the initial proposals
- The updated proposals would “introduce a more stringent public interest test”
- Rathi outlined that the regulator was mindful that concerns had been raised that the proposed public interest framework was “too vague,” and that the adjusted proposals will “look carefully at the impact on the firm and be particularly mindful of small firms”
- Giving insight on the expected number of firms that might be affected, Rathi explained that the FCA already has the power to name companies under investigation “in exceptional circumstances,” and that “if we do this in two or three more cases of regulated firms a year, then we are not talking about a big change”
A committee member asked whether a fair summary of the rocky reception that “name and shame” was received as not the FCA’s ‘finest hour,’ to which Alder replied – “probably not.”
Back to back backtracking
Since first announcing its name and shame proposals back in February as part of a consultation document, the FCA has gone to great lengths to clarify aspects of the proposed approach and to quell the industry’s misgivings. In its initial statement, the regulator stated that:
“Announcing an investigation does not automatically mean we have decided that there has been misconduct or breaches of our requirements, and we will be transparent when we close cases with no outcome.”
However, within a few weeks, FCA joint executive director of enforcement and market oversight Therese Chambers took part in a webinar in order to further clarify the proposals. She reassured viewers and critics that there was no “universal rule or timetable” for disclosures and that each announcement would be considered on a case-by-case basis, with decisions made at “appropriately senior levels within enforcement.”
While the proposals initially seemed to indicate that the regulator would name individuals as well as firms under investigation, Chambers confirmed this would not be the case due to privacy and GDPR concerns and the “backdoor risk” of senior individuals being identified as involved with investigations due to their position within a firm. She reiterated that the FCA was not “looking to be sensationalist” and would give “equal publicity” to investigations that close without findings.
In October, Rathi gave a speech that also sought to address concerns around name and shame, and to clarify points that had drawn the most industry ire:
“We know the proposals came as a surprise … And we have heard the strength of opposition … This is about firms, not individuals. We hope to reassure the sector that relatively few cases would be affected, given so many are already disclosed, mostly by firms themselves. Where we decide to name a firm in the public interest, it wouldn’t by default be when an investigation starts … We want to work through this together … We’ll continue to listen to feedback and our Board will decide early next year.”
What next for “name and shame”?
Chambers had previously stated that “consumer groups, whistle-blowers, and some other regulators” had welcomed the increase in transparency and the potential deterrent impacts of the proposals. However, the industry response was far louder, with regulated firms being “overwhelmingly against” name and shame in its original form.
With the FCA poised to release details of the reshaped proposals, alongside case studies of previous investigations that may have been made public under the approach, the industry is watching with interest to see if its criticisms have been taken on board, in full or in part – and whether the revised approach will be ‘name and shame’ in name only.
