The Financial Conduct Authority (FCA ) has recently unveiled a contentious plan to publicly disclose the names of companies under investigation, drawing sharp criticism from industry experts and raising concerns about the potential impact on businesses.
The "name and shame" proposal is causing controversy and, as the Financial Times claims, concerns in ministerial circles that it will lead to an exodus of companies from London. Even without this, the City is already increasingly losing ground to New York.
FCA's Controversial Plan to Expose Companies under Investigation Sparks Outrage
Under the proposed changes, the FCA would abandon its long-standing practice of keeping investigations confidential until a formal decision is reached. Instead, the regulator aims to adopt a more transparent approach by naming and shaming companies as soon as an investigation is launched.
In its February release regarding the “name and shame” scheme, the regulator emphasized that this move will enhance public trust and accountability, allowing consumers to make more informed decisions about the companies they engage with. However, critics argue that the plan could have severe unintended consequences.
Various stakeholders, including legal experts, business leaders, and industry associations, have fiercely opposed the FCA's proposal.
"The FCA says it’s thinking about competitiveness, but so often they take decisions that harm the competitiveness of the UK," a senior government figure told the Financial Times. “They have got to stop.”
Industry representatives argue that publicly naming companies under investigation could:
- Damage reputations before any wrongdoing is proven,
- disrupt business operations and lead to loss of clients and revenue,
- undermine the presumption of innocence and due process, and
- encourage a culture of fear and risk aversion in the financial sector.
Balancing Transparency and Fairness
While the FCA's intentions to promote transparency are commendable, many argue that the proposed approach goes too far. Instead, they suggest that the regulator should focus on improving its investigative processes and reducing the time taken to reach decisions.
The legal industry is also concerned, acknowledging that 65% of FCA investigations end without any action being taken. Publishing information about these cases would only result in reputational damage.
“It would significantly and pointlessly damage a firm’s reputation and value,” Miles Celic, the Chief Executive of TheCityUK, told the Financial Times. “Especially given that FCA investigations take four years on average and many conclude without requiring any action.”
Some have also called for a more nuanced approach, where the FCA would only name companies in exceptional circumstances, such as when there is a significant risk to public safety or when the investigation has reached an advanced stage.
The Road Ahead
As the debate continues, the FCA must balance the need for transparency with the rights of companies under investigation. The regulator has invited feedback from stakeholders and is expected to make a final decision on the proposed changes later this year.
Official voices are already being heard directly from the authorities. In March, Kemi Badenoch, the Business Secretary and Equalities Minister, accused the FCA of "regulatory over-reach" in an official letter. The outcome of this controversy could have far-reaching implications for the financial sector and how regulatory investigations are conducted in the future.
On the other hand, the FCA wants to strengthen its reputation as an enforcement agency and deter misconduct within the UK's expansive financial services industry. In 2023, the institution achieved a new milestone by issuing 2,286 scam alerts on its public Warning List, an improvement of 21% from the 1,882 alerts issued in 2022.
