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The FCA’s naming and shaming proposals – a step towards transparency or a leap too far?

Financial & Professional Services
Business Advisory
Wealth & Asset Management

Earlier this year, the FCA announced its proposals to “name and shame” City firms if they are under investigation by the regulator. While it confirmed that any decision to publicly flag a firm under investigation will be taken on a case-by-case basis, the proposal has been met with fierce criticism across the industry and this week, in a rare intervention, Jeremy Hunt weighed in.

For the FCA’s part, it asserts that this ability to name businesses under investigation will help to improve transparency across the industry, providing “reassurance, educational value, and effectiveness”. It claims that it will provide witnesses and whistleblowers a chance to come forward in a timely manger and that this threat will act as a deterrent to wrongdoing at other firms.

The problem is, however, what happens to the reputation of a company who, having been publicly named and shamed, is then found to be innocent? Column inches for “no wrongdoing” are much shorter than scandalous claims about what “may” have happened.

For the clients of said company, what should they do if they know a company they use is under investigation? Sit it out and hold tight in the hope that the FCA is wrong? Or drop the company like a hot potato?

This issue is only compounded by the fact that the company in question is unable to comment themselves, given they are under investigation (!). From a comms perspective, what a nightmare.

It is perhaps no surprise therefore, that firms have come out in their droves in criticism of this proposal, with executives claiming that it undermines the entire principle of being innocent until proven guilty and fears that it will ultimately harm the City’s international competitiveness.

And this week, even Chancellor Jeremy Hunt got involved. In a rare move by a chancellor on policymaking by the FCA, which is independent from the government, he said, “I hope the FCA re-look at their decision” and warned that the proposal could go against the regulator’s duty to promote growth.

However, so far, in spite of this pressure, the FCA has been steadfast in its defence – claiming that any instances where they choose to name and shame will be carefully considered and that something must be done to speed up the enforcement process.

The consultation period for this proposal closed on Tuesday, so now it’s time to wait and watch to see just what the FCA’s next move will be. Will firms under investigation be able to continue operations, with the rest of the world ignorant to the claims made against them? Or will naming and shaming and the associated reputational risks become commonplace? If so, I sense our crisis specialists are going to be in high demand.