The UK’s financial watchdog, the Financial Conduct Authority (FCA), has stood firm in its decision to disclose the names of firms under investigation at an early stage, despite facing criticism from industry insiders and legal experts.
In a response to the House of Lords Financial Services Regulation Committee published last week, the FCA defended its proposal, citing the need for greater transparency and deterrence in the financial sector.
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Therese Chambers and Steve Smart, joint executive directors for enforcement and market oversight at the FCA, highlighted the importance of accountability and transparency in addressing concerns raised by stakeholders.
The FCA’s move to adopt a “name and shame” approach has sparked controversy since its announcement in February. Critics argue that early identification of firms under investigation could jeopardise market integrity and unfairly impact companies and their share prices. The House of Lords panel echoed these concerns, urging the FCA to reconsider its strategy.
FCA mulls public naming of investigated firms to boost transparency
Despite the backlash, the FCA remains resolute in its stance. The regulator dismissed calls for a cost-benefit analysis, stating that such a study is unnecessary. Instead, it plans to engage further with stakeholders to refine the details of its proposal.
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By GlobalDataCurrently, FCA investigations take an average of 40 months to conclude if settled, and 64 months if unresolved, according to Sara Cody, a lawyer at Linklaters, Bloomberg reported. While the FCA aims to expedite investigations, critics argue that the consultation lacks clarity on practical implementation.
Under the new guidelines, the FCA will consider the public interest when deciding whether to disclose the names of investigated firms. However, it will continue to protect the privacy of individuals by refraining from naming them. Firms and individuals will have the opportunity to challenge the decision to make an investigation public.
In a statement, the FCA’s chief enforcers emphasised the importance of deterrence in combating unlawful behaviour and upholding consumer protection and market integrity standards across the UK.
The debate surrounding the FCA’s disclosure policy underscores the delicate balance between transparency and market stability in the financial sector. As the regulatory landscape continues to evolve, stakeholders await further clarity on how the FCA’s enforcement measures will shape the future of financial oversight in the UK.
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