The Financial Conduct Authority (FCA) softened its plans to publicly disclose the names of companies under investigation following strong objections from the financial industry. The regulator aims to address the concerns about maintaining a balance between transparency and fairness, the Financial Times reported.
FCA Reviews “Name and Shame” Policy
In a recent session with the House of Lords financial services regulation committee, the FCA's Chief Executive Officer Nikhil Rathi acknowledged the backlash against the initial proposal introduced in February.
The plan, which sought to increase transparency by naming firms under investigation, received heavy criticism for its potential to harm company reputations before any wrongdoing was proven.
Rathi mentioned that the regulator’s intent is to avoid unnecessary damage to businesses. He admitted that the FCA could have communicated the plans better and provided standard public notifications before unveiling the proposal.
The FCA’s revised plan includes significant changes, such as giving companies at least 10 days’ notice before making any public announcement about an investigation. The initial proposal, which offered only a one-day notice period, was reportedly perceived as too abrupt and potentially harmful to businesses’ market standing.
Additionally, Rathi mentioned that the revised approach would include a public interest test. This test will help the FCA determine when it is appropriate to disclose the name of a company under investigation.
New Guidelines
Despite the changes, Rathi emphasized that the overall impact on the number of public disclosures would likely be limited. The regulator currently has the authority to name companies under exceptional circumstances but reportedly plans to use this power sparingly. In some cases, the FCA also wants the flexibility to publicly state that a company is not under investigation for a specific issue.
This measure could help prevent unnecessary speculation and market volatility , providing clearer communication to the public and the financial markets. The revised proposals are expected to be presented within the next week, with a final decision anticipated early next year.
Besides the financial industry, the name and shame policy also attracted criticism from the ministerial circles. The authorities claimed that the punitive regulation risks pushing companies away from London.
For instance, Kemi Badenoch, the Business Secretary and Equalities Minister, accused the FCA of regulatory overreach in March. The legal industry cited that 65% of FCA investigations end without any action being taken.
