Stay informed with free updates
Simply sign up to the UK financial regulation myFT Digest — delivered directly to your inbox.
The UK’s top financial regulator is facing a fierce backlash from the government and City executives over its plan to “name and shame” companies under investigation more frequently and at a much earlier stage.
The move has caused anger in ministerial circles, fuelling fears that the Financial Conduct Authority’s approach to regulation is harming the City of London and driving business abroad.
One senior government figure said: “The FCA says it’s thinking about competitiveness, but so often they take decisions that harm the competitiveness of the UK. They have got to stop. We can’t afford to do this any more as a country.”
The FCA’s new approach, outlined in a consultation paper in February, aims to create more transparency concerning the watchdog’s enforcement work and to increase the deterrent effect such probes can have on the market.
The move has caused uproar among City lawyers who claim it could do significant damage to their clients both reputationally and financially, pointing to the fact that about 65 per cent of the agency’s investigations close without action.
Miles Celic, chief executive of TheCityUK, said: “The industry is opposed to the FCA’s proposal to name and shame financial services firms before the conclusion of enforcement investigations.
“This contradicts the fundamental legal principle of ‘innocent until proven guilty’ and risks undermining trust and confidence in the wider industry and the UK’s competitiveness.
“It would significantly and pointlessly damage a firm’s reputation and value, especially given that FCA investigations take four years on average and many conclude without requiring any action.”
Ministers are reluctant to criticise regulators publicly, but frustration with the FCA is running high in Whitehall circles.
The Treasury said: “This is a matter for the FCA. However, we are engaging with both the FCA and industry as the proposals are developed, in particular to ensure that any potential impacts on competitiveness are properly considered.”
Last month Kemi Badenoch, business secretary and equalities minister, wrote to FCA chief executive Nikhil Rathi to accuse the agency of “regulatory over-reach” because of the introduction of a new regime on diversity and inclusion in the financial sector.
Badenoch this week said in a speech to City leaders: “I worry about the tendency to push for well-meaning but counter-productive measures that stifle growth, productivity and innovation.”
The FCA has previously come under pressure from MPs to be more transparent about its enforcement work, including a call two years ago from the House of Commons public accounts committee as part of its investigation into the British Steel workers’ pensions mis-selling scandal.
When the proposal was announced, the FCA’s enforcement heads told the FT that the new approach would mainly apply to companies rather than individuals owing to legal constraints.
The regulator previously only disclosed details mid-investigation in “exceptional circumstances”. The agency is now looking to adopt a looser “public interest” test.
The FCA said it was looking to conduct investigations more quickly and would take a more focused approach to the number of cases it took on.
“We have been consulting on announcing our investigations, on a case-by-case basis, where it is in the public interest to do so,” the watchdog said. “We believe doing so will give all the firms we regulate and the wider public better insight, earlier, about issues we are concerned about.”
The FCA said the plans would bring it into line with several other UK regulators, including media watchdog Ofcom, energy regulator Ofgem and the Competition and Markets Authority.
It said it had given people more time to respond to the consultation, which closes at the end of April. FCA officials have said it is unlikely the regulator will announce an investigation if it is deemed likely to have an “outsize impact”.
Read the full article here
