FCA’s ‘naming and shaming’ consultation

The Financial Conduct Authority (FCA) consultation CP24/2: Our Enforcement Guide and publicising enforcement investigations–a new approach closed recently.

The Financial Inclusion Centre response to the consultation can be found here: Financial Inclusion Centre submission FCA enforcement principles CP24-2

The FCA wants to name financial firms that are under investigation much earlier in the process it follows when deciding whether action should be taken against firms. The regulator argues that this will help deter poor corporate behaviours in financial markets and services.

The proposals have proved surprisingly controversial and have been branded as the FCA wanting to ‘name and shame’ firms and have attracted fierce criticism from financial trade bodies and the attention of politicians. It has even been argued that these reasonable proposals would undermine the growth and competitiveness of the UK financial sector.

We support the FCA’s proposals and indeed argue that the regulator could go even further. Much greater transparency is needed within the UK financial legislative and
regulatory system. Far too much protection is given to commercial interests in financial legislation and, therefore, regulation.

The extent to which commercial confidentiality is used to restrict transparency on corporate behaviour undermines the effectiveness of Freedom of Information legislation. This has a deleterious effect on the effectiveness of regulation and the ability of civil society to hold financial institutions and individuals to account for malpractice.

We appreciate that the protections afforded corporate interests in legislation is a matter for  Parliament and government. The reasonable measures proposed here would at least tip the scales back a bit towards the public interest.

We note with growing concern the very vocal finance and legal lobbies who exaggerate the potential impact of these reasonable measures to try to stymie the FCA’s efforts. Even more concerning is the intervention by the Government on this issue.

The Financial Inclusion Centre and others warned that the new secondary growth and competitiveness objective imposed on the financial regulators could be used to try to compromise the FCA’s operational independence and effectiveness. It is very disquieting that these arguments are now being publicly used to try to prevent the implementation of this new approach.

This is a test of the FCA’s operational independence. We urge the FCA to stand firm on this issue and resist attempts by the Government and industry lobbies to prevent the introduction of what is a set of reasonable measures.

Moreover, we are in no doubt that the financial and legal sectors will use their considerable financial and legal resources to try to hinder the application of any new approach. We urge the FCA to prepare for this.