UK finance watchdog waters down 'name and shame' plans after backlash

The Financial Conduct Authority said it is making the changes after a 'strength of feedback' on its original plans to 'name and shame' firms it is investigating

The UK’s financial watchdog has agreed to water down proposals to “name and shame” firms it is investigating, after facing pressure from the City.

The Financial Conduct Authority (FCA) said it is making changes, having “heard the strength of feedback” on its original plans. Companies will now receive 10 days notice before any announcement is made, compared to the one day's notice proposed before. The FCA also plans to weigh up the "potential negative impact" such disclosures might have on the businesses in question.

Earlier this year, when the FCA first revealed its plans to disclose when it launched enforcement investigations—which currently happens only under exceptional circumstances. It would mean “naming and shaming” the companies being probed, regardless of whether or not it decides there has been misconduct or a breach of rules.

The move prompted a widespread backlash earlier this year, including from former chancellor Jeremy Hunt, who warned the watchdog to reconsider its plans over fears it could damage the UK’s standing internationally.

Several trade bodies, including the City of London Corporation and Pimfa (the Personal Investment Management & Financial Advice Association), also raised concerns that making investigations public could have a damaging effect on firms, their staff and customers, before any conclusions are reached.

The Financial Conduct Authority (FCA) has indicated that its updated proposals will likely result in a minimal increase in the number of investigations into regulated firms being made public. This is partly because the FCA will now need to assess if revealing details could significantly affect the market, lead to financial instability, or undermine confidence in the financial system.

Additionally, the FCA will take into account potential adverse impacts on the firm's employees, customers, and investors. The extended notice period will also provide companies with more time to contemplate issuing their own statements in response, the FCA noted.

Therese Chambers, joint executive director of enforcement and market oversight, commented: "We have heard the strength of feedback to our original proposals, and we are making changes as a result."

"We hope the greater detail published today supports the further engagement we hope to have on the proposals, before we make any final decisions."

Meanwhile, Miles Celic, chief executive of industry body TheCityUK, remarked: "Our industry has had serious concerns about the potential impact of the FCA’s enforcement proposals on firms, on markets more broadly, and on UK competitiveness."

He acknowledged it was "good to see movement on some of the issues the industry has raised" but pointed out "there has been little change in other key areas". "Ultimately, the FCA’s approach would leave the UK as a global outlier," he concluded.

"We will continue to constructively engage with the FCA during the next phase of the consultation as it is vital that this is tackled with care and rigour."