Firms want to come to a jurisdiction where they know that rules will be enforced, integrity upheld, bad actors challenged and a level playing field established. That’s why the FCA will name some companies subject to enforcement investigations, say Therese Chambers and Steve Smart
The enforcement action we take is often the most high-profile part of our work. Hefty fines and stern censures make easy headlines.
Yet, we are often criticised that these come too late. And called on to confirm sooner that we’re investigating potential wrongdoing. People naturally want to be reassured that justice is being done, that we are stopping harm in its tracks and to prevent more consumers falling prey to bad actors.
We too want to make sure that our enforcement action is timely, focussed, impactful and deters others from breaking the rules. It must be fair to all involved.
It’s for those reasons that we have reconsidered our approach and launched a consultation on whether we should shift from only naming firms subject to enforcement investigations in exceptional circumstances to where it is in the public interest to do so. We have previously been asked to consider options for greater transparency, including by MPs on the public accounts committee.
We recognise that these can be sensitive and emotive issues and we welcome the debate about our proposals. It’s important that concerns are aired and that we work with the industry, parliamentarians, government, consumer associations and others to identify the best way forward, including how the potential impact on firms is considered when deciding whether to name or not.
We have thought about these proposals carefully. We are not proposing to name every firm in every investigation. There would be no presumption of announcement. Each case would be judged on its merits. In some cases, it will be in the public interest to name a firm, in other cases not. And we will not usually name individuals.
We are also not seeking to shame firms. It’s about shining a spotlight on a case in a way that will deter others, raise standards, reassure consumers, counter ill-founded speculation that is damaging to firms or a sector, or encourage people to come forward with evidence and intelligence.
Nor do we think our proposals run counter to the longstanding principle of ‘innocent until proven guilty’. Many UK regulators already name those they are investigating early on. And as digital markets become more central to our work and we find ourselves taking more joint action with other authorities, it would be perverse to find ourselves in a position where we cannot name a firm but partner regulators can.
We have also analysed what happens to a share’s firm price if it becomes public that it is subject to investigation. Of cases we opened into firms between 2021 and 2024, there have been five instances where a firm has announced they are subject to an FCA enforcement investigation. In four of those cases the share price did not move down by more than 1 per cent. And in the one where it did, we judge it was more likely down to the significant compensation scheme announced at the same time. We welcome any further evidence of impact shared with us through the consultation. Enforcement investigations are reserved for the most serious situations – last financial year we opened investigations into less than 0.03 per cent of the firms we regulate.
Different countries take approaches in line with their culture and accountability mechanisms. Some, like Singapore, have a similar framework to what we propose. The United States sees much more litigation and disclosure through courts.
This is not about favouring consumers over competitiveness. It is not an either/or. Enforcing proportionate regulatory standards is crucial to growth. Firms want to come to a jurisdiction where they know that rules will be enforced, integrity upheld, bad actors challenged and a level playing field established.
Being more transparent will help with that. So too will our plans to better prioritise what enforcement action we pursue and accelerate the pace of our investigations. We are opening fewer investigations so we can complete cases faster. It will also enable us to be better held account.
This builds on the work we have done to speed up our authorisation process while also being more robust about who we allow to operate here. And strengthening our supervisory work: in the last year we have increased the use of our intervention powers to stop harm in real time and our supervisors have used more voluntary and own initiative actions to persuade firms to address any harm themselves, meaning less enforcement action is required.
While the consultation closes tomorrow, we will not stop listening and engaging as we take forward the work.
Ultimately, we believe our new approach to enforcement – more transparent, better prioritised, pacier – should help us deliver impactful deterrence, making sure that firms know what’s expected of them and consumers know where we are on the case. It should bolster transparency and accountability of the FCA.
The success of the UK’s financial markets has long been built on our country being a beacon for fair play, cleanliness and integrity. And we believe these proposals will help the UK’s financial markets to sustain their competitiveness and continue to flourish.
Therese Chambers and Steve Smart are joint Executive Directors of Enforcement and Market Oversight at the Financial Conduct Authority