City firms are plotting a revolt against the regulator and calling on top trade bodies to intervene after the Financial Conduct Authority (FCA) revealed plans to name and shame the firms it is investigating last month.
The watchdog triggered an immediate backlash when it launched a consultation on plans to identify the companies it was investigating as part of its push to beef up enforcement and deter firms from wrongdoing.
Under the proposals, companies would be ‘named-and-shamed’ at the outset of an investigation prior to any proof of wrongdoing.
The plans were met with fury from some in the City who labelled the plans as “sinister” and potentially damaging when no action had actually been taken.
Fresh calls are now growing for the regulator to row back on the plans and top City groups are hardening their stance. At a recent meeting held by the trade group TheCityUK, members of the body were understood to be pushing the group to speak up on their behalf against the FCA.
In a statement to City A.M, CityUK chief Miles Celic said: “The industry is opposed to the FCA’s proposal to name and shame financial services firms before the conclusion of enforcement investigations.
“This proposal contradicts the fundamental legal principle of ‘innocent until proven guilty’ and also risks undermining trust and confidence in the wider industry and the UK’s competitiveness.”
UK Finance, which represents banks and City firms, is also understood to have received requests from companies to speak up against the measures. The group is set to submit its response to the consultation this month and told City A.M. yesterday that the proposal “raises a number of issues” and could harm the UK’s reputation as a place to do business.
“We believe the current proposals are disproportionate in that they could result in firms suffering real damage in terms of their reputation and valuation, given the majority of FCA investigations are closed with no further action,” a spokesperson said.
“We also think the proposals have the potential to harm the UK’s competitiveness and attractiveness as a financial centre.”
A consultation is currently being conducted by the FCA but has been delayed from an initial deadline last week until the 30th May. The FCA did not say why the deadline has been delayed.
Scores of firms have already submitted responses against the efforts after the consultation was launched. One firm, which asked not to be named, said it had told the FCA the plans risked hammering smaller companies and stifling innovation in the City.
“Announcing investigations without evidence of wrongdoing isn’t oversight—it’s public criticism that deters innovation,” the person said.
“The FCA’s approach could disproportionately harm smaller firms still building consumer awareness, giving an undue advantage to established players and brands.”
The person added that coupled with the stringent new consumer duty, which forces companies to ensure good outcomes for consumers, it raises a question of whether fintech and tech firms will “continue to seek regulation at all”.
Under the current framework, around 65 per cent of investigations by the FCA are closed without action. However, the FCA is looking to tighten its enforcement activity and launch fewer and more targeted investigations.
“We have been making wider changes to the way enforcement operates in order deliver more impactful deterrence and greater transparency,” an FCA spokesperson said. “This includes plans to conduct investigations more quickly and with a more focused number of cases.”