The House of Lords Financial Services Regulation Committee in the UK Parliament published a report raising serious questions about the Financial Conduct Authority’s (FCA) proposals in consultation paper CP 24/2 (Part 2) to publicise enforcement investigations into firms more often. It concludes the FCA has not made a convincing case for moving away from its current policy of announcing investigations before they conclude only in exceptional circumstances, warning that a more flexible public interest framework would give the FCA significant discretion and could expose firms to reputational damage before facts are established. The report also argues the proposals risk making the UK an international outlier and could be misaligned with the FCA’s secondary competitiveness and growth objective. While noting the FCA’s engagement after the initial April 2024 consultation and its revised proposals in November 2024, the Committee says earlier development-stage stakeholder engagement could have avoided controversy. It recommends that the FCA ensure stakeholder concerns have been addressed, publish additional practical guidance on how the public interest framework would operate, change its approach to cost benefit analysis so it informs major policy changes, and consider prioritising transparency around measures that expedite investigations. Additional recommendations include better advance signposting of consultations on the Regulatory Initiatives Grid, publishing a “lessons learnt” document on internal processes and communications, and engaging with HM Treasury to ensure alignment with the Government’s view of the secondary objective. The Committee cites FCA evidence that investigations last around three to four years on average and that in 56% of cases no further action is taken, arguing the proposals could therefore unfairly damage reputations. The Committee calls on the FCA to demonstrate after the second consultation closes on 17 February that concerns have been adequately addressed and to amend the proposals before any final implementation decision, or withdraw them if it cannot strike an acceptable balance between consumer protection benefits and risks to firms, individuals and market stability.
UK Parliament 2025-02-06
UK Parliament committee urges the Financial Conduct Authority to amend or withdraw plans to publicise enforcement investigations more frequently
The House of Lords Financial Services Regulation Committee published a report questioning the Financial Conduct Authority's (FCA) proposals to publicize enforcement investigations more frequently, warning of potential reputational damage to firms before facts are established. The report suggests these proposals could misalign with the FCA's competitiveness and growth objectives, recommending enhanced stakeholder engagement and transparency measures. The Committee urges the FCA to address concerns before finalizing the proposals, highlighting the risk of unfair reputational harm given the lengthy average duration of investigations.