FCA set to name firms under investigation in plans to beef up enforcement

The Financial Conduct Authority is planning to publicly name the companies it is investigating in a bid to deter firms from breaking the rules and strengthen its enforcement action on the City.

In a consultation paper published today, the FCA said it is planning to set out a new approach to “public interest” that will name firms under investigation to strengthen deterrence and encourage witnesses and whistleblowers to come forward.

The move comes amid a wider push to improve the pace and transparency of its investigations and marks a step change from the current approach in which probes are rarely disclosed to the public.

“By being more transparent when we open and close cases we can enhance public confidence by showing that we are on the case,” said the watchdog’s co-chief of enforcement, Therese Chambers.

“At the same time, we will amplify the deterrent impact of our work by enabling firms to understand the types of serious failings that can lead to an investigation, helping them to change their own behaviour more quickly.”

Greater transparency will also “drive greater accountability for us as an enforcement agency”, Chambers added.

Chambers and co-head Steve Smart have looked to beef up the regulator’s enforcement action since starting in the role last year after a slide in enforcement action by the regulator.

Just eight fines issued last year, the lowest in the FCA’s decade long history, the FT reported.

However, the measures have come under fire from some quarters today for potentially damaging the reputation of companies before they are found guilty of any wrongdoing.

“Announcing an investigation before it has assembled the necessary evidence can also be extremely damaging to a firm, its staff, and its customers,” said Simon Morris, a financial services Partner with law firm CMS. “It could wipe millions off a company’s value, or even destroy its business, which a later announcement of ‘no case to answer’ will hardly repair.”

The measures seem “more about trumpeting its work than giving out useful information,” he added.

Some 65 per cent of the watchdog’s investigations currently close without action, the FCA’s co-head of enforcement Steve Smart has said, who joined the regulator last year from the National Crime Agency.

As part of the changes today, the FCA said it will also close cases where no outcome is achievable more quickly. 

FCA officials have blamed some of the lack of action in recent years on the backlog created by the covid pandemic, which has clogged up potential action and convictions.

A consultation on the plans is now open until 16th April.