Disclosing the names of companies at an early stage of investigation by the UK financial regulator could hinder economic growth, Chancellor Jeremy Hunt has suggested.
If greenlit, the plans will see the public updated on investigations, including their opening and progress, as well as the identity of the subject being investigated. This marks a change from the current approach in which investigations are only announced in very limited circumstances.
Commenting on the “naming and shaming” plans by the FCA, Mr. Hunt said that if approved, the policy will hurt the financial services sector.
The FCA operates independently from the government and is the conduct regulator for around 50,000 financial services firms and financial markets in the UK. Last year, ministers handed new competitiveness and growth objectives to the FCA, as well as the Prudential Regulation Authority, which regulates banks, credit unions, and major investment firms.
Under the “strengthened growth duty” the regulators have to consider the “desirability of promoting economic growth” when exercising their powers.
In a rare move, Mr. Hunt intervened in the FCA’s policy making process.
Transparency
While the Treasury may see a new approach as a move in the wrong direction, the FCA’s executive director of enforcement and market oversight, Therese Chambers, said it will increase transparency and boost public confidence.“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,” said Ms. Chambers.
Any decision to name a company under investigation will be taken on a case-by-case basis and on its value to the public. The FCA stressed that an investigation announcement should not be seen as a confirmation of breach or misconduct.
In response to Mr. Hunt’s comments, the FCA said it will listen carefully to the feedback given during the consultation, including that from the government.
“We embrace our secondary objective to facilitate international competitiveness and growth alongside the primary objectives given to us by parliament to protect consumers, market integrity and effective competition,” the regulator told the Financial Times.
FCA joint executive directors Ms. Chambers and Steve Smart said they don’t see the proposed approach as “naming and shaming.” The intent is to bolster transparency and accountability, the FCA bosses told the House of Lords Financial Services Regulation Committee.
In a letter published on Friday the pair added: “Ultimately, we all want the UK’s financial markets to sustain their competitiveness and continue to flourish and grow on the reputation that they were built on: fair play, cleanliness and integrity. Effective regulation is a key foundation for that reputation.
“We will consider carefully all feedback we receive with a view to our new proposed approach to enforcement, with continued improvements in our operational effectiveness, helping to achieve those ambitions.”
Last year, the FCA fined 12 firms for various breaches and failings, with fines totalling over £53 million, plus £154,300 imposed for breaches of the Competition Act 1998.
Companies that are currently under investigation by the FCA may also find their names disclosed as part of the proposed changes, despite preexisting assurances of confidentiality.
