The City regulator has bowed to pressure over plans to “name and shame” some companies it investigates, offering watered-down proposals that would give firms 10 days’ notice and consider the “potential negative impact” of revealing the identities of companies under inspection.
The Financial Conduct Authority (FCA) put forward new proposals on Thursday after months of intense criticism from businesses, which have tried to thwart the watchdog’s plans to be more transparent with the public and whistleblowers when it is investigating potential wrongdoing across the City.
The government had also threatened to intervene, with the City minister, Tulip Siddiq, having told the watchdog to rethink its plans, and suggested she could overrule the FCA.
This pressure from companies and the government forced the regulator to review its proposals, and run a second consultation.
“We have heard the strength of feedback to our original proposals, and we are making changes as a result,” Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, said. “We hope the greater detail published today supports the further engagement we hope to have on the proposals, before we make any final decisions.”
Some of the most significant changes include a new set of public interest tests that consider a wider range of risks if the FCA were to disclose individual investigations.
It means the FCA would explicitly consider whether an announcement could have a negative impact on the company, either through a fall in its share price and market value – if investors subsequently dump their stock – or whether it could lead to a loss of clients or contracts.
The regulator will also consider whether any announcement could seriously disrupt public confidence in the financial system.
It comes after pressure from lobby groups including UK Finance, which suggested the naming and shaming approach could be “harmful to wider financial stability”.
However, the FCA said that a large number of investigations into banks had been publicly disclosed before a settlement was reached, and that there was no evidence that they had put financial stability at risk.
Meanwhile, the regulator said it will give companies 10 days’ notice ahead of any public announcement being made. That is compared with the one day’s notice that the FCA originally proposed.
It will give companies the chance to challenge the FCA’s decision, and if the regulator still decides to push ahead, firms would have an additional 48 hours before the notice goes public.
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The regulator also clarified that it would not announce any investigations that were launched before the new policy comes into effect. However, it said it may confirm investigations that were already in the public domain if it determined it was in the public interest.
City firms are now being asked to weigh in on the new rules by 17 February, with the FCA board planning to make a final decision on the new rules by the end of March next year.
The UK Finance chief executive, David Postings, said he welcomed the new proposals after “constructive engagement” with the FCA.
“It is important to consider the impact on individual firms and the wider market before making any public announcement. We therefore welcome the fact the FCA has listened and taken on board industry feedback. They have made a number of significant changes, including the increased notice period and the more rigorous approach to assessing the potential impact of an announcement within their public interest test.”