FCA abandons plan to 'name and shame' more firms under investigation

The Financial Conduct Authority (FCA) has abandoned its proposal to introduce a public interest test for disclosing investigations into regulated firms, following strong opposition from industry leaders and government officials.

The regulator confirmed the decision in a letter to the Treasury Select Committee, citing a lack of consensus and concerns over potential reputational damage to firms.

The initial proposal, introduced in February 2024, sought to move away from the existing ‘exceptional circumstances’ threshold and allow the FCA to name firms under investigation if it deemed it in the public interest.

However, critics argued that premature disclosure could unfairly tarnish businesses, particularly as many investigations conclude without enforcement action.

Instead, the FCA will proceed with less controversial measures, including confirming investigations already in the public domain, issuing warnings about potentially unlawful activities by unregulated firms, and publishing greater detail on investigations anonymously. A final policy update is expected by June 2025.

Nikhil Rathi, Chief Executive Officer of the FCA, stated:

“We are speeding up our enforcement work. On our enforcement transparency proposals, we have always aimed to build a broad consensus. Considerable concerns remain about our proposal to change the way we publicise investigations into regulated firms, so we will stick to publicising in exceptional circumstances as we do today. We will implement changes which have commanded wider support and which we believe will help support our efforts to protect consumers from harm.”

Industry Leaders Welcome the FCA’s Reversal

The move has been met with approval from legal and regulatory experts. Steven Francis, Partner at Faegre Drinker and formerly at the FCA, noted:

“The FCA reversing its position on this is really no surprise given the criticism the proposal attracted. Its objective to prevent ongoing harm caused by companies under investigation can be met by the FCA using the wide range of other supervisory tools at its disposal.

“With growth now being the focus of attention, this proposal was looking out of touch with the current thrust. If the FCA improves its enforcement hit rate, then maybe this can be resurrected, but with most investigations ending without disciplinary action the proposal looks regressively anti-business.”

Nathan Willmott, Partner in the Dispute Resolution Practice at Ashurst, praised the FCA’s decision, stating:

“A big thumbs up to the FCA Board for shelving the regulator’s proposed new approach to naming firms placed under investigation, after a year of roadshows, parliamentary correspondence and hearings, industry submissions and revised proposals.

“This will now free up time for the FCA Enforcement division leaders to move forward and focus on the day job. A really positive development and great that the FCA listened to the industry.”

Jake Green, Partner in Financial Regulation Practice at Ashurst, highlighted the broader implications of the decision:

“I think this, together with things like the PSR being folded into FCA/abolished, does signal that the government is really trying to streamline regulation and bring a bit more certainty to the City. It will be positively received. Here’s hoping they can do more to really help innovation and competition.”

Regulatory Retreat on Multiple Fronts

The FCA’s decision to scrap the public interest test is part of a broader shift in its regulatory approach. Alongside this, it has also abandoned proposed diversity and inclusion (D&I) requirements for regulated firms, citing the broad range of feedback received and expected legislative developments.

Additionally, the regulator is reassessing its stance on non-financial misconduct, delaying the implementation of tougher rules until further review. Commenting on these developments, Jill Lorimer, partner in the Financial Services Regulatory team at Kingsley Napley LLP, stated:

“The FCA is shelving three of its flagship initiatives. Controversial plans to ‘name and shame’ firms under investigation and to scrutinise their D&I credentials have been dropped; proposals to toughen up rules on non-financial misconduct are now under review. This is a hugely significant development.

“The regulator has long faced allegations of ‘scope creep’ – today’s announcement is a clear indication that the regulator accepts that its ‘name and shame’ proposal was deeply flawed from the outset. Looking ahead, it will be focusing less on new initiatives likely to increase red tape for firms and more on its secondary objective of facilitating international competitiveness and the growth of the UK economy.”