Enforcement watch: FCA announces significant changes to its previous name and shame proposals

Earlier this year, the FCA published a consultation on a number of proposed changes to its enforcement approach, including a proposal to name the subject when an investigation is opened, together with other information such as the suspected breach and provide updates. For a summary of the proposals see our article here.

In response to feedback from the industry and political intervention (including appearances before the Treasury Select Committee and the House of Lords Financial Services Regulation Committee), the FCA has announced a number of changes to the initial proposals as part of a second consultation.

What are the key changes?

• The FCA will take into account the impact on the relevant firm when applying the public interest test, although firms will need to demonstrate publication is likely to have a severe impact on the firm or third parties (in particular current or former directors or employees). The size of the firm and the stage of development will be particularly relevant here.
• In addition, the FCA will take into account the potential for serious market or sector impact, financial instability, wider systemic disruption or impact or other potential to seriously disrupt public confidence in the financial system or market.
• In many cases, an anonymised announcement will be made. For example, in relation to investigations concerning anti-money laundering or other financial crime controls. Consideration will be given to whether to publish themes, topics or trends in the form of an 'Enforcement Watch' publication similar to the current Market Watch.   
• In some cases, the announcement will be made at the start of the investigation (and not before the three-month mark).
• Firms will be allowed longer to respond to a proposal to announce the investigation. Previously, the FCA proposed just one day's notice (and in some cases, no notice). The revised proposals suggest providing firms at least 10 business days' notice to review a copy of the draft announcement and decide whether to make representations and a further 2 business days' notice, a copy of the final text and the FCA's reasons if the FCA decides to proceed after taking these representations into account.  Typically, any legal challenge will be heard in private.
• The FCA has dropped its proposal to retrospectively announce existing investigations, except to reactively confirm ongoing investigations which are already in the public domain. 

The FCA confirmed the previous proposal not to announce investigations into named individuals in general.

Comment

The FCA has provided some helpful case studies which include proposed wording of announcements for historic cases such as the recent investigation into PwC. The announcements are relatively brief and do not, in all cases, identify the subject of the investigation or the potential breach under investigation.

Whilst the direction of travel is encouraging, the FCA could have gone further including to provide a threshold in terms of size of firm below which announcements would not be made and examples of a case which would meet the "severe impact" test. 

There remains an element of internal contradiction in terms of what the announcements are seeking to achieve.  One of the factors cited by the FCA in favour of publication of the name of a firm under investigation is to prevent direct or indirect consumer harm.  However, in two of the four case studies provided by the FCA steps had already been taken to remove consumer harm through supervisory intervention such as the imposition of restrictions on permissions and the only remaining justification for the announcement would be to provide reassurance in light of widespread public concern.    

This second consultation closes on 17 February 2025 with a view to the FCA's Board deciding whether to proceed with the revised proposals in the first quarter of 2025.