UK’s FCA consults again on enforcement transparency proposals

Summary

In February 2024, the FCA consulted on proposals on greater transparency of its enforcement investigations. In response to extensive feedback and widespread criticism, the FCA is now consulting on significant changes to the original proposals (see CP24/2, Part 2).

Currently, the FCA only announces it has opened an investigation in ‘exceptional circumstances’. The FCA considers that this approach has not always served the public interest. In the FCA’s view, a shift in approach is necessary to enable consumers to avoid harm, increase public confidence and trust in financial services, improve industry standards, enhance FCA accountability, and encourage whistleblowers and witnesses to come forward.

If implemented, the revised proposals will enable the FCA to announce limited, factual information about investigations into firms, where doing so is considered to be in the public interest.

The consultation closes on 17 February 2025. The FCA expects to make a final decision on the proposals in Q1 2025.

What has changed?

The FCA is proposing the following, significant changes to the original proposals:

1. The impact of an announcement on the relevant firm will form part of the public interest test and will be central to the FCA’s consideration of whether to make an announcement and name the firm.
2. The FCA will give 10 business days’ notice of an announcement (instead of one day, as initially proposed), to give firms the opportunity to make representations, with a further two days’ notice if, following this, the FCA decides to announce.
3. The potential for an announcement to seriously disrupt public confidence in the financial system or the market should be a new factor in the public interest test.
4. The FCA will not make proactive announcements of investigations that are ongoing when the proposals come into effect. However, the FCA may reactively confirm ongoing investigations that are already in the public domain, where this is in the public interest.

Impact

The FCA expects the impact of the revised transparency approach to be limited, as it will affect only a subset of the small number of firms it investigates. Under its more targeted, streamlined enforcement approach, the FCA now typically opens investigations into only 10 to 12 regulated firms per year. This substantial drop compared to previous years has been achieved by raising the bar for opening an investigation and strengthening pre-investigation triage processes, considering whether (i) an investigation is likely to drive impactful deterrence, and (ii) other tools can be used to stop or reduce harm. 

The transparency proposals would also apply to investigations into unregulated firms. The FCA is not proposing to announce investigations into individuals.

Under the revised proposals, the FCA would only make a proactive announcement when, having weighed all the circumstances, it considers this would be in the public interest. An anonymised announcement could be sufficient to meet the public interest test, or a reactive announcement if a firm itself announced that it was under investigation.

For investigations into dual-regulated firms, the FCA will engage with the PRA on the implications of any announcement.