The way that we deal with feedback is interesting. Sometimes it is a vital part of a decision-making process – such as asking a friend whether a risky new haircut is a good idea. Often, however, we only really seek feedback to justify a decision we’ve already made.
The FCA proposed what the finance industry felt was the equivalent of a dashing new mullet back in February 2024 – a shift towards publicizing firms under investigation, a policy that was given the moniker of “name and shame.”
While the regulator is still ironing out details during an ongoing consultation process, questions were raised about its viability after substantial industry pushback, with its future left in doubt. However, recent speeches from senior figures at the authority have made one thing clear – name and shame is almost certainly here to stay.
What is the FCA’s name and shame proposal?
On 27 February, 2024, the FCA published details of a consultation document setting out that, for the first time, the regulator intended to publicly identify individuals and firms under investigation.
In a press release discussing the shift, the FCA explained the rationale and the benefits to the market of naming firms that are being investigated:
“Enforcement action is not simply about individual instances of punishment. Its greatest impact is as deterrence, and in educating the whole market on what we expect, and where others have fallen short.”
The regulator’s goal with this shift was to “amplify the deterrent impact” of enforcements and to use these as examples the wider market can learn from, “enabling firms to understand the types of serious failings that can lead to an investigation” so they can review and adjust their behavior quickly, and avoid ending up under investigation.
Frosty reception
However, much to the surprise of the regulator, the FCA name and shame proposals were met with skepticism and in some cases outright hostility from the financial industry, even extending to senior government figures. A House of Lords committee said the proposal “risks the overall integrity of the market and possible unwarranted impact on blameless firms,” with many highlighting potential repercussions including reputational damage to named firms and an erosion of trust in the market. Then-chancellor Jeremy Hunt warned the FCA against the proposals, saying:
“I hope the FCA re-look at their decision … because it doesn’t feel consistent with that new secondary growth duty that they have.”
This unexpected level of concern prompted the regulator to clarify elements of the proposals in an attempt to reassure the industry that the shift towards ‘name and shame’ would not cause undue disruption.
Therese Chambers, FCA joint executive director of enforcement and market oversight, took part in a webinar with legal firm Simmons & Simmons where she spent time explaining that there was no “universal rule or timetable” for disclosures and that every announcement would be considered on a case-by-case basis decided upon by “appropriately senior levels within enforcement”.
Chambers also explained that the regulator was not anticipating naming individuals due to privacy and GDPR concerns, and that the FCA was not “looking to be sensationalist” when announcing investigations, choosing instead to give a “boring, factual, and balanced presentation” of what the investigation would encompass.
Whether this indicated the FCA was merely clarifying elements of the proposal that were always intended, or adjusting and ‘softening’ the approach as a result of unexpectedly strident industry pushback, it didn’t suggest that the FCA was ready to retract name and shame entirely – something more recent messaging has reinforced.
No shame
On 17 October, 2024, Nikhil Rathi, Chief Executive of the FCA, gave a speech at the City Dinner, Mansion House, mostly focused towards how the regulator is working to fulfill its objective to promote the growth of the U.K. economy. However, Rathi also took the opportunity to address the elephant in the room – name and shame and the industry’s negative reactions to the proposal:
“We have proposed being more transparent on enforcement. Not in all cases. But no longer just by exception. Because our current approach doesn’t work… We know the proposals came as a surprise … And we have heard the strength of opposition.”
Rathi attempted to allay concerns and provide reassurance, and explain how the approach will work in practice:
“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.”
The speech outlines that the regulator will be “mindful” of both of its objectives, and of the potential impacts of the approach on firms, especially smaller organizations. Rathi framed this as an ongoing process, a dialogue between the regulator and the industry, and gave rough timelines for any decisions being made:
“We want to work through this together … Next month, we will provide more data and case studies on how a public interest test could work in practice … We’ll continue to listen to feedback and our Board will decide early next year.”
Interestingly, a word was very much absent from Rathi’s speech, no doubt omitted to strike a more conciliatory tone: Rathi mentioned namingfirms, but the word ‘shame’ was not included.
Change for the better?
An earlier speech at the AFME Annual European Compliance and Legal Conference by Therese Chambers struck a similar tone to Rathi’s: one of reassurance.
Chambers asserted that the FCA is “not shying away from tough conversations in pursuit of long-term success,” also pointing out that not all feedback to the proposed new approach has been negative:
“While consumer groups, whistle-blowers, and some other regulators welcome the prospect of greater transparency, the companies we regulate were overwhelmingly against.”
Chambers reassured industry readers that “we are listening” and that the FCA is “not going to rush this,” going on to outline what the approach will look like:
“We are not proposing moving from publicity in zero cases now, to 100% of cases in the future. Rather, a case-by-case approach following assessment of clearly defined criteria – including consideration of the potential impact on the firm and market.”
Chambers gave a similar activity timeline to Rathi, suggesting the FCA will spend the autumn undertaking efforts to “intensify … engagement” with “those on all sides of the debate” to further develop the proposals, and publishing case studies of what announcements may look like, alongside information on the numbers of cases that might be affected.
Again, Chambers went to lengths to demonstrate that the regulator has understood that these proposals have not sat well with the industry, which will be impatient for more details regarding just how name and shame might impact them when the consultation period ends:
“I want to reassure everyone here today that we have heard the strength of feeling on this – from all sides – and that this is very much an ongoing conversation.”
While the FCA has repeatedly reassured the industry that concerns are being heard and feedback is being taken on board, critics may feel that – by sticking to its guns regarding the unpopular proposals – the regulator’s ‘ongoing conversation’ is a one-sided affair. Whether it’s set to usher in a new era of transparency, increase deterrence, or introduce a heightened culture of blame, one thing seems certain – name and shame is here to stay.
