An influential group of peers has called on the Financial Conduct Authority (FCA) to halt plans to ‘name and shame’ the firms it is investigating as fury over the proposals grows in the City.
In a letter to the FCA boss Nikhil Rathi last week, published today, the House of Lords Financial Services Regulation Committee said the plans “risk the overall integrity of the market” and could lead to “unwarranted impact on blameless firms”.
The City watchdog triggered an immediate backlash last month when it revealed plans to publicise the names of the companies it is investigating. City A.M. revealed on Saturday that trade bodies were now hardening their stance against the proposals after facing calls from their members to speak up.
However, the intervention from the Lords will now ratchet up the pressure on the regulator to soften or reverse the measures, currently out for consultation in the City.
“In our view, this proposal risks having a disproportionate effect on firms named in investigations, where those firms are subsequently cleared of any wrongdoing, particularly given the length of many investigations,” Lord Forsyth of Drumlean, chair of the Financial Services Regulation Committee, wrote to Rathi.
“This also risks the overall integrity of the market, including through possible unwarranted impacts on share prices for example.”
While individuals will not be named under the FCA’s plans, Lord Forsyth warned that individuals “may have their reputations unfairly tarnished through association with a publicised investigation”.
The plans have raised eyebrows as 65 per cent of the FCA’s current investigations are closed with no action taken. While the plans were designed as a deterrent, fears have grown that companies risk facing huge reputational damage despite no wrongdoing having taken place.
The FCA has delayed its consultation deadline on the plans until the end of this month. City A.M. has spoken with several businesses that have already submitted in protest against the plans.
Top trade bodies UK Finance and The CityUK are also understood to have hardened their stance against the measures after gauging the sentiment of their members at recent meetings.
In a statement to City A.M. over the weekend, CityUK chief Miles Celic said the industry is “opposed to the FCA’s proposal to name and shame” firms.
“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,” Celic added.
UK Finance, which represents banks and City firms, 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.
The measures form part of a wider push from the FCA’s two new enforcement chiefs, Therese Chambers and Steve Smart, to tighten 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.”