Following pushback on its plans to start revealing the existence of ongoing enforcement investigations, the U.K.’s Financial Conduct Authority (FCA) is scaling back its proposed approach.
Earlier this year, the FCA launched a consultation on a policy shift away from the traditional practice of not publicly disclosing the existence of enforcement investigations until after a case has concluded and penalties have been imposed — the regulator doesn’t even confirm an investigation in cases where the target of the inquiry has disclosed it themselves.
“This has not always served the public interest,” the FCA said.
And so, it proposed to start disclosing investigations in an effort to boost transparency, and to enable investors to take action to protect themselves in the face of possible misconduct.
“Greater transparency would support public confidence, reassuring consumers and market participants that we are taking appropriate, prompt action and building trust in the system,” it said. The FCA added that this could help industry firms act sooner to address possible misconduct and encourage whistleblowers to come forward, among other possible benefits.
However, the proposals met with “significant concerns” during the consultation, the FCA said.
As a result, it’s now aiming to add safeguards to its proposals, which are set out in a new consultation paper.
For instance, it’s now proposing to give firms 10 days notice before publicly disclosing an investigation, instead of the one-day notice period it initially proposed. During the 10-day period, firms would be able to make representations to the regulator, and if it still decides to go ahead with disclosure, firms would have 48 hours before that happens.
Additionally, the FCA has added considerations to the “public interest” test that it would use to determine whether to disclose an investigation — including whether the announcement could “seriously disrupt” public confidence in the financial system or markets and the possible negative impact on the firm.
The regulator also clarified that it won’t announce pre-existing investigations that began before these policy changes are adopted.
“We have made good progress in increasing the focus and pace of our enforcement work — so that we can prioritize the investigations most likely to drive meaningful deterrence across industry and deliver more timely outcomes. We want to hear further views on whether some increased transparency could work in practice,” said Steve Smart, joint executive director of enforcement and market oversight at the FCA, in a release accompanying the latest consultation.
The deadline for providing feedback on the new consultation is Feb. 17, 2025. The FCA said that it also plans to continue discussing its proposals with the industry, trade groups and investors, and expects to make a decision on whether to move ahead with changes to its disclosure policy in the first quarter of 2025.
“We have heard the strength of feedback to our original proposals, and we are making changes as a result. We hope the greater detail published today supports the further engagement we hope to have on the proposals, before we make any final decisions,” said Therese Chambers, joint executive director of enforcement and market oversight at the FCA.