FCA Rethinks Approach on Public Disclosure of Investigations Amid Industry Objections

​The Financial Conduct Authority (FCA) has adjusted its plans regarding the public disclosure of firms under investigation, responding to significant opposition from the financial sector and political figures. This modification, aimed at tempering its "name and shame" approach, follows mounting concern that such disclosures could unfairly damage reputations and disrupt the market even before any wrongdoing is confirmed.

Originally, the FCA intended to make public the names of companies under investigation with minimal prior notice, proposing a one-day notification period. However, industry leaders and regulatory stakeholders argued that this approach could disproportionately harm businesses by potentially triggering undue market reactions. In response, the FCA's revised policy now includes a ten-day notice period before any announcement, which aims to give firms more time to prepare.

Acknowledging the need for a more measured approach, FCA CEO Nikhil Rathi stated to the House of Lords' financial services committee that the initial rollout of the proposal may have lacked sufficient communication and was perceived as overly aggressive. Rathi also revealed that the updated framework would apply a public interest test to determine the necessity of disclosing an investigation, aiming to limit disclosures to only those that align with broader public interest.

While the FCA retains the power to disclose the identity of a company when deemed necessary, the regulatory body aims to use this authority sparingly. The agency also seeks to provide more transparent updates, including the option to publicly confirm when a company is not under investigation to alleviate unnecessary market speculation.

The "name and shame" policy had previously faced scrutiny beyond the financial sector, attracting criticism from officials like Business Secretary Kemi Badenoch, who described it as overreaching and warned it could deter companies from choosing London as their business base. The legal sector highlighted that nearly two-thirds of FCA investigations result in no further action, emphasizing the need for caution in making early-stage investigations public. The FCA's revised approach is expected to be formally proposed next week, with a final decision anticipated early next year.