FCA faces backlash over plan to expose firms under investigation

The UK’s financial watchdog is facing fierce resistance over its proposal to publicly disclose company investigations before enforcement action is taken.

The Financial Conduct Authority (FCA) has framed its initiative as a move toward transparency, but lawmakers and industry leaders warn it could unfairly damage firms’ reputations and deter investment in UK financial services.

The House of Lords Financial Regulation Committee sharply criticized the FCA’s so-called “name and shame” plan in a report released Wednesday, calling it an “abject failure.”

The committee raised concerns that over half of FCA investigations conclude without enforcement action, making early public disclosures a serious risk to businesses that may ultimately be cleared of wrongdoing.

“Without sufficient safeguards, publicizing investigations risks unfairly damaging firms’ reputations and creating uncertainty in the market,” the committee wrote. It urged the FCA to reconsider the plan unless it could strike a balance between regulatory transparency and due process.

“The Committee’s conclusions will be welcomed by the financial services industry and will put further pressure on the FCA either to water down their proposals or abandon them entirely,” commented Imogen Makin, counsel at WilmerHale.

She added that the committee’s remarks about a “worrying disconnect with industry on the part of senior FCA leadership” resonated with many in the sector.

The FCA’s Push for Early Disclosures

The FCA’s proposal, first floated last year, aimed to deter financial misconduct by making investigations public at an earlier stage. The watchdog argued that secrecy around probes has historically allowed bad actors to operate unchecked, eroding market trust.

After an initial wave of industry backlash, the FCA softened its stance in late 2024, introducing a more stringent public interest test before disclosures and an extended notice period for firms. But the revised framework has done little to ease concerns among regulators, lawyers, and financial professionals.

Reputational Risk and Market Stability

The Lords’ report highlighted fears that premature disclosures could cause irreparable harm to businesses, particularly those in sectors where trust is paramount. The committee emphasized that a mere investigation is not an indication of wrongdoing—yet a public announcement could fuel speculation and financial instability.

Jill Lorimer, partner in the Financial Services Regulatory team at Kingsley Napley LLP, noted: “The FCA will be dismayed that the amendments it has made to its ‘name and shame’ proposals have done so little to assuage fundamental concerns. Entitled ‘How not to regulate,’ today’s report does not make easy reading for the regulator.”

Legal experts have echoed these concerns, warning that the policy may have the opposite of its intended effect. Instead of fostering cooperation, firms may become more reluctant to engage with the FCA for fear of being publicly named before any misconduct is proven.

Industry leaders also fear the policy could hurt the UK’s attractiveness as a global financial hub.

The potential for businesses to be publicly named during investigations, even when no wrongdoing is found, raises concerns that companies might rethink their UK investments, according to industry observers.

The FCA’s Response

The FCA has acknowledged the criticism but remains committed to increasing transparency. A spokesperson for the regulator said it would “carefully consider” the Lords’ recommendations while continuing efforts to improve engagement with the industry.

However, Lorimer pointed out that the FCA’s credibility as a regulator is under pressure. “It is difficult to see how the FCA will proceed in the light of this report.

The Committee’s criticisms are not limited to technical issues of implementation but go to the heart of the FCA’s approach to this issue and its credibility as a regulator,” she said.

Some argue that the FCA’s approach is a necessary evolution in financial oversight. Regulatory experts argue that a lack of transparency in enforcement actions leaves markets and consumers uncertain. They suggest that keeping misconduct investigations confidential can limit accountability and erode public trust in the financial system.

What’s Next?

The FCA now faces pressure to further refine or abandon the proposal altogether. The House of Lords has called for a thorough cost-benefit analysis before any implementation, emphasizing that the regulator has yet to make a compelling case for why the change is necessary.

For businesses, the uncertainty remains.

As UK regulators wrestle with the balance between market integrity and corporate fairness, the outcome of this debate will have lasting implications for how financial misconduct is policed—and how companies operate under regulatory scrutiny.